Wednesday, March 2, 2011

Payroll taxes - Federal and State

Payroll taxes:
Both Federal and State have payroll taxes.
Federal payroll taxes are also called FICA taxes. They are divided into Social Security and Medicare taxes.Both the employer and the employee pay both Social Security and Medicare taxes. For 2011 the Social Security rate is 6.2%. for employers and 4.2% of the employees first $106,800 in wages. The Medicare tax is 2.90% (1.45% for employee and 1.45% for employer) and there is no wage base/limit for it.

Self-employed individuals are responsible for paying both the employee and the employer portions of the Social Security tax and the Medicare tax.

California has 4 payroll taxes- Employment Training Tax(ETT), Unemployment Insurance(UI),State Disability Insurace (SDI) and Personal Income Tax(PIT). ETT and UI are paid by employers whereas SDI and PIT are withheld from employee's wages.


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