Expert: Ed McFarland - 3/15/2005

Question
Hi Ed,

  I am an owner of a small business in New Jersey. I am at the point of hiring my first employee.

  I have read the Federal and NJ tax booklets. I have payroll questions maybe you can help?

  From what I read on the federal level the following deductions should be made.

Fed. Inc. Tax ------ Employee
Fed. SS   Tax ------Employee + Employer  ( Rate 12.4% or 15.3% ?, 2005 salary cap $90,000)
            From Publication 15 Circular E pg. 16

Fed. Med. Care ----Employee + Employer  (Rate  2.9 no cap ?)
                              From Publication 15 Circular E pg.16
Fed. Unemployment ---------Employer (Rate 6.2 % salary cap $7,000)
                           From Publication 15 Circular E pg.29

Are these are the only deductions on the Federal level? The SS rate of 15.3 I cannot remember were I found that one, but I remember not being sure of witch to use?

State taxes for New Jersey

Income ---------------Employee
Unemployment ---  Employee ( and Employer ?)
Disability ------------Employee ( and Employer ?)

Do I match NJ Unemployment and Disability, and at what rates?
Did I miss any other deductions?

Thank you for your time.


Don Macaluso  

Answer
You may have to get Workers comp insurance.

Contact the tax department for the state of New Jersey. Tell them what you are going to do and they should provide you with the information.

Go to http://www.irs.gov/businesses/small/article/0,,id=98862,00.html for the IRS information.

Good luck