Income Taxes and Withholdings

Thanks to income taxes, what you take home is probably a lot less than what you earned.

Thanks to income taxes, what you take home is probably a lot less than what you earned.

Each time you get paid, your boss calculates the tax owed on your income and withholds that amount from your paycheck. These taxes consist of Social Security, Medicare, federal and usually state income tax. If your city charges a tax, he must withhold that as well. All the taxes your boss withholds are applied to each of your tax accounts, which go toward the year's tax bill.

Does Income Tax Held by Employers Cover Tax Liability?

Whether the income tax your boss withholds from your paycheck is enough to cover your tax bill depends on you. It's your responsibility to make sure you fill out Form W-4 correctly. If you do, the withheld amounts will probably cover your tax liability. Follow the instructions on Form W-4 to account for you, your spouse and any other dependents. If your partner also works, you have to consider that income, too. If you still are concerned about owing extra tax, consider having your employer take out a little extra each pay period, which you can request on your W-4.

How Much Tax to Withhold From Self Employment Earnings?

Self-employed Nesties don’t have the luxury of having income taxes withheld from their pay. If you want taxes withheld, you'll have to do it yourself. Your income tax can vary from 10 to 35 percent, depending on your taxable income and filing status. Fill out Form 1040ES to estimate your taxes for the year. If you expect to owe more than $1,000 in taxes, you have to make quarterly income tax payments to the Internal Revenue Service. Some states also require you to prepay taxes. For example, if you expect to owe more than $200 in Wisconsin or $1,000 in Arkansas, you have to make quarterly tax payments.

What Is the Amount of an Employer's Share of the Payroll Tax Expense?

Your employer has to pay three different taxes: FICA, FUTA and SUTA. FICA is a combination of the employer's portion of the Social Security and Medicare taxes, which he has to pay each time he makes scheduled tax deposits. As of 2012, the employer portion of the Social Security tax is 6.2 percent of the first $110,100 of each employee's wages and 1.45 percent of all taxable income for Medicare. FUTA is the federal unemployment tax, which is 6 percent of the first $7,000 of each employee's pay. SUTA is the state unemployment tax. The percentage and income base vary by state.

Does an Employer Have to Take State Tax?

If the state that you live in collects income tax on wages, your employer will have to collect and deposit state income taxes. Although most states base income taxes off a percentage, each state is different. For more information on requirements and your state's procedures, contact the state's department of revenue.

Can Employers Tax Waitress Tips?

Waitresses earn their living differently from most other professions -- mostly through tips and a small hourly wage. A waitress's tips are taxed the same way regular income is taxed. The only difference is that a waitress gets her money before the employer calculates the withholding. Per IRS policy, waitresses have to report all tips from the previous month to their boss by the 10th of the next month. The employer adds the tip amount to her hourly wages then calculates and withholds the taxes based on the total earnings.

About the Author

Angela M. Wheeland specializes in topics related to taxation, technology, gaming and criminal law. She has contributed to several websites and serves as the lead content editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and criminal justice. She has owned and operated her own income tax-preparation business since 2006.

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