If you own a small business in Minnesota, it’s important to understand the payroll tax requirements that apply to your business. Payroll taxes are deducted from an employee’s wages and paid to the government. These taxes help fund programs like Social Security and Medicare. Here’s what you need to know about small business payroll taxes in Minnesota.
What Are Small Business Payroll Taxes?
For the purposes of this blog post, we are defining payroll taxes as FICA and withholdings. FICA stands for Federal Insurance Contributions Act and is a Federal payroll tax that funds Social Security and Medicare. FICA payroll taxes are actually paid by both the employer and the employee, 7.65% each. Employers are also required to withhold a portion of their employees’ wages for Federal and state income taxes based on their W4’s.
Do Payroll Taxes Apply to My Small Business?
Payroll taxes apply to almost all small businesses in Minnesota. Whether you’re a Sch. C, S-Corp, C-Corp, or Partnership, if you have employees you are required to withhold payroll taxes. These payroll taxes must then be remitted to the state taxing authority by predefined deadlines in order to remain in good standing and avoid fines and potential legal action. If you are a sole proprietorship or a single-member LLC without any employees you are not required to withhold payroll taxes, because you report your income and taxes, along with self-employment tax, on Sch. C. You may need to pay quarterly estimated taxes as a result.
How Do I Calculate and Pay Payroll Taxes?
Calculating and remitting payroll taxes can be complex. Employers are required to withhold FICA taxes from their employees’ wages at 7.65% up to an income limit, and pay an equal amount themselves. An additional Medicare tax comes into play for high earners. Employers must also withhold Federal and state income taxes from their employee’s wages in line with their W4’s.
The amount of payroll taxes you will owe will depend on the wages you pay to your employees, the number of employees you have, and the frequency of your payroll tax remittance. The IRS provides a variety of tools and resources to help small business owners calculate and pay payroll taxes. Depending on the size and complexity of your workforce, the level of effort to maintain compliance can vary greatly.
In addition, the Minnesota Department of Revenue provides resources to help small businesses in Minnesota comply with payroll tax requirements. The department provides online resources, guides, and webinars to help small business owners understand their tax obligations and stay in compliance.
Failing to Remit Payroll Taxes
Nothing will shut a small business down faster than failing to remit payroll taxes. The Federal and state governments take this very seriously, and even one missed payroll deposit will result in notices and the wrong type of attention. Explore every possible option if you’re short on cash, but don’t skip your payroll taxes.
Working with Haworth & Company
Payroll taxes are one of the most important aspects of running a small business in Minnesota. If you have employees, you are required to withhold and pay payroll taxes. It’s important to understand the payroll tax requirements that apply to your business and to comply with all state and Federal regulations. By working with Haworth & Company, you can ensure that you are in compliance with payroll tax requirements and avoid costly penalties or fines. Contact us to get started.
Disclaimer: This blog content is for general informational purposes only, should not be considered professional advice, and does not establish a client relationship. Haworth and Company is not liable for the accuracy of this information or the content of external links. Please use this information at your own risk, ensuring it suits your specific needs, and consult with a certified tax professional for your own personalized guidance.
