What to Know About Texas Paychecks
If you have employees in Texas, here are the federal and state payroll taxes you’ll have to collect and pay.
Texas payroll taxes
Texas has only one state payroll tax, and it’s paid for by the employer.
Texas Unemployment Insurance (UI) is paid on the first $9,000 in wages you pay each employee every calendar year. Your tax rate is calculated using several factors and can change each year—the minimum tax rate is 0.31% and the maximum rate is 6.31% in 2022. Check out the Texas Workforce Commission’s website to find your current tax rate.
Federal payroll taxes to include in each paycheck
In addition to the Texas UI tax, here are the federal payroll taxes that all employers must pay or withhold from employees’ earnings.
Employers and employees both pay:
FICA: The Federal Insurance Contributions Act tax is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax rritequires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
FUTA: Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but most employers only have to pay 0.6% each year.
Requirements to obtain Workers’ Compensation vary by state, this table outlines some of these requirements. If you determine that your company is required to purchase Workers’ Compensation insurance in your state, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
Federal income tax: The amount withheld is based on the employee’s Form W-4. (Here are instructions on how to fill out Form W-4.) The amount of tax that you withhold from each employee’s paychecks varies based on their earnings, filing status, and other factors.
Additional Medicare tax: This 0.9% tax applies to employees who make more than a certain income threshold, which varies by filing status. You must withhold this tax from employee wages that exceed $200,000 per year.
Remember, you’re responsible for sending the taxes you withhold from employees’ earnings to the state and federal governments.
Federal salary threshold
The federal salary threshold is now $684 per week (equivalent to $35,568 per year for a full-year worker). The Department of Labor permits employers to count some bonuses, commissions, and other incentive payments toward meeting the standard salary level (up to 10%). Employees who earn at least $107,432 per year may qualify as “highly compensated.” See this Department of Labor fact sheet for details.
Other Texas paycheck rules to know
Here are a few other essential things to know:
- Exempt employees must be paid at least once per month.
- You need to provide employees with a written earnings statement at the end of each pay period. This can be a pay stub or check voucher, for example. That earnings statement needs to include the employee’s name, their pay rate, and the total number of hours worked. It’ll also need to state their gross pay during the pay period, any deductions made and the purpose, and their net pay.
- You need to report new hires to the Texas Attorney General’s office. You must do this within 20 days from the day they start work, or you may owe a penalty.
- When you terminate or lay off an employee, you must pay the employee their final paycheck within six calendar days. If the sixth day falls on a weekend or holiday, you can wait until the next workday. However, if an employee voluntarily leaves, there’s no need to make a special paycheck. You can just pay them on the next regularly scheduled pay date.