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The Truth About Payroll Tax

Payroll Tax

Payroll taxes are the responsibility of the employer and the employee. In fact, each is responsible for half of the total payroll tax burden. Payroll taxes are withheld from the employers check, every pay period. Generally, the employers contribution is combined with the employees contribution and forwarded to the taxing jurisdiction on a quarterly basis.

Payroll taxes pay for a variety of services which are provided through programs funded directly by those taxes. For example, payroll taxes include payments towards social security. Those payments are meant to fund that individual's specific access to social security payments when they retire at the age of sixty five.

Payroll taxes also fund employment. The unemployment tax is taxed as a percentage of salary and their is a maximum total allowable. That cap rate varies based on factors such as type of employment and the amount of time a business has been in existence. This tax may be imposed by both the state and federal government.

In some tax jurisdictions, there is a tax towards disability insurance. That program allows those that have a disability or get a disability while working, to receive disability payments.

Those that do not contribute to these programs through payrolls taxes, often can not access the programs funded through those taxes. For example, in order to obtain Medicaid benefits, the individual must have contributed through payroll taxes for at least ten years prior to retirement.

NEXT: A Guide Guide to Tax Exempt Status

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