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5.4 Social Security & Payroll Taxes

5.4 Social Security & Payroll Taxes
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  • Math Help

    It is highly unusual for employees to actually receive their full gross pay for a given pay period. (Gross pay is the amount of money before taking taxes or deductions.) This is true because state and federal laws require employers to make several payroll deductions. In Example 1, the payroll deductions were federal income tax, state income tax, Social Security tax, and Medicare tax. Additional payroll deductions include local income tax, medical insurance, life insurance, retirement plans, and union dues. The amount of money received after all payroll deductions have been made is called take-home pay or net pay. Normally, each paycheck is accompanied by a payroll statement that shows the gross pay, the deductions, and the net pay received by the employee. Using the general procedures demonstrated in Chapter 5, you can check your payroll statement for errors and report any errors to your employer. Many employers hire outside firms to do payroll, so your employer may be unaware of the errors.

  • Consumer Suggestion

    Check out the social security benefits calculator at socialsecurity.gov to determine how much money you can expect to receive from social security upon retirement, based on your past earnings and projected future earnings.

  • Checkpoint Solution

    You pay of your taxable income to these 4 taxes.

    You pay of your taxable income to these 4 taxes.

    The more you make (up to $106,800), the higher your percent toward these 4 taxes. The percent toward these 4 taxes will decrease above $106,800 due to the threshold on Social Security taxes.

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    system user
    Guest   6 years ago |
    You should point out that Social Security tax and Medicare tax is only paid on earned income. In most cases, this is not the type of income going to the super wealthy. Removing the cap on Social Security tax will not affect the super wealthy. But, it will be adding at 12.4% tax to high income people who run their own businesses. These are the people who provide millions of jobs for working families.
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