Updated: May 25, 2022
On the shores of North Carolina in 1903, history was made. For the very first time, an airplane lifted from the ground and completed the first successful flight. Due to Kitty Hawk’s courage and the Wright brothers’ dedication, the airplane was created. Imagine the world without planes, a world without the opportunity to travel halfway across the world in a few mere hours. Greatness was created on the very same soil your small business is planted. With your own small business, you have the opportunity to invent your own form of greatness.
But to achieve such greatness, there is a price to pay. The price of a small business owner is payroll taxes. Luckily, our payroll calculator is here to ease the strain on your resources. Simply enter wage and W-4 information for each employee and our calculator will take care of the rest.
Federal Payroll Taxes
Regardless of whether your employee is paid on salary, hourly, or by other means, all federal payroll taxes are the same. To make things simple for you, all you need to do is remember these six aspects of federal payroll taxes:
- Calculate Gross Wages:
- For all your hourly employees, multiply their hours worked by the pay rate. Don’t forget to increase the rate for any overtime hours.
- For all your salaried employees, divide each employee’s annual salary by the number of pay periods you have.
- Pre-tax withholdings. Subtract any eligible retirement savings account, Flexible Spending Account, Health Savings Account, and other pre-tax withholdings.
- Federal Income Tax. The biggest tax there is. Rates range from 0% to 37%. We won’t get into all the finer details here. Tax bracket information can be found through IRS Publication 15-T.
- FICA Taxes:
- Social Security Tax. Subtract and match 6.2% of each employee’s taxable wages until they have earned $147,000 (2022 tax year) for that calendar year. Any wages above $147,000 are exempt from the Social Security Tax.
- Medicare Tax. Subtract and match 1.45% of each employee’s taxable wages until they have earned $200,000. Once an employee has surpassed an annual earning of $200,000, he or she has to pay an additional 0.9% tax called…wait for it…Additional Medicare Tax (super original, we know). Fortunately for you, only employees are responsible for this tax on higher wage earners.
- FUTA Unemployment Tax. Employees are not responsible for paying this tax, so this one is all on you. Employers have to pay 6% of the first $7,000 each employee earns per year. The good news is that you’re eligible to get a credit of up to 5.4%, making your effective FUTA tax rate 0.6% if you pay your state unemployment tax on time and in full. All the details on the FUTA credit reduction can be found on this IRS website.
- Post-Tax Withholdings. The final deduction is for any special responsibilities an employee may have, such as court-ordered wage garnishments and child support.
If you would like a more detailed explanation of federal payroll taxes, head on over to our step-by-step guide for additional information.
North Carolina Payroll Taxes
North Carolina payroll taxes are as easy as a walk along the outer banks. There is a flat income tax rate of 4.99%, which means no matter who you are or how much you make, this is the rate that will be deducted. Plus, to make things even breezier, there are no local income taxes.
The only other thing you need to worry about is North Carolina State Unemployment Insurance. Unemployment insurance rates vary based on year and are usually determined by an employer’s reserve ratio percentage (ERRP), which is the employer’s 2022 reserve ratio multiplied by 0.68. Rates range from 0.06% to 5.76%. All new employers should use a flat rate of 1.0%. If you can’t tell, calculating North Carolina State Unemployment Insurance is a little less like walking along the beach and a little more like climbing Mount Mitchell. You can click here to see all the 2022 tax rates.
Federal tax filings are due quarterly by filing Form 941. There’s also the Form 940 for FUTA annual filings. but for most North Carolina employers, deposits must be made on an ongoing basis via the EFTPS payment system. You can find employment tax due dates from the IRS here.
Write Your Paychecks!
It’s go time. Calculate each employee’s pay, factor in all deductions and withholding requirements, then pay your employee’s the check they deserve. Make sure you’ve set aside any contributions your company owes and soon you’ll be soaring towards the golden North Carolina sun!
Additional NC Payroll Tax Resources:
If you want to learn more about North Carolina Payroll Taxes, we think you should check out the Department of Revenue website, particularly these two sections:
Or if you have any questions, call them at (877) 252-3052