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Payroll Taxes Explained
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Social Security Tax (part of FICA)
Funds the Social Security program and as of the most recent data, the rate is 12.4% split evenly between employer and employee (6.2% each).
Medicare Tax (part of FICA)
Funds Medicare and has a rate of 2.9%, split evenly between employer and employee (1.45% each), with an additional 0.9% for high earners.
Federal Unemployment Tax (FUTA)
Funds unemployment compensation programs and has a federal rate of 6.0% on the first
State Unemployment Tax (SUTA)
Varies by state, employers pay this tax to fund their state's unemployment insurance program.
Additional Medicare Tax
A 0.9% tax that applies to individual incomes over 250,000 for married couples filing jointly.
Self-Employment Tax
Consists of the employer and employee portions of Social Security and Medicare taxes, totaling 15.3%.
Gross Pay
The total earnings of an employee before payroll taxes and other deductions.
Net Pay
The amount of an employee's earnings after all deductions, including taxes, insurance, and retirement contributions, have been taken out.
Payroll Withholding
Amounts withheld from an employee's wages by the employer to pay part of the employee's income tax liabilities.
Employer Payroll Tax Responsibilities
Employers are responsible for withholding the correct amount of taxes, contributing their share of taxes, and submitting all taxes to the appropriate authorities.
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