Nevada is renowned for its lenient taxation policies, but does this apply to payroll taxes? If you’re starting a new business in Nevada or relocating yours here from afar, you’ll want to know about your payroll tax obligations. Falling behind on your taxes can lead to costly fines and penalties, possibly causing you to change your business plans to handle them. Take some time to learn about Nevada’s payroll tax laws so you can stay ahead of your obligations and keep your business in good standing.
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Does Nevada Have Payroll Tax?
Payroll taxes refer to any federal, state, or local taxes that are levied on wages or salaries, which may be paid by employees or employers depending on how they are formulated. At the federal level, payroll taxes include Medicare, Social Security, and unemployment taxes. Nevada doesn’t have a personal income tax, which is typically a major source of payroll taxes at the state level. However, the state does levy several other forms of payroll taxes which you’ll need to take into consideration.
Nevada’s levies a General Business tax on all businesses, but the amount businesses must pay toward this varies depending on their gross revenues. Nevada also levies an unemployment insurance (UI) tax on all businesses, which is also dependent on the size of their payrolls. There are also some industry-specific payroll taxes, including a tax for businesses in the financial and mining sectors. Nevada doesn’t allow businesses to withhold taxes, meaning your business will be obligated to pay them from your own finances, not those of your employees’.
How Much Is Payroll Tax in Nevada?
As there are multiple different payroll taxes in Nevada, each has its own set of conditions for businesses, which may be subject to change. In most cases, if businesses don’t qualify to pay a tax, they still must file that they have a $0 tax obligation. As you’re not allowed to withhold taxes from employees, you’ll need to factor in these expenses to your cash flow. However, businesses are allowed to deduct health insurance expenses from their payrolls, which can significantly lower their burdens if they offer coverage to their employees.
As on 2019, Nevada’s General Business tax is 1.45% for businesses with quarterly gross payrolls in excess of $50,000. In addition, employers face an unemployment insurance (UI) tax that ranges from 0.25% to 5.40% for gross annual wages greater than $31,200. New businesses must pay a UI tax of 2.95% tax on wages until they qualify for an experience rating, which may lower their burden, and must also contribute 0.05% of gross wages to the Career Enhancement Program. Financial and mining businesses must pay a 2% tax on gross wages after health care deductions.
Does Nevada Have State Withholding Tax?
Withholding is a practice tax authorities use to collect income taxes throughout the year instead of all at once when they are due. In short, since Nevada does not have a state income tax, it has no state withholding tax. This means employers aren’t obligated to withhold those taxes on their employees. However, they are still responsible for withholding for federal income taxes, which means they’ll still have to plan their own finances with this in mind.
Related: What Happens if You Pay Your Quarterly Taxes Late?
What Is the Federal Withholding Tax Rate in Nevada?
Federal withholding rates are the same nationwide and aren’t subject to variation by state. Federal payroll taxes consist of three separate taxes, Medicare, Social Security, and Federal Unemployment taxes. Federal Insurance Contributions Act (FICA) taxes consist of two separate taxes that go toward Medicare and Old Age, Survivors, and Disability Insurance (OASDI), or Social Security. The Federal Unemployment Tax Act (FUTA) tax is designed to fund unemployment benefits for employees.
Employers and employees split the cost of their contributions to federal payroll taxes. Medicare taxes are a flat 2.9% of gross wages up to $200,000 (or 1.45% for employers), at which point there is an additional tax of 0.09%. As of 2019, the federal government also withholds 12.4% of gross wages up to $132,900 for Social Security taxes, with employers and employees each paying 6.2%. Businesses must pay 6% toward the Federal Unemployment tax on the first $7,000 of gross wages for each employee, but this can be dropped to 0.6% if they pay their state unemployment taxes early.
Nevada is in many ways a tax haven, but your business will still have to pay some here. It’s important to be aware of your obligations before making a move here or opening your doors for the first time. As tax laws are subject to change, it’s good to get refreshed on them, even if you’ve been in business for years. Working with an experienced tax professional can help you avoid any surprises, and the fees that come with them, while keeping you up on your tax obligations.
