CPA Brooklyn New YorkOctober 15, 2018
5 Things You Should Know About Taxes on Payroll Brooklyn NY
‘Tis the season for tax preparation Brooklyn. You have heard of payroll taxes and have watched the money be deducted from your paycheck, but do you know what the reason is for these line items? Two of the most common payroll taxes include the Federal Insurance Contributions Act and Medicare Federal Insurance Contributions Act which take up 7.65 percent of your wages. It is important to educate yourself on exactly what they are so that you can fully understand the controversy surrounding them. The following are 5 things you should know about payroll taxes Brooklyn:
- What are they: Payroll taxes are simply taxes paid on the wages and salaries of employees. The money goes towards social insurance programs including Social Security and Medicare. They are the second largest source of government revenue in the US.
- Who pays them: Employees effectively pay almost the entire payroll tax. The tax is determined by the market not the law, meaning that the person required to pay a tax to the federal government is different than whoever bears the tax burden. The burden is divided between buyers and sellers and varies between marketplaces. This is because of the sensitivity to changes in price changes per market.
- The argument for transparency: This all leads to the issue that only half of the taxes fund the before stated social programs while the other half fund programs that are hidden from workers. This is all in the form of lower wages and results from “employer-side” payroll tax. It can be misleading and cause unrest with employees.
- Payroll vs. income taxes: Income taxes are progressive and are based on earnings while payroll taxes go directly into the government’s fund and are paid out as a flat rate. Income tax goes towards the U.S. treasury while
- Self-employed taxes: If you are self-employed (ie. contractors, writers, musicians, small business owners) then you pay your own version of a payroll tax. Because it is not remitted through an employer, you would have to pay both sides of the employee and employer.
For more information regarding all things taxes Brooklyn – contact Tax Town Brooklyn today!