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Employers are required by law to withhold employment
taxes from their employees. Employment taxes include:
- Federal Income tax withholding
- Social Security and Medicare Taxes
The federal income tax is a "pay as you go
tax." You must pay the tax as you earn or receive
income during the year. For most employees this takes the
form of income taxes withheld from their pay.
Self-employed persons are also required to make estimated
tax payments during the year. The pay as you go system was
designed to ensure that taxpayers meet their tax
obligations timely.
Social Security and Medicare taxes pay for benefits
workers and their families receive under the Federal
Insurance Contributions Act (FICA). Social security taxes
pay for benefits under the old age, survivors, and
disability insurance part of FICA. Medicare taxes pay for
hospital benefits. Each employee contributes part of these
taxes and the employer pays a matching amount.
Self-employed taxpayers must also pay social security and
Medicare taxes in the form of self-employment taxes. The
programs funded by employment taxes provide essential
benefits to many citizens. The importance of the programs
will continue to grow as more citizens reach retirement
age. The Federal Unemployment Tax Act (FUTA) tax, together
with state unemployment systems, provides for payments of
unemployment compensation to workers who have lost their
jobs.
Per
IRS Website - 10/2005
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