How much of your paycheck goes to taxes
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Federal Income Tax
Federal income tax withholding is based on a percentage of wages over a specific amount. To determine the amount subject to withholding, your employer obtains your filing status and number of allowances from lines 3 and 5 of your W-4 form and applies the IRS Circular E percentage method table that matches your wages after allowances, plus your pay period and filing status. Based on this information, you are taxed on 10, 15, 25, 28, 33 or 35 percent of wages exceeding the indicated amount. To determine the amount of allowance to subtract from your wages, your employer multiplies your number of allowances by the amount the agency specifies per allowance, which is based on your payroll frequency.
As of 2011, Medicare tax is based on 1.45 percent of all of your wages. Therefore, if you earn $460 weekly, you pay $6.67 weekly in Medicare tax. Your employer pays a matching amount in Medicare tax.
Social Security Tax
As of 2011, Social Security tax is based on 4.2 percent of your wages up to $106,800. While Medicare is withheld from all wages earned, Social Security withholding stops for the year when you satisfy the annual wage limit and resumes when the next year begins. Your employer pays 6.2 percent up to $106,800 for the year in Social Security tax. As of September 2011, the employee's contribution was scheduled to return to 6.2 percent on Jan. 1, 2012.
Employee tax rates are generally updated yearly; therefore, for accurate calculation, consult the Circular E for the tax year in question. The Circular E has all federal tax rates. It also includes withholding payment and reporting schedules that your employer must follow. As an employee in Florida, you do not have to file a state income tax return with the Florida Department of Revenue because you are not subject to the tax. However, if you receive a W-2, you must file a federal tax return with the IRS.Source: www.ehow.com
Category: Personal Finance