Texas Paychecks and Taxes
New to the Texas payroll world and not quite sure what taxes you have to pay or withhold on behalf of employees? We're here to help.
In Texas, there are both state and federal taxes you must withhold or pay as well as paycheck laws you must remember.
If you'd prefer to have someone else take care of calculating paychecks for you, an
online payroll software
small business accountant
What Texas payroll taxes do I need to know about?
The state of Texas may be big, but its list of payroll taxes is small. There is only one state payroll tax—unemployment insurance
and it is paid by the employer. (Yep, there's not even state income tax in the Lone Star State.)
As an employer, you'll pay Texas
(UI) on the first $9,000 of each employee's wages each year. The exact tax rate is specific to your business and may change each year. In 2019, the minimum tax rate is 0.36% and the maximum is 6.36%.
You can obtain your tax rate by visiting the
Texas Workforce Commission's Unemployment Tax Services website
How about federal payroll taxes?
There are also a few federal taxes that all employers must pay or withhold from their employees' earnings.
The tax that
both employers and employees must pay
Federal Insurance Contributions Act (FICA) tax
FICA has two parts: Social Security tax and Medicare tax.
For Social Security tax, employees and employers each contribute 6.2% of earnings up to $132,900. For Medicare tax, the rate is 1.45% on all earnings for both employees and employers. (Keep in mind those are 2019 rates and the IRS may change rates each year.)
The tax that
only employers must pay
federal unemployment tax
The current tax rate is 6% on the first $7,000 of each employee's wages each year. Most employers, however, can qualify for a 5.4% federal tax credit by paying their state unemployment taxes on that. That makes the effective FUTA rate just 0.6%.
The two taxes that
only employees pay
Federal income tax: How much you withhold here depends on the employee's withholding selections on their
The amount each employee withholds varies based on their earnings, filing status, and other factors..
Additional Medicare tax: Depending on the employee's
they may be subject to this additional 0.9% tax. You must withhold this tax from employee wages that exceed $200,000 per year.
Anything else about Texas paychecks that I need to know?
Here are a few other important things to know:
report new hires
to the Texas Attorney General's Office within 20 days of their first day. If you fail to do so, you may be fined.
You must give pay stubs or another type of written earnings statement to your employees at the end of each pay period. Pay stubs must include the following information: employee name, number of hours worked during the pay period, their rate of pay, any deductions made and for what purpose, and their
gross and net pay
Non-exempt employees must be paid at least twice per month.
Hourly employees must be paid 1.5 times their regular hourly rate for any time worked beyond 40 hours in a week.
If you terminate or lay off an employee, you must pay the employee their final paycheck within six calendar days (or the next workday if the sixth day is on a day when the business is usually closed). If an employee voluntarily leaves, the final paycheck is due on the next regular pay date.
Ready to hire your next employee? Calculate their paycheck here and explore the true
cost of hiring an employee in Texas