The authority over federal payroll tax in the United States is the Internal Revenue Service (IRS that determines the percentage of payroll tax withheld from an employee's wages, the formalities to be fulfilled by an employer and any other issues relating to federal social security, Medicare and unemployment taxes.
Federal payroll tax withheld from an employee's wages and paid by the employer includes federal social security tax and federal Medicare taxes. This is a mandatory government extraction from your check on every payday. The federal payroll tax also includes the Federal Unemployment tax that has to be paid by the employer. Medicare and social security federal taxes have to be equally divided with the employer and employees. Social security is taxed at 6.2% currently and Medicare at 1.45% currently in the United States.
Every organization and every employer must report to the Internal Revenue Service for the federal payroll tax. As an employer, your obligations for federal payroll tax are many. The first step is to get an Employer Identification Number (EIN), by filling out form SS-4 and applying for it at the local office of the IRS. Each employee then needs to fill out form W-4 for the employer. This procedure has to be followed by both full time and part time employees in your organization. In case the employee has not submitted this form, taxes will be withheld from the wages of an employee without taking into consideration dependants. This is because the amount withheld is based on the marital status of the employee and the number of dependants. Once done, the federal payroll tax is calculated according to the current rates and submitted to the local IRS office.
More information on federal payroll taxes can be found at the IRS Publication 15, Circular E.
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