Payroll tax percentage
Payroll tax deductions are the major source of tax revenue for the state and federal government, generating funds for the unemployment and welfare checks. Payroll tax is the federal and state taxes that an employer is required to deduct and pay to the government on behalf of employees. Federal Insurance Contributions (FICA) taxes, they are social security and Medicare. Both are payable on gross income, with no withholding exemptions are allowed.
Tax percentage imposed
Federal taxes percentage cut-out are computed based on gross wages reduced by the number of exemption claimed by the employee on W-4 form. The amount of persons federal income tax depends on several factors such as- the taxpayers marital status, the number of children or dependants the taxpayers has, whether or not he is an employee. The FICA tax is a kind of payroll tax imposed in an equal amount on employers to fund federal programs for retirees, the disabled and children of deceased workers.
Social Security and Medicare taxes are withheld form the employee\'s wages. As an employer, amount of FICA taxes should match with an employee. As of 2007, the social security tax percentage is 6.2%. The employee must have 6.2%withheld from their wages for social security taxes and employer pays a matching amount is social security taxes until the employee reaches the wage base for the year. The wage base for social security tax in 2006 was $94,200 and for 2007 is increased to $97,500. Once the tax is earned, employer and employee neither of both owes any social security tax. The Medicare tax percentage is 2.9% for the employee and for employer. The employers withhold 1.45% of an employee\'s wages and pay a matching amount for Medicare tax.There are no maximum wage percentage bases for the Medicare portion of the FICA tax.
Both the employer and employee continue to pay same percentage for Medicare tax, no matter how much is earned. Each employer pays state and federal unemployment taxes (SUTA AND FUTA). The FUTA rate is 6.2%, normally rate nets 0.8% because the employers is allowed to take a credit of up to payroll tax percentage 5.4% for SUTA taxes and that is paid and employer is eligible for the maximum credit.The wage base percentage for FUTA is $7,000, the employer is liable for FUTA only on the first $7,000 of compensation paid to each employee per year. Each state has different payroll tax percentage; so that employers must consult the state requirements for each application state regarding the taxes percentages and maximize the percentage of wage base. Indiana requires new employers to pay 2.7% for the first 3 years for an average starting rate until an employment history to be created. Social security and payroll tax percentage is 6.2%, and Medicare and payroll tax percentage is 1.45%. Both are payable on gross income, with no withholding exemptions are allowed. So, the total rate is 7.65% to be withheld from each employee.
Thus, there are some measures that state and federal tax structures that calculate the income percentage and then deduct percentages for tax from income of an employee.
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