How to Calculate Payroll Taxes for Small Beauty Businesses

Hiring new staff is essential for expanding your business. If you have the budget to afford the help, it can be worth the investment to take on new employees. Staffing more employees also means taking on more expenses, but paying your employees their hard-earned salaries shouldn’t be the hard part – it’s what comes after: the small business payroll taxes. Filing taxes was never a walk in the park, but having to manage it yourself for a staff of people can be even more complex. 

This article will cover how to calculate payroll taxes for small businesses, including a breakdown of what they are and the different types, and a step-by-step guide through the calculation process.

What Are Payroll Taxes?

Payroll taxes are a certain amount of money paid to the federal government (and in some cases, withheld from your employees’ salaries) to subsidize insurance programs like Medicare, Social Security, and disability. Most employees are required to pay into these federal insurance programs, and as their employer, this becomes your responsibility. 

It is crucial to properly manage your small business payroll taxes, as your employees’ livelihoods – and the financial health of your business – depend on it.

Types of Small Business Payroll Taxes

Before you start learning how to calculate payroll taxes for your small business, it’s important to understand each type and what they’re for. Here, we break down three different types of payroll taxes, their percentages, and who pays them. 

Federal Insurance Contributions Act (FICA) 

FICA taxes are federal payroll taxes paid by employers and employees, and are deducted from the employee’s gross pay. This tax funds Social Security and Medicare, as well as retirement and disability, which provides benefits for seniors now – and eventually, you! These safety nets ensure that those who paid into these programs during their careers can have the coverage they need when they reach a certain age or are no longer working. 

The total 2025 FICA tax rate is 15.3%, but you and the employee split this amount, with each of you paying your share of 7.65%. This payroll tax percentage includes the social security tax rate of 6.2%, plus the medicare tax rate of 1.45%. 

If you’re self-employed, you’ll need to pay the FICA tax equivalent known as the Self-Employed Contributions Act (SECA), which is a payroll tax on net earnings. This program also funds Social Security and Medicare, and like FICA, gets taxed at 15.3% (with 12.4% reserved for Social Security, and 2.9% for Medicare). However, self-employed workers may deduct the employer portion of the tax so they don’t need to shoulder the entire financial burden themselves.

Federal Unemployment Tax Act (FUTA)

FUTA taxes are federal payroll taxes paid by employers exclusively, which means you cannot deduct this from your employee’s wages. These taxes fund unemployment programs, which workers can take advantage of should they lose their job. 

The FUTA payroll tax percentage is 6%, and applies to the first $7,000 of employee income. (Under certain conditions, though, you may qualify for up to 5.4% in credit.)

State Unemployment Tax Act (SUTA)

Also known as State Unemployment Insurance (SUI), SUTA taxes are another employer-exclusive tax, and required by every state to help fund the state unemployment system. Alaska, New Jersey, and Pennsylvania are the only exceptions to this rule, allowing employers to withhold some of these funds from employee wages. 

Since specific industries, employee wage bases, and state laws directly influence how much you owe, the actual payroll tax percentage varies. Typically, this amount ranges anywhere from 0% to 15%. 

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Steps to Calculate Payroll Taxes for Small Beauty Businesses

To learn how to calculate payroll taxes for small businesses, you’ll need to understand each step of the process and what it entails. 

Determine employee gross pay

Figuring out your employee’s full income for the year is the first step in calculating accurate payroll taxes. The employee’s gross pay is their total income, including compensation like tips, commissions, bonuses, and overtime pay, but before any withholdings or deductions. This step can be easier when the employee receives an annual salary, but for hourly employees, calculate their income by multiplying their hours worked by their hourly rate. 

Calculate federal income tax withholding

An employee’s W-4 form typically determines their federal income tax withholding. Also known as an Employee’s Withholding Certificate, this document will help your staff determine their filing status, as well as how much you can take from their wages. Though it may be more tempting for employees to keep as much of their earnings upfront, this can result in more tax responsibilities on their end later. 

Calculate FICA taxes

To calculate FICA taxes, multiply the employee’s gross pay by each of the tax percentages for both Social Security and Medicare. Remember that once you calculate the employee’s FICA total, you will have to match that amount as your employer contribution toward the IRS. 

For example:

• Employee salary: $75,000 per year
• Social Security tax: 6.2% x $75,000 = $4,650
• Medicare tax: 1.45% x $75,000 = $1,087.50
• FICA total: $4,650 + $1,087.50 = $5,737.50

Social Security taxes are only applicable up to the year’s wage base limit. (In 2025, this amount is $176,100, an increase from 2024’s previous limit of $168,600.) This means that once an employee reaches that limit, they are no longer taxed for Social Security on any of their earned wages for the rest of the year. 

For Medicare, if your employee earns more than $200,000 annually, you’ll have to withhold an additional 0.9% from their salary. However, you will not be required to match this extra amount. 

Include state and local income taxes if applicable

State and local income taxes depend on a number of factors, such as where your business is located, which states your employees report their income, and how your business is structured (such as S-Corp, LLC, etc.). 

Calculate FUTA and SUTA taxes

FUTA and SUTA taxes are determined at both the federal and state levels, respectively. The FUTA tax rate for 2025 is 6% and only applies to the first $7,000 of an employee’s non-exempt wages, which means the maximum FUTA amount per year is $420. 

As mentioned above, exact SUTA tax amounts depend on specific industries, wage bases, and state laws. Please check your state website for more details on applicable tax rates. 

Deduct any additional withholdings

If your employee receives any fringe benefits such as health insurance or wellness benefits, these may be deducted and withheld from their paychecks (which can also help lower the tax obligation for your employees). You’ll also need to withhold any additional earnings noted on their W-4. 

Summarize employer contributions

Figure out how much tax money you’ll owe per employee. You can get this number by adding up your portion of the FICA tax, plus your FUTA and SUTA amounts. 

Verify and record

If you’re doing your own payroll taxes, make sure you double-check your work and keep logs of all your tax data. In the event of an error, it can be enormously helpful to have an easily accessible record of calculations and employee information. 

Deposit and report taxes

Once you’ve done all the necessary math, you’re ready to deposit and report your payroll taxes. You can file electronically, or physically mail a check, money order, or cashier’s check to the US Treasury. Ensure your deposits and tax reports are filed in a timely manner to avoid late fees or other penalties. 

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Which Taxes Are Employers Obligated to Pay?

Before you go on a hiring spree, understand that as an employer, you’ll be responsible for paying certain taxes on behalf of your employees. 

Employer tax rate

Employers must share half of the FICA tax (15.3%) with their employees, and are required to pay both FUTA and SUTA taxes when applicable. 

Taxable employees

Employers are only responsible for employee payroll taxes for W-2 employees. Independent contractors are not considered employees of the business, and typically don’t have access to any of the benefits of one. 

Simplify Your Payroll Process with GlossGenius

Even if you’ve saved every receipt (and are decently good at math), tax season can be a stressful time. Add taxable employees into the mix, and you can find yourself buried under hours of paperwork – something no small business owner has time to deal with.

Knowing how to calculate payroll taxes for your small business can save you from having to budget for an accountant, but it’s also a time consuming process with no room for error. Even the smallest mistake can result in a mountain of penalties and fines, plus a big headache for your employees. 

Luckily, GlossGenius is a multifaceted software with a range of features to help streamline your business operations. With features like Payroll and Team & Staff, you can manage and pay your team, track hours and commissions, plus automate tax filings, all from one convenient platform. 

Try GlossGenius today and get 14 days free!

FAQs

Is payroll tax flat or progressive?

Payroll taxes are flat taxes, which means employers and employees pay the same percentage across the board, regardless of their total income. Income taxes, on the other hand, are progressive, which means your tax bracket changes depending on your adjustable gross income (total income minus the standard deduction or other itemized expenses). 

Is overtime taxed more?

No, overtime pay is taxed at the same rate as regular wages. However, overtime pay may push annual employee income into a higher bracket, in which case they may end up with a higher tax responsibility.

What are the consequences of late or unpaid payroll tax payments?

If you don’t pay your payroll taxes, you’ll have to fork over a percentage of your unpaid taxes as a penalty (up to 25%). This specific calculation will also depend on the type of infraction – whether you didn’t pay the amount listed on your return, or failed to pay any tax amounts not listed on your return – plus the amount of non-payment time.

Also, if the IRS finds your business negligent in its payroll services, there will be an additional 50% of interest charged on underpayments. 

There are additional penalties for late payments: 

• One to five days late: 2% penalty 
• Six to 15 days late: 5% penalty 
• 16 days late or within 10 days of first IRS notice: 10% penalty
• 10 days after first IRS notice: 15% penalty (maximum)

How can employers prevent payroll tax penalties?

To prevent payroll tax penalties, it’s advised that employers either invest in accounting services by a certified professional, or use payroll software like GlossGenius to ensure they are in compliance with all federal, state, and local tax laws. Paying taxes in full and on time is the best way for employers to avoid fines or conflict with the IRS. 

‍Disclaimer: This information is provided for general educational purposes only. For legal, cybersecurity, or compliance advice specific to your business or situation, please consult a professional.