Payroll taxes are taxes that are withheld from an employee's paycheck and paid to the government by the employer. These taxes are used to fund various government programs and services, such as Social Security, Medicare, and unemployment insurance. Payroll taxes are typically a combination of federal and state taxes, and may also include local taxes in some cases.
The most common payroll taxes are:
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Social Security tax: This tax is used to fund the Social Security program, which provides retirement, disability, and survivor benefits. The current rate for Social Security tax is 6.2% for both the employee and the employer, up to a certain income limit.
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Medicare tax: This tax is used to fund the Medicare program, which provides healthcare coverage for seniors and some disabled individuals. The current rate for Medicare tax is 1.45% for both the employee and the employer, with no income limit.
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Federal income tax: This tax is based on an employee's taxable income and is used to fund various federal government programs and services. The rate for federal income tax depends on the employee's income and filing status.
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State income tax: Some states also have their own income tax, which is based on an employee's taxable income and is used to fund state programs and services. The rate for state income tax depends on the state and the employee's income.
In addition to these taxes, employers may also be required to pay unemployment insurance tax and other state or local taxes.