The payroll tax is something that all employers and employees should know about. When an employer processes payroll, the taxes that are withheld from the employee’s income are payroll taxes.
At a glance, there are two types of payroll taxes. The income taxes and FICA taxes. You pay Social Security and Medicare taxes that have a fixed rate and federal income tax depending on your income. If the state or the local government you’re working at taxes wages, you will also pay state and/or local income taxes.
Social Security and Medicare Tax Rate
Social Security and Medicare tax rates have stayed the same for a long number of years. Social Security tax rate is 6.2 percent for employees while the Medicare tax rate is 1.45 percent. This is also the same for employers.
Employers are required to match the Social Security and Medicare tax paid by employees. This is on top of the self-employment tax paid. So for each employee, the employee is responsible for paying an additional 6.2 percent of Social Security tax and 1.45 percent Medicare tax.
Both Social Security and Medicare taxes fall under the Federal Insurance Contributions Act taxes, or better known as the FICA taxes. The rates are the same as always. While the 2021 FICA tax rates are the same, it might change in the future. If that happens, be sure to find it on our homepage.
Federal, State, and Local Income Tax
How much your employer is going to withhold as part of income taxes depends on your income and the information provided on the withholding certificate form, better known as Form W-4. Employees can fill out a Form W-4 for the 2021 tax year to provide the information necessary to withhold tax accurately.
If the tax withheld from an employee’s income isn’t accurate, ask the employee to fill out a new Form W-4 with the most accurate information to the employee’s knowledge. This will ensure that the tax withheld isn’t too much or little in comparison to the expected tax liability.