Apply Payroll Taxes to Which Amount?

by anonymous

QUESTION: My employee made $24,456.00 GROSS annual, but the I.R.S. told him his "taxable income" is $15,106.00


As his employer... do I apply the 15% tax bracket to the $15,106.00 OR Do I apply the 15% to his gross the $24,456.00? ... I'm totally confused... HELP !!

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IRS Knows Best
by: Best Business Payroll

If the IRS is saying the taxable amount is $15,106.00, then you would apply the 15% to that amount. Certain deductions affect the taxable amount: health and dental insurance, prescription drug coverage, and 401(k) contributions reduce the taxable amount. So if those are being taken out of your employee's pay, they are considered "Pre-Tax Deductions"; take the tax out of the remainder.

Many people find doing their own payroll to be burdensome (and sometimes stressful), as you seem to be saying. If that is the case, you might consider having someone else do your payroll for you. We can give you a free quote (see the button on the left), or you can request a quote from a local payroll outsourcing provider. Either way, best of luck!

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