The Ins and Outs of 2023 Payroll Tax Updates

Many tax years bring about changes, but you should not get caught off guard by the upcoming 2023 tax updates for payroll. Prepare for how you will report your business’s 2023 taxes in 2024 by familiarizing yourself with any planned phase-outs, changes, or inflation adjustments. The Internal Revenue Service presents these different regulations for taxes. Consider your best course of action ahead of time to identify your own business’s adjustments for the future. A forward-thinking approach helps you to better prepare and gives you much more flexibility if your company needs it.

Advanced Micro Solutions’ accounting suite of tools anticipates many of the changes that the IRS presents business owners with in any given tax year. One of our comprehensive tools is AMS Payroll with regularly updated state and federal tax tables. Download our free 1099-etc Demo software today to minimize the risk of facing major surprises with 2023 tax updates for payroll.


Which Payroll Taxes Should Business Owners Monitor?

Employers must manage five standard types of payroll taxes. Each type of tax has its purpose. Understand from the start of your business the calculation and withholding requirements for all of the taxes.

Social Security Payroll Tax – Employers and employees each contribute 6.2% to the overall 12.4% Social Security payroll tax rate. Consider whether you will need to use a tax year other than the current calendar year for your upcoming contributions. Use a tax rate and maximum earnings limit from the beginning of the applicable tax year. Do not switch rates regardless of whether they change during the tax year.

Medicare Payroll Tax – The tax generally remains consistent each year amidst other 2023 tax updates for payroll. Employers withhold 1.45% of the total 2.9% current Medicare tax rate. The Medicare tax has no wage base limit. Apply these taxes to the wages of any household worker that you pay $2,600 or more with cash wages in 2023.

Federal Payroll Tax – Employers must withhold federal payroll taxes from employee paychecks and remit these taxes to the government. Determine an employee’s gross taxable earnings. Use the earnings and apply the applicable payroll tax rate to them. Reference the Internal Revenue Service’s wage bracket table or percentage table. Reduce the risk of incurring harsh penalties with an accounting system that keeps you compliant.

State and Local Payroll Tax – Review your state-specific 2023 payroll tax updates for each tax year in advance. State and local governments impose these taxes on employers and each of their employees. These taxes range from the state unemployment tax and income tax to any local taxes. State and local agencies provide access to information and forms that allow you to report and deposit these taxes.

Unemployment Taxes – The current Federal Unemployment Tax Act (FUTA) rate is 6% on the first $7,000 of the wages that you paid each employee during a particular calendar year. Every employer contributes to the tax. Use IRS Form 940 to report your annual FUTA tax. Do not pay more than $420 annually for each of your employees.


What Can Affect Your Business’s 2023 Tax Updates for Payroll?

Planning your business’s finances and accounting for payroll changes is not a perfect science. Take into consideration the following areas that influenced our taxes in 2023 and will continue influencing them in future tax years.

Inflation – Incomes generally rise when the prices of goods and services increase. Review how the income tax brackets and standard deduction adjust to reflect inflation and what it means for how you pay your employees.

Deductions and Credits Phaseout – The government adjusts tax deduction and tax credit phaseouts. The key 2023 phaseout changes were earned income tax credit, the Alternative Minimum Tax, and IRA contributions.


How Does AMS Help to Prepare Your Business?

Finding a fully comprehensive and functional accounting software program keeps businesses ahead of any 2023 tax updates for payroll or other surprises. AMS Payroll software operates as an add-on module to our base W-2/1099 Forms Filer program. We process “live” or after-the-fact payroll depending on what you need to focus on during a tax season. Users can automatically calculate federal, state, and local payroll taxes.

Process your employee direct deposit payroll information or print any of the 30-plus different check types that we support. Stay up-to-date in our software program with our tax tables. We include tables for the necessary state and federal regulations and update them as needed to reflect the most recent information.

Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.