What to Know About Texas Paychecks
Payroll taxes can be overwhelming when you’re
starting your business
There are federal taxes, state taxes, and even local and city taxes in some locations.
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.
(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 0.36% and the maximum rate is 6.36% in 2019. 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:
Federal Insurance Contributions Act tax
is made up of the Social Security tax and Medicare tax.
Employers and employees each contribute 6.2% of wages up to $132,900 for the Social Security tax in 2019. For the Medicare tax, each pays 1.45% of wages. Note: the Medicare tax has no wage limit.
FUTA: In 2019, the federal unemployment tax rate is 6% on the first $7,000 of each employee’s wages each year.
Most employers qualify for the much lower rate of 0.6% by paying their state unemployment taxes on time and earning a 5.4% federal tax credit.
Federal income tax: The amount withheld is based upon the employee’s
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.
Other Texas paycheck rules to know
Here are a few other essential things to know:
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
during the pay period, any deductions made and their 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.
Rather leave the numbers to someone else? An
automated payroll system
an experienced accountant
can help you with the payroll process.