Payroll Day!

In light of the payroll class I'm currently teaching, I thought I'd post a tidbit about payroll this week. It may help you understand your paycheck a little better.

There are 6 payroll taxes divided into 2 categories: employer taxes and employee taxes. Here are the sinister six:

1) Social Security (Employer & Employee)*
2) Medicare (Employer & Employee)*
3) Federal Withholding (Employee)
4) State Withholding (Employee)
5) FUTA (Employer)
6) SUI (Employer)

*These 2 taxes make up FICA; sometimes they'll be combined on your check as one number, but it's referring to these 2 taxes.

I'd like to note that in some states, they have county taxes, or district taxes, or city taxes. These are all employee taxes and act similiarly to state withholding.

Social Security Tax

The social security tax is a percentage. For employees, it's 4.2% (recently lowered by the Obama administration; let the politics fly about that). For employers, it's still 6.2%. So on your paycheck, if you multiply your taxable wages by 4.2%, you'll get your social security amount. The wage limit in 2012 is $110,000. Once you, as an employee, reach that amount of taxable wages during the year (we all do this, right!?), you no longer have to pay the social security tax.

Medicare

The medicare tax is also a percentage: 1.45% for both the employee and the employer. There is no wage limit on this tax.

Federal Withholding

This is strictly an employee tax. The owner doesn't care what you put down for this one because he's either going to pay it to you or to the IRS. The amount of this tax is based on the information you provide in your W-4 form and the tax tables. You can change this to whatever you want...it's your paycheck, so if you want a certain amount to be withheld every time, you can put that on your W-4 form.

State Withholding

Also an employee tax, works the same way as the federal withholding here in Utah. In other states, you may have your own way of doing it. Nine states don't have income tax withholding on normal income (Alaska, Washington, Wyoming, Nevada, South Dakota, Florida, Texas, Tennessee, New Hampshire).

FUTA

This tax is for employers only. It is the federal unemployment tax and is very minimal for most companies: 0.6%. It's wage limit is $7,000.

SUI

The state unemployment tax is different for each state, and dependent upon employer history. Rates tend to vary from 0.1% to 8% with most companies on the lower side. For Utah the wage limit is $29,500. Each state differs for this as well.

There are some other miscellaneous payroll taxes that are state or city-dependent, and I'd have to research all of them. New Jersey has a bunch. Nevada has one, California has one. Ohio, New York, and Pennslyvania do, too.

Hopefully this helps explain some of your taxes, and what to do about them. Basically you can only change your federal or state withholding; the others are percentages. But remember this next time you feel like you have a crappy job. First of all, you have a job period. That's great right now. Second of all, if you make $1,000 this payday, your employer isn't only spending $1,000 on you. He's spending that, plus his share of social security, plus his share of medicare, plus FUTA, plus SUI. The employer probably pays an extra $100 to have you as an employee for that $1,000 you made. And that's for every employee. And that's just from a payroll standpoint.

If you'd like to enroll in the class, it's $40 for four weeks (one night a week, on Wednesdays). You'll get all kinds of handouts and helpful items for payroll. One class starts Oct. 3, the next Nov. 7. Here's the link:

http://granite.augusoft.net/index.cfm?method=ClassListing.ClassListingDisplay&int_category_id=4&int_sub_category_id=31&int_catalog_id=

Good luck with payroll in the future, check your check stubs, and I hope you make more money!