How to Calculate Employee Payroll Taxes
Payroll taxes, also known as FICA taxes, are taxes imposed only on earned income such as wages or bonuses. The payroll taxes include the Social Security tax and the Medicare tax. Payroll taxes go to support programs for the elderly and disabled workers. In order to calculate your payroll taxes, you need to know how much you earn, how much you have already had payroll taxes deducted from, and the current payroll tax rates and limits.
Other People Are Reading
Instructions
-
-
1
Look up the current payroll tax rates on the Social Security Administration's website. You can also find the payroll tax rates in the current version of IRS publication 15. For 2010, the rates are 6.2 percent for the Social Security tax and 1.45 percent for the Medicare tax.
-
2
Multiply your pretax income by the current Medicare tax rate to calculate your Medicare tax. For example, if you make $6,000 per month, you would pay $87 in Medicare taxes.
-
-
3
Check your total income to date for the year and compare it with the limit for the Social Security tax. If your income exceeds the limit, you no longer have to pay the Social Security tax. For example, in 2010 the Social Security tax applies only to the first $106,800 of earnings, so if you have already had Social Security taxes charged on at least $106,800 you would not have Social Security taxes taken out.
-
4
Multiply your pretax income by the current Social Security tax rate to determine how much you would have taken out if your year-to-date income does not exceed the annual limit for the tax. Finishing the example, if you earned $6,000 per month, you would multiply $6,000 by 0.062 to find that you would have $372 withheld for the Social Security tax.
-
1
References
- Photo Credit 3D dollar sign with multiple smaller dollar signs. image by Steve Johnson from Fotolia.com
