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The Curious Bag
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The government requires all employers to withhold federal and state payroll taxes from employees' paychecks. Employers are also required to pay their portion of taxes to the government. To avoid fines, these taxes must be paid in an accurate and timely manner.
Federal Tax
All employees must pay federal tax. The amount is based on the number of allowances the employee claims on his W-4 and on the IRS withholding tax tables.
State Tax
Most states require employees to pay state income tax. The amount is dependent on the employees' withholdings. States such as Florida and South Dakota do not impose income tax.
FICA
FICA (Federal Insurance Contribution Act) requires that both the employer and employee pay Medicare and Social Security taxes.
Medicare Taxes
The employee is required to pay 1.45 percent of his annual wages toward Medicare taxes. The employer must pay a matching amount.
Social Security Taxes
The employee must pay 6.2 percent of his wages (up to the annual maximum) toward Social Security taxes. The employer is required to pay a matching amount.
FUTA and SUTA
The employer must pay state unemployment taxes (SUTA), which varies by state. Federal unemployment taxes (FUTA) requires the employer to pay 6.2 percent on the first $7,000 of each employees' annual gross earnings.
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