What are payroll taxes and how do they affect my paycheck?

What are payroll taxes and how do they affect my paycheck?

Payroll taxes are taxes withheld from your paycheck to fund social security and Medicare. They reduce your take-home pay.

How much of my paycheck goes to payroll taxes?

Typically, payroll taxes amount to about 7.65% of your gross income, which includes 6.2% for Social Security and 1.45% for Medicare.

Are there any ways to reduce payroll taxes?

While you can't directly reduce payroll taxes, contributing to retirement accounts like a 401(k) can lower your taxable income.

What happens if I don't pay payroll taxes?

Failing to pay payroll taxes can lead to penalties, interest charges, and potential legal action from the IRS.

Can payroll taxes change based on my income level?

Yes, payroll taxes are generally a flat rate, but the amount you pay increases with higher income due to the Social Security wage base limit.