Dublin, CA – Ultimate Guide to Understanding Payroll Deductions from a Provider

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As a new business owner or someone new to the workforce, taxes can be complex and hard to understand. Every time a paycheck is issued for an employee, a percentage is deducted and this percentage can vary based on the amount of wages paid, the location of the company and other relevant factors.

Our company specializes in payroll processing, and we help our clients pay their employees correctly. We employ payroll experts who pay close attention to payroll laws and ensure your company is always compliant with your payroll and your people receive checks in the correct amount every pay period.

While payroll deductions might seem complex, they always fall into one of a few different categories. For our clients, we ensure the amount to be deducted is correct on every front, and we even take care of paying the deducted amounts to the right agencies. If you are curious about the different deductions which can come out of a paycheck, read on to learn more.

Federal Income Taxes

Every paycheck has a portion which is set aside for the federal government. While some states don’t take taxes out of paychecks, everyone is subject to federal income taxes and the amount you pay can vary based on a couple important factors. Your overall tax bracket dictates the amount you pay, and the number of withholdings also plays a role. An employee’s W-4 form helps determine this amount.

State Income Taxes

States also take a percentage of your income in all but seven states in the US. The same rules apply to state income tax as federal, and in some cases even local municipalities can take a percentage of your check as well.

Medicare & Social Security

Also known as FICA taxes, each person has to pay into Medicare and Social Security with every check. As an employer, you also have to match the amount taken out of each check with your own payment toward these two funds. 6.2% of each check goes to Social Security and 1.45% to Medicare, and the employer matches this every time.

Court Ordered Withholdings

In some cases, a person can have money withheld from their check due to a court order. This situation is most common for child support payments, but a court can also withhold percentages of an employee’s check to pay for back taxes which are still owed.

Voluntary Withholdings

An employee can choose to have a portion of their check withheld to go toward employer sponsored benefits. These can include a 401(k) retirement account, health insurance including medical and dental coverage, optional life insurance coverage and more.

If you are an employer and this seems like a lot to keep up with for every single check you issue, we can help. Our team is experienced in payroll processing and we have the right software to make the process easy from start to finish. To learn more about how we can help your company, browse our website or give us a call today.