How to Do Payroll in Washington, D.C.

Paying employees, contractors and government agencies is a daunting task for small businesses. In D.C., the process can be even more complicated because of the mandatory employee health care coverage that has to be paid into personally (via Form 1040). With this in mind, check out our guide on how to do payroll from start-to-finish using Paychex’s software.

The “dc tax withholding form 2021” is the most important document for businesses to file. It’s a very simple form that you can fill out online and print.

In Washington, D.C., setting up your payroll is simple and follows broad government requirements. You’ll need to get a federal EIN, a state tax ID, and an unemployment ID number, as well as register for an employment services number. You should still take the necessary measures to stay in compliance with state payroll laws by following the procedures outlined below.

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Gusto is a great place to visit.

Step-by-Step Instructions for Payroll in Washington, D.C.

Step 1: Get a federal EIN (Employee Identification Number). Every employer, regardless of where they are located, is required to get an EIN. It’s also known as a Federal Tax Identification Number, and it’s used to identify you as a company. Make an account with the Electronic Federal Tax Payment System as well (EFTPS).

Step 2: Obtain a state-issued tax and unemployment identification card. Form FR-500, the Combined Business Tax Registration Application, is required for new firms with workers in the District of Columbia. You will get numbers for both your state tax and unemployment tax as soon as you register with the D.C. Office of Tax and Revenue (OTR).

Step 3: Apply for a job through Employment Services. Employers who pay salaries in the District of Columbia must create an account on the Department of Employment Services Self-Service Portal (ESSP). After you’ve completed the registration process, you’ll obtain an EIN and be able to start filing wage reports and managing your account online.

Step 4: Create an account with your payroll service provider. If your company utilizes a third-party payroll service like Gusto, you’ll need to designate your agent as a third-party administrator and provide him or her power of attorney (POA). After you’ve registered for your Employment Services number, you may complete this step using the ESSP (details in Step 3).

Step 5: Gather employee paperwork. Before you can calculate payroll, you’ll need to gather the following documents from your workers, which you should do during onboarding:

Step 6: Gather your workers’ time sheet records. In order to submit payroll, whether you pay W-2 employees or 1099 contractors, you must collect and approve their hours worked. You may save time and ensure accuracy by utilizing time and attendance software or our free time card calculator, but you can also generate your own time sheets using one of our free time sheet templates.

Step 7: Complete your payroll and pay your workers. In D.C., you must pay your workers on a regular basis at least twice a month. You can calculate payroll on your own, even using Excel, or you may hire a payroll processing firm to do it for you. You must pay your workers when you have processed their paycheck (cash, check, or direct deposit).

Step 8: Payroll taxes in the United States and the District of Columbia. If your company is a sole proprietorship, LLC (Schedule C), or corporation, your federal tax filing will be different. Employers must also submit an Employer Withholding Tax Return with the District of Columbia, either FR-900A (annual filing) or FR-900Q (monthly and quarterly filing).

Step 9: Keep track of your payroll data by documenting and archiving them. Employers in the District of Columbia are required to keep payroll records for up to three years. When recording employee payroll, be sure to include the following information: the employee’s name, address, Social Security number, pay rate, exempt status, and the total amount paid every pay period.

Process yearly Federal payroll reports in step 10. Processing your yearly federal payroll reports is the last step in payroll processing. All regular workers will require W-2s, and all independent contract employees will need 1099s. By January 31 of the next tax year, these forms must be distributed to all workers.

D.C. Payroll Laws, Taxes & Regulations

While the payroll regulations in D.C. are not particularly complicated, they do vary from those in other states. For example, D.C.’s income tax rates are progressive based on your wage, making it the country’s highest tax rate.

Here are a few more things to think about:

• Employers are required to withhold income taxes from D.C. residents who work in the District.
• Virginia and Maryland have reciprocal agreements with D.C. (these residents who work in D.C. have taxes withheld for their home states only).
• Employers must make a full contribution to the Paid Family Leave tax.

Payroll Taxes in Washington, D.C.

Employers in Washington, D.C. must pay payroll taxes, as well as Social Security and Medicare taxes, as required by the Federal Insurance Contributions Act (FICA). FICA is paid in half by the employer (6.2 percent for Social Security and 1.45 percent for Medicare) and the other half by the employee.

Employers must also submit a quarterly Employer’s Quarterly Contribution and Wage Report (Form UC-30) with the IRS.

Income Taxes in Washington, D.C.

The District of Columbia’s income tax rates range from 4% to 8.95 percent, depending on the amount of money earned each year.

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To support the paid leave program, private companies in D.C. must pay a 0.62 percent Paid Family Leave tax. This tax is entirely financed by the employer and cannot be deducted from an employee’s wages.

The Paid Family Leave Act provides for the following:

• It takes eight weeks to form a relationship with a new kid.
• Six weeks to look after a family member who has a severe illness.
• For an employee with a significant health condition, two weeks is the maximum amount of time they may work.

Taxes on Unemployment Insurance (UI)

Employers in D.C. must submit D.C. unemployment insurance taxes in addition to federal unemployment insurance taxes (FUTA). Unlike federal and state laws, there is no minimum wage requirement in D.C. before UI taxes must be paid. This implies that even if you just have one employee, you must pay UI taxes, regardless of how much you pay them.

The typical tax rate for new employers in the District of Columbia is 2.7 percent. This tax, which is levied on the first $9,000 in earnings provided to each employee, is used to support unemployment benefits, which are granted to people who have lost their jobs. Depending on their experience rating, established employers pay a reduced (or higher) tax rate. The following factors influence the experience rating:

• Whether or not a lawsuit has been filed against a company.
• The amount of money spent on taxes
• The average amount of taxable payroll paid by an employer (determined in three-year increments)

What If I Told You…

You will get a 90 percent offset credit against your FUTA taxes if you pay your state unemployment insurance taxes in full and on time.

Insurance for Workers’ Compensation

Any business operating in Washington, D.C., with one or more employees is required to carry Insurance for Workers’ Compensation to cover injuries or illnesses that are a direct result of an employee’s job. This coverage also applies to part-time staff, minors, and domestic workers who work a minimum of 240 hours in a quarter.

The Department of Employment Services is in charge of workers’ compensation, and it gives certificates of compliance and imposes fines on companies that are found to be noncompliant.

Sole-proprietors and partners are exempt from D.C.’s Insurance for Workers’ Compensation requirements; however, they can purchase self-employed workers’ comp.

Minimum Wage Laws in Washington, D.C.

The District of Columbia’s current minimum wage (as of July 1, 2021) is $15.20 per hour. Tipped workers (such as restaurant staff) get a base minimum wage of $5.05 per hour, but if an employee’s tip earnings plus their base minimum wage do not meet the full minimum wage of $15.20 per hour (based on a complete workweek), the employer must make up the difference. Salaried workers are entitled to salary that is equal to or more than the federal minimum wage (currently $31,616 per year).

The table below illustrates how Washington, D.C.’s minimum wage has risen over the last several years:

OAG is the source of this information.

Minimum wage regulations do not apply to the following occupations or groups:

• Executive, administrative, and professional professionals are classified as white collar workers.
• Any salesperson who works outside the office is known as an outside salesperson.
• Child Care – only applies to those who babysit on a regular basis.
• Minors (those under the age of 18) are entitled to the federal minimum wage.

Visit the Office of the Attorney General for D.C. for a complete list of people excluded from minimum wage restrictions under D.C. Code 32-1003.

Overtime Regulations in Washington, D.C.

After 40 hours of labor in a seven-day workweek, employers must pay overtime at the rate of time and a half.

Overtime restrictions do not apply to the following employees:

• Exempt Salaried Employees – covers executive, administrative, and professional employees who are paid a salary.
• Employees of airlines – people who swap work days with other employees just to take advantage of the company’s travel advantages
• Dealership for automobiles Employees – any employee that works in the vehicle sales industry.
• Employees that work in a parking lot or garage are known as parking lot attendants.
• Any worker hired in a private family who resides on the premises is referred to as a live-in domestic worker.

Visit the Office of the Attorney General for D.C. for a complete list of persons exempt from overtime laws under D.C. Code 32-1003.

Different Methods of Paying Employees in Washington, D.C.

Employees in Washington, D.C., may be paid via the following methods:

Employees may be paid via pay card if they have complete access to their salaries without paying a charge at a bank near their workplace.

Pay Stub Laws in D.C.

Employers must furnish workers with a written statement (pay stub) on or before each payday, according to D.C. law. At a minimum, the pay stub should contain the following information:

• Hours worked and net wages paid
• Wages paid in gross
• Wage deductions list

Minimum Pay Period

Employers must pay their workers on predetermined paydays at least twice a month (biweekly or semimonthly). At the employer’s choice, payments may be issued more regularly (daily, weekly). Payment must also be paid within 10 days after the end of the pay period, unless there is a documented agreement in place between the employer and the labor union.

Payroll Deduction Regulations

Every printed pay statement from an employer must contain itemized deductions from the worker’s salary (pay stub). Certain deductions are mandated by law (garnishments, child support). However, no employer may charge or deduct the following from an employee’s pay:

• Breakages
• Walkouts
• Customer check blunders
• Fines
• Assessments
• Charges if the payment brings the employee’s compensation below the legal minimum wage.

Uniforms

Employers in D.C. must either pay the employee 15 cents per hour in addition to the minimum wage for the purchase, maintenance, and cleaning of uniforms required by the employer or by law, or they must pay the employee 15 cents per hour in addition to the minimum wage for the care of washable uniforms.

D.C.’s Final Paycheck Laws

If an employee is fired in Washington, D.C., they must be compensated by the following working day. When an employee resigns, the employer is required to pay them by the next normal paycheck or within seven days after the resignation date, whichever comes first. Because Washington, D.C. Because this is an at-will employment state, neither party is obligated to offer notice of termination.

Severance Pay Laws in D.C.

The law of Washington, D.C., does not mandate severance compensation. If your company’s handbook or employment contract provides for severance pay, it must be handed out in accordance with your policies.

Paid Time Off (PTO) has been accrued (PTO)

Employers are not obligated to give paid (or unpaid) vacation or personal leave to their workers. If a firm decides to provide PTO, it must follow the rules described in its paid time off policy, which include how PTO is accumulated and whether it is on a use-it-or-lose-it basis. Employers in D.C. are likewise not compelled to pay out accumulated PTO or sick leave at the conclusion of work unless otherwise indicated in a corporate policy.

Sick Leave with Pay

The Accrued Sick and Safe Leave Act requires all employers in the District of Columbia to provide Sick Leave with Pay to employees for their own or their immediate family members’ illnesses. The paid leave provided is based on the size of the employer’s business and is accrued as follows:

The COVID-19 Paid Public Health Emergency Leave Requirement states that all employers with 50–499 employees, that are not healthcare providers, are required to provide their employees (full-time and part-time) with up to two weeks of Sick Leave with Pay for reasons related to COVID-19.

HR Laws in D.C. That Affect Payroll

The majority of human resources laws in Washington, D.C. follow federal principles; however, Laws Concerning Child Labor may vary from federal regulations. Businesses employing tipped workers are also obliged to engage with a third party to handle payroll under the Tipped Wage Workers Fairness Amendment Act.

New Hire Reporting in Washington, D.C.

New hires, rehires, and temporary workers must be reported to a state directory within 20 days after hire, according to D.C. law. Any Federal or District employee who conducts intelligence or counterintelligence tasks is an exception.

The Office of the Attorney General of D.C. accepts new hire reports online.

Requirements for Lunch and Other Breaks

There are no lunch or break time regulations in the District of Columbia. This implies that a company is not obligated to offer workers with breaks.

Laws Concerning Child Labor

Several requirements must be observed when hiring juveniles under the age of 18 in Washington, D.C.:

There are also the following laws:

• Minors between the ages of 14 and 15 are not permitted to work in the following occupations:
  • The use of any kind of power equipment, as well as the oiling, wiping, and cleaning of machinery
  • Any construction site activity, including office work, that is done on the construction site itself.
• Minors under the age of 18 are not permitted to work in the following occupations:
  • Working in a quarry, tunnel, or excavation is a dangerous job.
  • Using any non-automated or freight elevator
  • In any place where alcoholic drinks are served

Minors’ Work Permit

When employing minors, the minor must acquire a D.C. Public Schools Office of Youth Engagement Official Work Permit and Child Labor Application. These are usually accessible at any of the District’s public high schools. When you’re ready to hire, just fill out Section C of the application and include a letter of intent to employ. After that, the minor will resubmit the application to the school for approval. Your office will get the permission in the mail.

(Photo courtesy of D.C. Public Schools)

Forms for Payroll

Forms for Payroll in the District of Columbia, beyond the federally required forms, consist of the D-4 form and Form UC30 for unemployment taxes.

W-4 Form for the District of Columbia

W-4 forms should be collected from workers in D.C. by employers. These are nationally mandated paperwork that are used to figure out how many withholding allowances you have. Employers should also get a D-4 form from each employee.

If an employee fails to supply you with a D-4 form, you must adjust the withholding allowances for that employee to zero.

Forms for Unemployment Insurance

Each quarter, employers must submit an Employer’s Quarterly Contribution Wage Report. Those who have household assistance may file once a year.

The final day of the month after the conclusion of each quarter is when reports are due (April 30, July 31, Oct. 31, and Jan. 31). Annual reports must be submitted by April 15th.

Federal Forms for Payroll

• W-4 Form: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
• W-2 Form: This form is used to report total yearly earnings (one per employee)
• W-3 Form: Reports all workers’ total pay and taxes.
• Form 940: This form is used to report and compute the amount of unemployment taxes owed to the IRS.
• Quarterly income and FICA taxes deducted from paychecks are reported on Form 941.
• Annual income and FICA taxes deducted from paychecks are reported on Form 944.
• Non-employee pay information is included on 1099 forms to assist the IRS in collecting taxes on contract labor.

Payroll Tax Resources/Sources in D.C.

Conclusion

Payroll in the nation’s capital, Washington, D.C., is relatively easy; nevertheless, there are requirements to follow in order to remain in compliance, such as paying to the Paid Family Leave tax and adhering to specific labor laws. Remember to register your company, set up payroll accounts, and pay your workers on time.

Consider utilizing Gusto to keep your payroll process simple and compliant. It calculates all payroll taxes, provides several payment choices, including direct deposit, and keeps you informed about state requirements. For a limited time, you can try Gusto for free.

Gusto is a great place to visit.

The “dc tax withholding form 2022” is a document that Washington D.C. employers use to calculate the amount of taxes that an employee must pay on their paycheck.

Frequently Asked Questions

Does Washington DC have a payroll tax?

A: The answer is no. Washington DC, a city in the United States of America does not have an income tax, or payroll tax

How do I process payroll myself?

A: Depending on the company, they may have someone that will process payroll for you. Some companies require a letter from their accountant in order to do so. Others will simply input your information into some form of accounting software and print out a check with what needs to be sent back or pay it electronically via PayPal or Venmo.

How do I register payroll taxes in DC?

A: If youre employed in the United States, your employer pays taxes to the IRS. You can register for payroll tax online at https://www.irs.gov/individuals/ps-form-8846 .

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