Payroll Taxes
Published on Nov 19, 2015
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PRESENTATION OUTLINE
Payroll taxes are the State and Federal taxes that an employer, are required to withhold and/or to pay on behalf of their employees. Employer are required to withhold State and Federal income taxes as well as Social Security and Medicare taxes from their employees' wages. Employer are also required to pay a matching amount of Social Security and Medicare taxes for their employees and to pay State and Federal Unemployment tax.
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WHAT IS PAYROLLTAXES
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There are two similar type of taxes. First type are the taxes that an Employee must pay and that are collected or deducted from pay checks by Employers. These taxes are more specifically called either “withholding”, “pay-as-you-earn” or “pay-as-you-go taxes”.
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Second payroll tax involves the taxes Employers are required to pay for their employees. These are directly involved with some of the payroll taxes Employees must pay.
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Workers must pay Federal, State and local Income taxes. Just how much is deducted is determined by the employee on his or her tax status on IRS Form W-4.Tennessee has no income tax but does have a "hall tax" that is, a 6% tax on interest .TN also has a 7% sales tax.
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What is a W-4 form well it's when an employee gets hired the Employer has the employee complete Employee's Withholding Allowance Certificate or knows as a W-4 form. Form W-4 tells you, as the employer, the marital status, the number of withholding allowances and any additional amount to use when you deduct Federal income tax from the employee's pay. If an employee fails to give you a properly completed Form W-4, the Employer withhold federal income taxes from his or her wages as if he or she were single and claiming no withholding allowances.
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What specific taxes are deducted from your paycheck
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Income taxes withheld from payroll are not final taxes, but 'prepayments.' Depending on a worker's tax bracket and deductions, some of this money can be refunded from State and Federal governments come tax time. In other cases, workers may owe more income tax than they've had deducted from their checks.
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- Social Security and Medicare Withholding Rates
Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as Social Security taxes, and the hospital insurance tax, also known as Medicare taxes. Different rates apply for these taxes.
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The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total. All covered wages are subject to Medicare tax.
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Beginning in 2011, insurance companies are required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting a medical loss ratio (MLR) standard. Insurance companies that are not meeting the MLR standard will be required to provide rebates to their consumers beginning in 2012.
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In 2015 Obama care was introduced which includes many benefits,rights,and protections including the requirement for health insurers to cover people with pre-existing conditions. It also expands access to affordable health insurance to almost 50 million low-to-middle income men, women, and children across the country by offering reduced premiums via tax credits and expanding Medicaid and CHIP. The ACA’s expansions of the quality, affordability, and availability of health insurance (along with other aspects of the law) come at a high cost. Assuming all tax provisions remain in place, the revenue generated from these new taxes helps to cover the costs of the program.
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Employers are subject to unemployment taxes by Federal and all State governments. The tax is a percentage of taxable wages with a cap. The tax rate and cap vary by state and by the employer's industry and experience rating. For 2015, maximum taxable earnings 9,000 with an employee deduction of the employer 2015 tax rates is between .15-10.0% according to the ADP. Employers also pay a per-employee federal tax, which funds administrative costs of implementing the unemployment system.
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Looking for Tennessee State tax information? With the latest resources on State tax, Unemployment, Income tax and more.
TennesseeTennessee Department of Revenue
IRS.GOV - payroll taxes
ADP.COM -tax facts
SHRM. ORG- FICA
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