In: Accounting
What type of taxes are withheld or deducted from a paycheck? What is the tax rate for each type of withholding tax from a paycheck?
Internal Revenue system has the Federal , State and Local taxes for the Payroll. Every employer deducts certain amount on the Gross earnings of the employee as Follows.
1.Federal Insurance Contribution Act (FICA)
Under FICA there are 2 components
a) Social Security Tax or Old Age Survivors, and disability Insurance (OASDI) - 6.2% on first $132,900 every year
b) Medicare Tax or Health Insurance (HI) - 1.45% on all earnings and
Additional Mediacre Tax - 0.9% for employees earnings over $ 200,000
2. State Unemployment Tax Rate which diifers from state to state and the wage base also differs.
So the above mentioned taxes are deducted from the gross earnings of the employee.
Employer also has responsibility to pay his share of Payroll taxes. Following are the diffrent taxes to be paid by the employer for payroll.
1.Federal Insurance Contribution Act (FICA)
Under FICA there are 2 components
a) Social Security Tax or Old Age Survivors, and disability Insurance (OASDI) - 6.2% on first $132,900 every year
b) Medicare Tax or Health Insurance (HI) - 1.45% on all earnings and no additional medicare tax applicable for the employer
2. State Unemployment Tax Rate (SUTA) which diifers from state to state and the wage base also differs.
3.Federal Unemployment Tax Rate (FUTA) - 6% on first $ 7,000, However, after availing the credit of 5.4%, employer pays only 0.6%
Hence above mentioned are the taxes paid by the employer for his payroll tax after deducting from employee's gross earnings.