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How Do You Determine Withholdings On Payroll Checks?

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How Do You Determine Withholdings On Payroll Checks?

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The Internal Revenue Service requires you to withhold payroll taxes from employees’ income and pay it according to its regulations. These taxes include Social Security (SS) tax, Medicare tax, federal income tax, and most likely, state income tax. The federal government sets the calculation standards for Social Security tax, Medicare tax and federal income tax. The state taxation (revenue) agency mandates the criteria for state income tax. You have to stay abreast of payroll tax laws, which can be changeable, to ensure accurate withholding. Find out the Social Security tax. For years 1990 and later, the rate is 6.2 percent of gross earnings. The yearly wage limit is $106,800 as of 2010. Suppose the employee earns $650 weekly. The calculation would be: $650 x .062 = $40.30 weekly withholding. Figure out the Medicare tax. For years 1990 and later, the Medicare rate is 1.45 percent of all gross earnings. Suppose the employee earns $1,175, biweekly. The Medicare calculation would be: $1,175

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