This article is the current Taxation Collaboration of the Month.

Payroll tax generally refers to two kinds of taxes: Taxes which employers are required to withhold from employees' pay, also known as withholding, Pay-As-You-Earn (PAYE) or Pay-As-You-Go (PAYG) tax; or taxes directly related to employing a worker paid from the employer's own funds: these may be either fixed charges or proportionally linked to an employee's pay. A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ... Employment is a contract between two parties, one being the employer and the other being the employee. ... Employment is a contract between two parties, one being the employer and the other being the employee. ... Look up pay in Wiktionary, the free dictionary. ... In the US, this refers to a deduction from an employees salary by an employer for federal, state and local tax liabilities. ... PAYE (or pay-as-you-earn) is a payroll deduction system for collecting income tax in the United Kingdom. ... PAYG (or pay-as-you-go) is the Australian Taxation Offices system for withholding taxation from employees in their regular payments from employers. ...

Australia

In Australia, the Payroll Tax is a specific tax which is paid to the individual states and territories by employers not employees. It is not a deduction from the worker. The Australian Government itself only requires one tax withheld from paychecks, the PAYG (or pay-as-you-go) tax which includes medicare levies. PAYG (or pay-as-you-go) is the Australian Taxation Offices system for withholding taxation from employees in their regular payments from employers. ...

Brazil

In Brazil employers are required to withhold 11% of the employee's wages for Social Security and a certain percentage as Income Tax (according to the applicable tax bracket). The employer is required to contribute an additional 20% of the total payroll value to the Social Security system, and depending on the company's main activity, must also contribute to federally-funded insurance and educational programs. There is also a required deposit of 8% of the employee's wages into a bank account that can only be withdrawn from when the employee is fired or certain other extraordinary circumstances (called a "Security Fund for Duration of Employment"). All these contributions amount to a total tax burden of almost 40% of the payroll for the employer and 15% of the employee's wages. Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). ...

United Kingdom

In the United Kingdom, Income tax for employees and Employees' National Insurance contributions are examples of the first kind of payroll tax, while Employers' National Insurance contributions are an example of the second kind of payroll tax. An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. ... UK Income Tax and National Insurance (2005–2006) UK Income Tax and National Insurance as a % of Salary (2005–2006) National Insurance is a system of taxes, and related social security benefits, that has operated in the United Kingdom since its introduction in 1911, and wider extension by the government...

United States

In the United States, employers are required to withhold federal income tax, plus one-half of the Social Security tax, and one-half of the Medicare tax. Together, the employer's and employee's shares of the Social Security and Medicare taxes are known as the FICA tax. In some places, employers may be required to withhold state income tax, or even city income tax. In addition the employer is required to pay State and Federal unemployment tax. The United States imposes an income tax on the taxable income of individuals, corporations, trusts, decedents estates and certain bankruptcy estates. ... Social Security, in the United States, refers to the Federal Old-Age, Survivors, and Disability Insurance (OASDI) program. ... President Johnson signing the Medicare amendment. ... Federal Insurance Contributions Act (FICA) tax, a kind of payroll tax, is a United States employment tax imposed in an equal amount on employees and employers to fund federal programs for retirees, the disabled, and children of deceased workers. ... Federal courts Supreme Court Chief Justice Associate Justices Elections Presidential elections Midterm elections Political Parties Democratic Republican Third parties Libertarian Party State & Local government Governors Legislatures (List) State Courts Counties, Cities, and Towns Other countries Politics Portal      A U.S. state is any one of the fifty subnational entities of...

Social security and Medicare taxes

Social security and Medicare taxes, also known as FICA taxes must be withheld from your employees' wages. As an employer, you must also pay a matching amount of FICA taxes for your employees. As of 2007, the social security tax rate is 6.2%. The employee must have 6.2% withheld from their wages for social security taxes and the employer pays a matching amount in social security taxes until the employee reaches the wage base for the year. The wage base for social security tax in 2006 is $94,200 and for 2007 increases to $97,500. Once that amount is earned, neither the employee or the employer owes any social security tax.

The Medicare tax rate is 2.9% for the employee and the employer. The employer must withhold 1.45% of an employee's wages and pay a matching amount for Medicare tax. Unlike the Social security tax, there is no maximum wage base for the Medicare portion of the FICA tax. Both the employer and the employee continue to pay Medicare tax, no matter how much is earned.

Unemployment taxes

Each employer also must pay State and Federal Unemployment Taxes (SUTA and FUTA). The FUTA rate is 6.2% but normally nets to .8% because the employer is allowed to take a credit of up to 5.4% for SUTA taxes that it pays. This will be the case if you are eligible for the maximum credit your FUTA rate. The wage base for FUTA is $7,000. You will stop paying FUTA for each employee once their earned wages exceed $7,000 per calendar year. Each state has different rate so you will need to check with your state about SUTA tax rates and maximum wage base. Many states require new business to have an average starting rate until an employment history is created. For example, Indiana requires new employers to pay 2.7% for the first 3 years. Afterwards the rate is adjusted depending various factors including if any of their ex-employee filed for unemployment benefits.

Historical Social Security, employee wage tax base

The following table only shows the taxes collected from the employee. The employer pays another 6.2 percent and through the theory of tax incidence, the entire 12.4 percent in payroll taxes ends up being paid for by the employee (half directly to the government, half in the form of lower wages). First discussed by the Physiocrats in France, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. ...

For information on Federal payroll tax requirements, check out IRS publication 15, Circular E. For information on State payroll tax requirements, contact your state's taxation and revenue department.

External links

• What are Payroll Taxes?
• Payroll tax in Australia
• Payroll tax (Australian Tax Office)