As an employee you are required to pay applicable withholding taxes to the government. Your employer is responsible for withholding these taxes from your paycheck and for paying them timely to the proper government agency. While you can determine how much tax to withhold from your paycheck to a certain degree, the government regulates other tax withholding.

Federal Tax

Upon being hired, you should have completed a Form W-4 (federal tax form) stating your filing status, number of dependents and any additional taxes you would like withheld. Your employer uses this data plus the IRS withholding tax tables to determine your federal tax amount. For example, for 2010, you can go to page 37 of the 2010 IRS Circular E to figure your federal taxes using either the wage bracket or percentage method displayed. Generally, the more dependents you claim, the less federal tax you will pay. But keep in mind that not withholding enough taxes can lead to you owing the IRS. Use the IRS Withholding Calculator to find out whether you should submit a new W-4 to your employer. The calculator will help you avoid withholding too much or too little tax. You must have your most recent pay stub and income tax return handy. Enter pertinent information such as number of dependents, estimated salary for the year you are computing and estimated itemized deductions. Based on your entries, the calculator will give you your estimated tax for the year.

State Tax

Not every state charges income taxes, so find out from your payroll department or your local department of labor if state taxes apply to you. If so, find out the tax rate. State taxes vary by state and are calculated based on the tax rate, your filing status and your taxable income. Find out whether your state charges city or local income tax such as county or school tax and at what rate.

FICA Taxes

Your FICA (Federal Insurance Contributions Act) taxes are your Social Security and Medicare taxes. The government is responsible for setting the yearly FICA withholding percentage. For Social Security, your employer must withhold this percentage, up to the annual wage maximum--6.2 percent up to $106,800 for 2010. Once you reached the annual wage limit, no more withholding should occur from your paycheck until the start of the next year. For Medicare, there is no annual wage maximum. For 2010, the percentage is 1.45; your employer must withhold this amount from all your wages for as long as you are employed.

Source:

IRS: IRS Withholding Calculator

IRS: Circular E: Employer's Tax Guide

Money Zine: FICA Tax

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