Resources The United States

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Overview

The U.S. consists of states, the District of Columbia and the island state of Hawaii. The U.S. is the largest economy in the world. Along with its educated workforce, the U.S. remains one of the top locations for a business to expand into. However, different states have their own laws around tax and wages which makes setting up payroll a complicated process.

The United States Payroll Facts

  • Population : 323.1 million
  • Working Population : 205.6 million
  • Currency : US dollar
  • Minimum Wage : Federal minimum $7.25
  • Identity Number : Social Security Number
  • Number Of Pay Periods : 26
  • Main Languages : American English
  • Capital City : Washington, DC
  • Big Mac Index : $5.30
  • Fun Fact : The current 50-star American flag was designed by a 17-year-old as a school project in 1958. He got a B-.

Taxes

Tax year – Jan 1st to Dec 31st.

The federal government enacts laws relating to income tax, social taxes under the Federal Insurance Contribution Act, and unemployment taxes.

41 states, the District of Columbia, Puerto Rico and many localities within these jurisdictions have separately enacted income, wage or occupational tax laws. All states are required to apply their own unemployment tax as part of the Federal Unemployment Tax Act (FUTA) program

Taxable income Tax on this income
Up to $9,525
10%
$9,526 to $38,700
12%
$38,701 to $82,500
22%
$82,501  to $157,500
24%
$157,501 to $200,000
32%
$200,001 to $500,000
35%
over $500,000
37%

Tax forms which are important in the states include the W-3. This is a transmittal form which is sent to the Social Security Administration showing total earnings, Social Security wages, Medicare wages and withholding for all employees for the previous year.

The W-2 form is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. An employer must send the Form W-2 to employees on or before January 31st.

 

Healthcare & Benefits

The Federal Insurance Contributions Act (FICA) requires U.S. employers to withhold Social Security and Medicare contributions from employee paychecks.

Your responsibility for providing insurance to your employees will depend on the number of full-time equivalent employees your business has.

The health care law does not require employers to provide health insurance for their employees. However, employers with 50 or more full-time employees that do not offer insurance, offer insurance that is unaffordable, or offer coverage that does not meet a minimum value standard will be subject to fees.

Expatriates

Foreign workers in the U.S. generally are taxed on income sourced in the U.S., may be covered under the U.S. Social Security and Medicare programs, and are covered by federal labour law.

In order to prevent the double taxation of income earned by U.S. citizens living abroad, the U.S. tax code contains provisions that can reduce or eliminate an expat’s obligation to pay U.S. taxes. Expats are also generally allowed to use foreign taxes paid as a credit against their U.S. tax obligation

In many countries, individuals are allowed to contribute to a pension plan or other investment savings plan and enjoy tax deferral until distributions are made from the plan upon retirement. This has no bearing on the U.S. tax treatment of your foreign plan.

 

Work Leave & Holidays

U.S. law does not require employers to grant any vacation or holidays, and about 25% of all employees receive no paid vacation time or paid holidays.

Employers are required by law to give new mothers 12 weeks unpaid leave. The U.S. is one of the few countries who has not passed laws requiring a business to offer paid maternity leave.

United States National Holidays
New Year’s Day
1st of January
Martin Luther King Day
15th of January
Memorial Day
28th of May
Independence Day
4th of July
Labor Day
1st of May
Veterans Day
11th of November
Thanksgiving
23rd of November
Christmas Day
25th of December

Navigating U.S. payroll can be a complicated process. The key is having the correct information and right strategy in place for your business. Relying on a trusted service provider for payroll allows businesses to focus on growth while remaining fully compliant.

To learn more about United States tax and payroll speak with one of the Immedis experts here.