The 1920s marked the creation of even more taxation, specifically sales taxes were enacted first in West Virginia in 1921.
President Franklin Roosevelt signed the Social Security Act in 1935, and Social Security taxes were first collected in January 1937, although no benefits were paid until January 1940.
The 30s also marked the time when payroll taxes began. Before to the Great Depression, there were no federally mandated insurance or retirement plans. The first set of payroll taxes were used to fund programs like social security, and unemployment insurance.
Up until this point, no progress toward payroll automation had occurred. It was still standard practice to tally employee hours in ledgers and hand write checks with numbers and bank codes. In 1947, General Motors was the first to establish an “automation department” that automated payroll.
In 1957, ADP became one of the first companies to begin the shift from manual to automated payment processing. Additionally, IBM’s first computer was released in 1953, setting the foundation for fundamental changes to automation.
MIT designed the first personal computer, which would make computing more accessible to the masses and in 1962, computer science became an area of study in the U.S., and eventually, an official requirement for businesses looking to stay competitive and automate manual processes.
In the 1960s, Medicare was introduced to rectify the issue of healthcare for the elderly. The FICA tax was increased to pay for this expense.
The alternative minimum tax (AMT), a type of federal income tax, was enacted in 1978 which meant a separate set of rules to calculate taxable income after allowed deductions.
Automation became even more accessible in the 1980s thanks to the arrival of desktop computers. As a result, dozens of payroll companies began to emerge.
Payroll innovators made it simpler and more affordable for companies of all sizes to conduct payroll. In 1982, the American Payroll Association was founded.
The internet was created, and ADP - now one of the largest payroll processors in the U.S. - officially launched their first website.]
Additionally, the 90s marked the introduction of Social Security payroll deductions (1992), which called for an automated, electronic system to manage money behind the scenes for employers.