Mississippi payroll taxes are a vast expanse of information. There are forms and filings that can be disorienting for a new business owner. Mississippi payroll taxes are a bit more difficult to understand than other states. Mississippi employers have to keep track of their gross pay and the withholdings, as well as make quarterly tax payments. However, if you are a Mississippi employer and this is your first time dealing with these issues, don't worry. It isn't as complicated as it sounds. Here is a complete guide.
If you are an employer in the state of Mississippi, you know how complicated payroll taxes can be. Fortunately, there are some helpful resources to consult when you need guidance. Our in-depth guide will cover everything from taxes for different types of businesses, withholding rules for federal and state income taxes, minimum wage laws and whether or not your small business employees need worker's compensation.
You've heard of payroll taxes before, but do you know what they are? In this article, we'll look at Mississippi payroll taxes and how they impact your business:
- What are Mississippi payroll taxes?
- Mississippi Payroll Tax Registration
- How much is the Mississippi income tax rate?
- Who needs to pay Mississippi income tax?
- Mississippi Payroll Tax Withholding and Filing Requirements
- Federal Income Tax
- Mississippi State Income Tax
- Social Security and Medicare Tax
- How do you calculate state taxes in Mississippi?
- Mississippi Unemployment Taxes (SUTA)
- Wrapping Up
- Key Takeaways
This guide breaks down the fundamentals of Mississippi payroll taxes, including the employee state tax, employer withholding tax, unemployment insurance tax and other related taxes.
What are Mississippi payroll taxes?
Mississippi payroll taxes are all the various tax contributions that your business must make on behalf of its employees. The main types of Mississippi payroll taxes include:
- Federal income tax withholding
- Mississippi state income tax withholding (no state income tax)
- Federal unemployment tax (FUTA)
- State unemployment tax (SUTA)
The Mississippi payroll taxes are a combination of federal, state, and local taxes that are withheld from employee paychecks or paid by the employer.
Mississippi employers are required to collect and remit payroll taxes quarterly to the Mississippi Department of Revenue (MDOR) using Form 80-105, Employer Withholding Tax Return.
The Mississippi Payroll Tax System (PTS) is a tax collection system that allows businesses to report, pay and view all of their payroll taxes electronically. This includes withholding tax and employer contributions for unemployment insurance, workers' compensation, and the Mississippi Department of Revenue.
Payroll tax responsibilities include:
- Withholding and paying Mississippi income taxes
- Withholding and paying the state unemployment tax rate (SUTA)
- Withholding and paying local unemployment taxes (SUTA)
- Paying the employer portion of Social Security and Medicare taxes
- Filing Mississippi payroll tax reports
Mississippi requires employers to file quarterly wage reports on or before the last day of the month following the end of each calendar quarter. By using PTS, businesses can submit wage reports online in real-time, which eliminates the need to mail their paper reports in.
While many small business owners choose to handle their payroll taxes themselves, it can quickly become confusing and time-consuming. That's why many small business owners choose to outsource their payroll.
Mississippi Payroll Tax Registration
The first step of setting up a payroll system is to register with the Mississippi Department of Revenue (DOR) and obtain a Federal Employer Identification Number (FEIN). You can register for a FEIN online or by mailing a completed Form SS-4 to the Internal Revenue Service (IRS).
Employers in certain industries, such as home healthcare and private security, may also be required to register with other state agencies.
Mississippi Unemployment Insurance Tax Registration
The Mississippi DOR requires businesses that have one or more employees to register for unemployment insurance. You can apply for unemployment taxes through the DOR's website or by submitting Form UCE-120, Unified Business Application.
Employers who have employees working in Mississippi must register for the following Mississippi payroll tax accounts:
- Mississippi Unemployment Insurance (SUTA)
- Mississippi Workers' Compensation (WC)
Employers who do not withhold state income tax from their employee's paychecks must register for a Mississippi withholding tax account. Employers who are required to withhold federal income taxes from their employees' paychecks must also withhold Mississippi state income taxes and will automatically be registered for a Mississippi withholding tax account when registering for a Federal Employer Identification Number (FEIN).
Employers who do not withhold federal income taxes but still need to withhold state income or sales tax must register the state tax with the Department of Revenue. For most employers, registration is easy and can be done online through the Taxpayer Access Point. In just a few minutes, you can be registered and ready to file your returns electronically.
How much is the Mississippi income tax rate?
Mississippi's tax brackets are indexed for inflation and are updated yearly to reflect changes in the cost of living. Mississippi has four marginal tax brackets, ranging from 3% (the lowest Mississippi tax bracket) to 5% (the highest Mississippi tax bracket). Each marginal rate only applies to earnings within the applicable marginal tax bracket.
Mississippi has a state sales tax rate of 7%. Counties, cities, transit, and special purpose districts have the option to impose additional local sales and use taxes. These local taxes bring the total sales and use tax rates that can be charged by local taxing jurisdictions to as much as 10.25%.
- Mississippi's income tax rate is 5%. It's a flat rate, which means that all Mississippi residents pay the same percentage
- Mississippi has a number of income tax deductions and exemptions. The most common deductions include allowances for dependents and personal exemptions
- Mississippi state taxes are due annually on April 15*
Mississippi collects a state income tax at a maximum marginal tax rate of %, spread across tax brackets. Like the Federal Income Tax, Mississippi's income tax allows couples filing jointly to pay a lower overall rate on their combined income with wider tax brackets for joint filers. Mississippi's maximum marginal income tax rate is the 1st highest in the United States, ranking directly below Mississippi's percentage.
Mississippi has a progressive state income tax system with rates that range from 3.0% to 5.0%. The state also assesses a 1% tax on all taxable income, which is deductible on federal returns. Local jurisdictions may also impose income taxes.
The Mississippi Department of Revenue enforces payroll reporting and payment requirements for the state. All employers are required to withhold state income tax from their employee's wages unless the employee has filed Form W-4ME and claims exemption from withholding. The current statewide withholding rate is 5%, and there are seven income tax brackets ranging from 3% to 5%. Mississippi does not allow local income tax withholding.
Who needs to pay Mississippi income tax?
As with most states, employers are required to withhold a portion of their employees' paychecks for Mississippi income tax. However, the state's income tax rate is one of the lowest in the country.
Any business that collects more than $5,000 in monthly sales or whose business location is inside Mississippi must register for a sales tax account and collect sales tax from customers. The amount of tax collected depends on where a customer lives. If a customer lives within the same taxing jurisdiction (county, city) as the taxpayer, the full local rate should be collected for all transactions. If a customer lives within another taxing jurisdiction, only the difference between the two rates should be collected by the taxpayer.
All employers who have employees working in Mississippi are required to withhold state income tax from their paychecks. The amount withheld will be based on the employee's Form W-4 and the state's withholding tables. These calculations can be done manually, but using payroll software can make this process much easier.
Employers are also required to withhold local income taxes from their employees' paychecks if they work outside of Jackson or a handful of other cities that don't require local taxes to be paid.
Mississippi Payroll Tax Withholding and Filing Requirements
Keep in mind that there are two types of payroll taxes: deduction and contribution. Deductions are withheld from employees' wages and paid from employers' accounts. Contributions come from employers' accounts only. Employers must deposit all federal employment taxes using EFTPS (the Electronic Federal Tax Payment System). Employers must deposit all state employment taxes using the Mississippi State Tax Commission's EFTPS site.
When you have employees, you'll need a federal employer identification number (FEIN), which serves as your organization's taxpayer ID number. You can apply for an EIN online or by phone. If you hire employees in Mississippi, you'll also need a state employer identification number (SEIN) from the Mississippi Department of Revenue. To apply for a SEIN, complete the MS-1 application and submit it by mail, fax or email.
Mississippi employers who have employees working in other states are responsible for withholding and remitting income taxes to those states as well as Mississippi. If your business has workers in other states, you may need to register for a reciprocal agreement or file an exemption certificate with those states.
Federal Income Tax
Mississippi employers are required to withhold federal income tax from employee paychecks in addition to state income tax. The federal income tax rate depends on the employee's taxable income, filing status and number of exemptions claimed. The employer must also match what it withholds from employee paychecks.
Mississippi State Income Tax
Mississippi has a flat income tax rate of 5 percent. The employer must withhold an amount equal to that percentage from each paycheck after subtracting the employee's pretax deductions, such as health insurance or retirement plans. The employer must also match what it withholds from employee paychecks.
Social Security and Medicare Tax
Employers in Mississippi must withhold 6.2 percent for Social Security tax and 1.45 percent for Medicare tax from employee paychecks, as well as matching both amounts themselves. Employees earning more than $200,000 in wages will have an additional 0.9 percent withheld for Medicare
How do you calculate state taxes in Mississippi?
Mississippi's income tax ranges between 3% and 5%. The state uses a simple formula to determine how much someone owes: If someone makes less than $5,000, they pay a minimum of 3%. If someone makes more than $10,000, they pay a maximum of 5%. The rate increases with income in between. (Lowest minimum wage earners in Mississippi do not have to pay state income tax.)
Your Mississippi withholding tax is based on the information you provide on your W-4. You can use the IRS withholding calculator to figure out how much your employer should withhold in state taxes.
Employers in Mississippi have to pay unemployment taxes based on a formula that considers several factors:
- What business you're in?
- How many people do you employ?
- How long does it takes for your employees to find new jobs if they leave yours?
- The number of unemployment benefits paid out by your company
State unemployment insurance (SUI) is paid by employers in Mississippi to provide temporary income support to workers who have lost their jobs through no fault of their own.
The SUI tax rate varies depending on your business. The Mississippi Department of Employment Security uses a formula based on the prior calendar year's average to determine your business's rate. For new businesses with no established history, there is a default rate of 2.7% in the first year of operations.
The maximum benefit that an employee can collect from your company is $235 per week. The maximum amount employers must pay for their employees' benefits is $2,500 per year per employee.
Mississippi Unemployment Taxes (SUTA)
Employers in Mississippi are subject to state unemployment (SUTA) tax, federal unemployment (FUTA) tax, and possibly other state payroll taxes. SUTA tax is paid entirely by the employer, while FUTA is split between the employer and the employee.
The Mississippi unemployment insurance (UI) tax funds payments for workers who have lost their jobs. Mississippi's UI tax is a pay-as-you-go tax, meaning you must make deposits of your UI taxes throughout the year rather than at the end of the year.
You must register with the Mississippi Department of Revenue to file and pay employment taxes if you have employees working in Mississippi.
Your Mississippi tax rate is determined by your experience rating. This is based on claims made against your account. The more claims, the higher your rate will be in the future. To ensure that your rate stays as low as possible, you should:
- Promptly respond to all correspondence from the department
- Avoid large layoffs whenever possible
- Make sure you request benefits debit card payments only when they are needed
Mississippi Department of Employment Security (MDES) administers unemployment insurance benefits in the state. Employers are required to file an Unemployment Insurance Quarterly Tax and Wage Report with MDES by the last day of the month immediately following the end of each calendar quarter.
The report can be filed electronically on the MDES website or by mailing a paper copy. Employers are required to pay unemployment taxes quarterly. Employers have until the last day of the month following the end of each calendar quarter to pay their taxes. Payments can be made online, over the phone, through a bank draft, or by mailing a check.
The unemployment tax rates for Mississippi employers range from 0% to 6%. Each employer's rate is based on their history of unemployment claims. New employers will have a lower rate than established employers because new employers have not had time to accumulate claim experience and will be assumed to be below average in claim experience.
Mississippi is an interesting state, as it has some of the most varied laws in terms of payroll taxes, unemployment taxes and their relationship to minimum wage and salary requirements for them. Because of this, it's important to be fully aware of what is expected by the state of Mississippi so that you can be sure to provide adequate employee compensation.
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Employee payroll taxes are comprised of state and federal taxes imposed on employees and withheld by employers.
Employers must withhold Mississippi income tax from their employee's paychecks unless they have completed Form 89-350 and the employee has elected not to have income tax withheld.
For each employee, you must also withhold:
- Federal income tax, based on the employee's wage and filing status
- Social Security (FICA) tax, which funds benefits like Social Security and Medicare
- Medicare (FICA) tax, which funds health insurance for the elderly
- State unemployment (SUTA) tax, which funds unemployment benefits
You will also need to match your employees' FICA contributions. This means that for every dollar your employees contribute to FICA, you must contribute a dollar as well.
Within 20 days of hiring an employee, you must report their information to the Mississippi Department of Revenue's New Hire Reporting Center. You can complete this requirement by phone or online through Employer Direct.
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