Income Tax on Payroll

Just processed my company's first payroll for the year. Employment taxes increased $500(unemployment tax increased 65%) so that's an additonal $13,000 out of my pocket that I have absolutely no chance to pass on to my customers. 

So to make up the difference no one is getting a raise this year as it is either that or layoff one admin staff person.
 

Edited by Jackemy 2010-01-14 10:25 AM

I'm genuinely curious as to why this is true.   I'll not be offended if you can't/won't answer.

2010 Federal Tax Table (Annual Married)

Over But Not Over Base Tax Over Tax % 0 13750 0 0 13750 24450 0 10 24450 75750 1075 15 75750 94050 8762.5 25 94050 124050 13337.5 27 124050 145050 21437.5 25 145050 217000 26687.5 28 217000 381400 46833.5 33 381400 99999999.99 101085.5 35

Page 40 of from the following doc on http://www.irs.gov/pub/irs-pdf/p15.pdf

I may be completely mistaken here, but it appears that one of the tables is from what you pay to the government and the other (with the 27%) is from what employers are to withhold from your paycheck.  I suspect they try to withhold more than what you are expected to pay, hence all the refunds that people get.  I hope someone can clarify!

Brian 

That wouldn't be allowed.   The gov't requires that your employer withhold taxes at the rate that they (the gov't) expect you to pay.  If you correctly fill out your W4 with an accurate number of allowances, your return will be very small.   (as you will not be providing the gov't with an interest-free loan!)

The reason people get refunds is that they don't claim any allowances, even though they've got a big mortgage and 3 kids.    (these things account for significant deductions/credits)

Back when I owned my own business, I used to withhold alot of $$$ from my "real job" paycheck, just so I wouldn't get socked with a big bill at tax time.    Sadly, I was usually too conservative and got some decent refunds.  Now that I have a much more predictable income/allowances, I shoot for less than $1000 back at the end of the year.

Not offended what so ever. I own a real estate managment company. We are paid on a percent of gross rents for commercial and apartment units or a fixed fee per unit for condo association. The rents are falling and vacancy rates are increasing in our area so our gross revenues are falling in those property sectors and in those properties that we are paid fixed fees, the competition is such that if we raise rates there is a good chance a competitor will offer a better deal. Heck, I used to never market to my competitors properties but now I am.

Also with the amount of starving contractors out there it has been very difficult to maintain our maintenance rates as clients would rather pay $20 for some starving carpenter than pay $40 for the carpenters on my staff. I have actually had to cut my maintenance rates to 2003 levels just to secure winter work.

So not only are my margins going down but overhead expenses though higher taxes and worker comp rates (which is government set in my state) are increasing.

Gotcha.   thanks for the reply.