Question

Are the limits different between the employee and the employer? For this question, ignore income taxes themselves and focus on the various types of payroll taxes.

Answer 1

Payroll taxes are all taxes that are collected by federal,state,and local govenments,based on slaries and wages paid to employees.These taxes must be withheld from wages by all businesses that have employees.These taxes are remitted on a semi-weekliy basis,depending on aquantity owed.Many small businesses fall behind in paying these taxes or filing the associated reports at some time during their existence

Three main types of taxes fall under the catagory of payroll taxes.But there are five -

1.The regular income tax that must be withheld from employees' paychecks.Employees can adjust their income tax withholding by filing FORM W-4 with their employer and designating the number of withholding allowances they wish to claim.By adjusting their withholding allowances properly,employees can avoid owing large amount in taxes or providing the govenment with an interest-free loan.

2.Federal Insurance Contribution Act (FICA) taxes.This tax includes contributions to two taxes programs,Social security and Medicare.The tax rate for FICA taxes does not often change but the earnings on which those taxes are applied changes from year to year.Self employed are required to pay both the employer and employee portions of FICA tax

3.Federal Unemployement Tax Act (FUTA).This tax is approximately 1 percent of the first $7000 in wages paid to an employee and is paid in full by the employer.Technically the federal unemployement insurance payroll tax is 6.2 percent of the first $7000 of an employee's wages.

4.State Unemployement Taxes.Unemployement insurance (UI) is a federal - state progeam jointly financed through federal and state employer payroll taxes.The federal portion is the FUTA.The state unemployement tax differs from state to state,the rate being determined by each state seperately and within the state for each employer seperately.

5.Local Pyroll Taxes.Cities and municipalities may impose a payroll tax.These taxes are usually paid by both the employee and employer and vary in range widely.