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BrianF1986
September 2, 2022
Question

Payroll Tax

  • September 2, 2022
  • 1 reply
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I am a new business owner and finally am attempting to pay myself for the first time. I currently am the only employee on payroll and am confused at why the "employer" portion of payroll tax is so high and adds on roughly 18% additional to the "total payroll cost" to pay myself. Is this additional payroll percentage something that the company has to pay out of the bottom line? If so, the total tax paid between my net pay and what my company has to pay on my behalf is almost 28%. Am I understanding this correctly? This seems astronomically high....But then again, I am super green to this component.

1 reply

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Charies_M
September 2, 2022

Good day,, BrianF1986.

 

I can help your achieve your goal in paying yourself for payroll in QuickBooks Online.

 

When  you pay yourself, you'll want to decide which method to use. You can choose either Owner's draw or Salary. To learn the difference between these two, refer to the information below:

 

  • Owner’s draw: The business owner takes funds out of the business for personal use. Draws can happen at regular intervals, or when needed.
  • Salary: The business owner determines a set wage or amount of money for themselves, and then cuts a paycheck for themselves every pay period.

Then, you'll want to consider the following in your setup:

 

  • Understand how business classification impacts your decision
  • Understand how owner’s equity factors into your decision
  • Understand tax and compliance implications
  • Determine how much to pay yourself
  • Choose salary vs. draw to pay yourself

You can read more of each of these processes on how you can pay yourself as a business owner through this article: Salary vs. owner's draw: How to pay yourself as a business owner.

 

Since you're working with payroll, you might want to check this article for some links about the payroll tasks in QuickBooks Online: QuickBooks Payroll help article hub.

 

The Community is always open if you have other questions while working with payroll. I'll be around to help. Wishing you a great day ahead!

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