Being Smart about Payroll Taxes
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Being Smart about Payroll Taxes
When you get your paycheck, it can seem like most of it is eaten by various taxes. You probably feel a lot like entertainer Arthur Godfrey, who said, "I am proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money."
Things To Know
- Taxes can eat up a good deal of your paycheck.
- Social Security and Medicare taxes contribute toward future benefits.
Types of Payroll Taxes
Every employee has taxes withheld from their paycheck; some may have more taxes than others, depending on where they live. Here are the types of taxes that are typically withheld from a paycheck:
- Federal income
- Social Security
- Medicare
- State income
- Local income
If you live in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming, you will pay no state income taxes. In New Hampshire, you will pay nearly none. Federal income taxes, and state and local income taxes where they are levied, are withheld from your paycheck as a payment toward your yearly income tax obligation.
Social Security and Medicare taxes are contributions toward the benefits you will ultimately receive from those programs when you retire. Social Security takes 6.2% of your wages, up to a certain annual amount, while Medicare takes 1.45% of all wages; Medicare’s take is 2.35% for those earning over certain high wage amounts.
… Don’t forget certain fees
Payroll cards bear some mention, even though they are not tax-related. If you receive your wages via a payroll card—a debit card that is loaded up with your wages—instead of a traditional check or direct deposit, you should be aware that there may be fees involved for accessing your money. There may be fees to get your balance, for calling customer service, and/or for actually using the card.
