A Complete Guide to Georgia Payroll Taxes
Nancy Rogers works as a cashier at the age of 74 while struggling to make ends meet on her work income and Social Security benefits of just $709 a month. She lives in Georgia and cannot survive on her meager Social Security benefits, so she has to work even though her body refuses to cooperate.
Her benefits are low since there were years her abusive husband didn’t allow her to work. She had also taken time off from work to care for her father before he died. Rogers relies on Medicare insurance even though she still co-pays for her doctor's visits. She receives only $19 a month in food stamp assistance.
Nancy is in the same boat as many Americans who are either senior, disabled, or survivors of a deceased worker and rely on Social Security even though the benefits don't provide enough income to cover the basic necessities. It is the payroll taxes that are used to fund Social Security benefits and Medicare for people like Nancy, so we must understand the components of payroll taxes in Georgia.
This article deals with the following topics:
- Payroll Taxes in Georgia: What Do They Consist of
- Payroll Taxes in Georgia: Federal Payroll Taxes
- Payroll Taxes in Georgia: Federal and State Income Tax
- Payroll Taxes in Georgia: Federal Payroll Taxes vs. Income Tax
- Payroll Taxes in Georgia: Forms to Be Filled Out
- Georgia, Payroll Taxes: Form G-4
- Georgia, Payroll Taxes: Form W-4
- Georgia, Payroll Taxes: Form W-2
- Georgia, Payroll Taxes: Form I-9
- Georgia, Payroll Taxes: Direct Bank Deposit Authorization Form
- Payroll Taxes in Georgia: How to Calculation
- Conclusion
- Key Takeaways
Federal taxes and Georgia state income tax is needed for the upkeep of the country and state respectively and for the smooth functioning of the govt. Federal payroll taxes, on the other hand, are necessary for funding Medicare and Social Security.
Unemployment taxes are paid by the employers so that the unemployed receive an income in the form of unemployment benefits. All these taxes come under the heading of Georgia, payroll taxes, and have to be considered by employers in Georgia in order to process the payroll of their employees. It is clear that Payroll Taxes in Georgia are necessary to keep many people afloat.
Payroll Taxes in Georgia: What Do They Consist of
As a business owner, you have to take into account Federal payroll tax, the income tax that goes to state and federal funds, and unemployment tax while determining the payroll taxes in Georgia for calculating payroll.
Payroll Taxes in Georgia: Federal Payroll Taxes
Medicare and Social Security programs are funded by the Federal payroll tax component of the payroll taxes in Georgia. These Federal payroll taxes that fund Medicare and Social security are collectively known as FICA (Federal Insurance Contributions Tax) tax contributions.
It is a type of tax where both the employer and the employees contribute. The percentage withheld by an employer from the employees' pay is based on salaries, wages and tips paid and forms a part of payroll taxes in Georgia. Federal payroll taxes are not impacted by people's tax filing status. Whether single or married, the withholding rates are the same.
In Georgia, payroll taxes that fund Social Security go into two trust funds: They are the Old-Age and Survivor's Insurance Trust Fund and the Disability Insurance Trust Fund. The first fund pays retirement and survivor benefits while the second fund is for Federal disability benefits.
In Georgia, payroll taxes also go towards medical expenses. The payroll deductions make their way to two separate trust funds. They are the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund.
The Hospital Insurance Trust Fund pays for hospital care, skilled nursing inpatient care, in some cases, home care, and also the associated administration fees. Since most people pay payroll taxes in Georgia during their working years, they don't pay a premium for hospital care. The Supplementary Medical Insurance Trust Fund assists in covering laboratory tests, screenings, outpatient care, X-Rays, ambulance service, and many additional costs. It also helps with prescription drugs.
Medicare taxes and Social Security taxes together are also known as FICA (Federal Insurance Contributions Act) tax. The Social Security tax is what determines the monthly payment people get after retirement. The Medicare tax covers the cost of medical expenses after the employees retire at the age of 65. The FUTA (Federal Unemployment Tax Act) tax provides insurance if an employee becomes unemployed.
Payroll Taxes in Georgia: Federal and State Income Tax
Income tax refers to the state and federal taxes. In the case of income tax, the employer holds back a part of the income to pay either the state or the Federal department. Once the taxes are paid, the employers can pay back the withheld income to their employees.
Georgia requires employers to withhold state income tax from employees’ wages in addition to the employer-paid unemployment taxes and remit the amounts withheld to the Department of Revenue. Residents of Georgia working outside the state are exempt from Georgia income tax withholding if their compensation is subject to withholding in that state.
If your business has employees working in Georgia, you will need to withhold and pay state income tax on their salaries for services performed inside or outside Georgia. You will also need to withhold and pay taxes on the taxable wages for taxable non-residents for the services performed in Georgia. This is in addition to having to withhold federal income tax for the same employees.
The payment schedule depends on the average amount withheld from employees' wages over time. If you withhold more money, you will need to make withholding tax payments more frequently. The amount for different payment schedules changes from time to time. The rules regarding payments also change over time, so you should check with the Georgia Revenue Department at least once a year for the latest information.
Payroll Taxes in Georgia: Federal Payroll Taxes vs. Income Tax
In Georgia, payroll taxes consists of payments towards medical care tax, unemployment tax, social security tax, state income tax, and Federal Income tax.
- In the case of the income tax, only the employee pays the amount of the tax. Whereas Federal payroll taxes classified under payroll taxes in Georgia draw contributions from both employers and employees
- Income Tax is the tax paid by a person on his wages plus income from all other sources whereas the Federal payroll tax component of the payroll taxes in Georgia is withheld by the employer on just the wages of the employee
- In the case of income tax, the tax slabs vary with the income of a person whereas, in the case of Federal payroll taxes, the tax slabs are fixed regardless of the income
- Income tax is paid by people to ensure the smooth functioning of the govt. while the Federal payroll taxes are paid so that people can directly benefit from taxes as a result of Medicare and Social Security
No local income tax needs to be paid in Georgia regardless of the city you live in. Georgia does not offer short-term disability benefits and does not support reciprocal agreements with other states.
Since, in Georgia, payroll taxes that are deducted are itemized on the employees' pay stubs, the itemized list shows the money that is withheld for Federal and state income taxes in addition to the amounts collected for Medicare and Social Security payments. In Georgia, payroll taxes have to be paid by businesses on a monthly, quarterly or annual basis, and at every payroll run, businesses have to pay Federal and state taxes.
Payroll Taxes in Georgia: Forms to Be Filled Out
If you are a small business, before you can begin determining payroll taxes in Georgia for calculating payroll, your employees will need to complete the following forms:
Georgia, Payroll Taxes: Form G-4
Before employers can determine the payroll taxes in Georgia, employees have to fill out the employee withholding allowance certificate. Georgia has its own form that informs the employer about the state income tax withholding for employees. Employees have to enter their name, address, social security number, city, state, and zip code.
They have to enter their marital status, dependent allowances, additional allowances, and additional withholding. There is also a worksheet for calculating additional allowances. In case employees are claiming exemption from withholding, that too has to be filled out. The form also contains employer details. All the instructions for completing form G-4 are given in the form.
Georgia, Payroll Taxes: Form W-4
All new employees have to complete Form W-4 which informs the employer about how much Federal income tax has to be withheld from their wages to determine the payroll taxes in Georgia.
The employees have to enter their name, address, and social security number. If employees were hired in 2019 or prior to that, employers can continue to use the information provided on the employees' old W-4s. The form aids employees in calculating withholding allowances for dependents and children.
A new W-4 has to be filled out by employees if they work a second job, get married, have a child, or get divorced. Employees can choose to have additional tax withheld or request to be exempt from federal income tax withholding.
Georgia, Payroll Taxes: Form W-2
Employers have to use Form W-2 to report FICA or Federal Insurance Contributions Act taxes for the employees, so employers must provide form W-2 to each employee who had earnings in the prior year. Medicare taxes and Social Security taxes together are known as FICA taxes or federal payroll taxes. These have to be determined to find out the payroll taxes in Georgia.
Georgia, Payroll Taxes: Form I-9
New employees have to complete and sign section 1 of Form I-9 at least by the first day of employment, but not before accepting a job offer. Section 1 of the form contains the following: name, address, telephone number, e-mail, state, zip code, apartment no, city/town, date of birth, and social security number.
Employees also have to declare if they are citizens of the United States, non-citizen nationals of the US, permanent residents, or an alien authorized to work. All employers have to obtain a signed Form I-9 from their employees before employment commences. Section 2 of Form I-9 has to be completed and signed within 3 business days of the employees' first day of employment. Section 3 of the form pertains to the re-verification and rehires.
Georgia, Payroll Taxes: Direct Bank Deposit Authorization Form
Employees who want the employers to net pay directly into their bank account have to fill out a direct bank deposit authorization form stating their bank routing numbers and account numbers. Employees also have to attach a voided check along with the Direct Deposit Authorization form so that the bank can verify the information provided for the bank accounts by the employees.
Generally, a Direct Bank Deposit Authorization form received, in the payroll office, after the 4th business day of the pay period will be processed the next pay period. Despite signing the authorization for Direct Bank Deposit, certain checks may not be automatically deposited into the employees' account but may be handed over to the employees.
For instance, the first check after the payroll office sets up the Direct Bank Deposit, the first check after the payroll enters the authorized changes to the employees' bank or bank account, and the last check paid to the employees after they are terminated from service are generally not directly deposited into the employees' account.
Payroll Taxes in Georgia: How to Calculation
In Georgia, payroll taxes are calculated after determining gross wages. You first have to calculate Federal Income Tax and Federal Payroll Tax using the following steps and then calculate State Income Tax.
- To Calculate payroll taxes in Georgia, determine gross wages in the following manner: In case all the employees are salaried, divide every employee's annual salary by the number of pay periods. In case some employees are working on an hourly basis, multiply their hours worked by the pay rate to compute gross wages for calculating payroll taxes in Georgia
- Calculate pre-tax holdings if your employees contribute to HSA, 401(k), or other pre-tax-holdings. Remember to deduct the correct amount from their gross pay before you calculate payroll taxes in Georgia
- The next step in determining payroll taxes in Georgia is to calculate Federal income tax. Federal taxes can range anywhere from 0% to 37% of taxable earnings, so deduct Federal taxes
- Remember to deduct and match any Federal Insurance Contributions Act taxes while calculating payroll taxes in Georgia. Social Security tax is 6.2% of an employee’s taxable wages until they reach $147,000 for the year. Employers also have to pay a tax of 6.2% up to the wage limit. Medicare tax is 1.45% of each employee’s taxable wages up to $200,000 for the year. For wages above $200,000, there is an Additional Medicare Tax of 0.9%, which increases the rate to 2.35%. Employers have to pay a Medicare tax of 1.45%, but only the employee is responsible for paying the 0.9% Additional Medicare Tax
- The next step is to calculate the Federal Unemployment Tax Act Taxes. This tax is 6% of the first $7,000 of each employee’s taxable income. If employers pay state unemployment taxes in full and on time, they are eligible for a tax credit of up to 5.4%, so the FUTA tax rate becomes 0.6%. Only employers are responsible for paying the FUTA taxes. The employees don't have to pay these taxes
- After calculating Federal income tax and Federal payroll tax, state income tax is determined if the employees' income is greater than the state’s personal exemptions and standard deduction, or if they have an income that is not subject to Federal tax but is subject to state tax
- Georgia has a progressive income tax system, so the more the employees make, the more they are taxed. Georgia’s income tax has six brackets that range from 1% to 5.75%. Business owners have to withhold the correct amount for all employees, especially as their salaries change over time
Conclusion
Even though it is hard for people to get by on just Social Security checks, many people are still doing it. Some people are living months on their social security check that is funded by payroll taxes. Sue David, who lives outside Georgia, is an example of what it is like to live almost entirely on Social Security with no savings and no house to sell.
Ms. David who is 82 years old stayed home when her children were young but then worked for 30 years before retiring as a certified nursing assistant at age 65. Sue relies on payroll taxes to fund her Social Security and Medicare benefits. There are many people like Sue who are relying heavily on payroll taxes in Georgia to see them through in their old age.
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Key Takeaways
- Businesses have to consider Federal payroll tax as well as income tax that goes to state and federal funds, so these have to be taken into account along with the unemployment tax while calculating payroll taxes in Georgia
- Federal payroll taxes that are classified under payroll taxes in Georgia draw contributions from both employers and employees
- Medicare and Social Security programs are funded by the Federal payroll tax component of the payroll taxes in Georgia
- In Georgia, payroll taxes that fund Social Security and Medicare go into two separate trust funds each
- Income tax refers to the state and Federal taxes. In the case of income tax, the employer holds back a part of the income to pay either to the state or the Federal department
- In Georgia, payroll taxes are calculated after determining gross wages. You first have to calculate Federal income tax and Federal payroll tax using the aforementioned steps and then calculate state income tax
- Before computing payroll taxes in Georgia employees have to fill out Form G-4 for state income tax withholding
- Form W-4 has to be completed by employees so that Federal income tax withholding can be determined for computing payroll taxes in Georgia
- Form W-2 has to be completed by employees so that Federal payroll tax withholding can be determined for computing payroll taxes in Georgia
- Form I-9 and Direct Bank Deposit Authorization form also have to be filled out before payroll taxes in Georgia are calculated