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Payroll Tax
Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true Tax incidence, economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages. Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in human capital such as higher education. National payroll tax systems Australia The Australian federal government (Australian Taxation Office, ATO) requires withholding tax on employment income (payroll taxes of the first type), under a system known as Pay-as-you-go tax, pay-as-you-go (PAYG). The individual states impose payroll taxes of the second type. Bermuda In Bermuda, p ...
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Social Security Tax
The Federal Insurance Contributions Act (FICA ) is a United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ... federal payroll A payroll is the list of employees of some company that is entitled to receive payments as well as other work benefits and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks per ... (or employment) contribution directed towards both employees and employers to fund Social Security Welfare (or commonly, social welfare) is a type of government support intended to ensure that members of a society can meet basic human needs Maslow's hierarchy of needs is an idea in psychology Psychology is the science of mind and ... and Medicare—federal programs that provide benef ...
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Federal Insurance Contributions Act Tax
The Federal Insurance Contributions Act (FICA ) is a United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ... federal payroll A payroll is the list of employees of some company that is entitled to receive payments as well as other work benefits and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks per ... (or employment) contribution directed towards both employees and employers to fund Social Security Welfare (or commonly, social welfare) is a type of government support intended to ensure that members of a society can meet basic human needs Maslow's hierarchy of needs is an idea in psychology Psychology is the science of mind and ... and Medicare—federal programs that provide benef ...
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Pay As You Earn
A pay-as-you-earn tax (PAYE), or pay-as-you-go (PAYG) in Australia, is a withholding tax, withholding of taxes on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may include withholding the employee portion of insurance contributions or similar social benefit taxes. In most countries, they are determined by employers but subject to government review. PAYE is deducted from each paycheck by the employer and must be remitted promptly to the government. Most countries refer to income tax withholding by other terms, including pay-as-you-go tax. United Kingdom Origins Devised by Sir Paul Chambers, PAYE was introduced into the UK in 1944, following trials in 1940–1941. As with many of the United Kingdom's institutional arrangements, the way in which the state collects income tax through PAYE owes much of its form and structure to the peculiarities of t ...
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Tax Credit
A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state (polity), state. It may also be a credit granted in recognition of taxes already paid or a form of state "discount" applied in certain cases. Another way to think of a tax credit is as a rebate. Refundable vs non Refundable A refundable tax credit is one which, if the credit exceeds the taxes due, the government pays back to the taxpayer the difference. In other words, it makes possible a negative tax liability. For example, if a taxpayer has an initial tax liability of $100 and applies a $300 tax credit, then the taxpayer ends with a liability of –$200 and the government refunds to the taxpayer that $200. With a non-refundable tax credit, if the credit exceeds the taxes due then the taxpayer pays nothing but does not receive the difference. In this case, the taxpayer from the example would end with a tax liability of $0 (i.e ...
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Tax Credits
A tax credit is a tax incentive A tax incentive is an aspect of a country's tax code Tax law or revenue law is an area of legal study in which public or sanctioned authorities, such as federal, state and municipal governments (as in the case of the US) use a body of rules a ... which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * The State (newspaper), ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, Un .... It may also be a credit granted in recognition of taxes already paid or a form of state "discount" applied in certain cases. Another way to think of a tax credit is as a rebate. Refundable vs non Refundable A refundable tax credit is one which, if the credit exceeds the taxes due, the government pays back to the taxpayer the diffe ...
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Form W-4
Form W-4 (otherwise known as the "Employee's Withholding Allowance Certificate") is an Internal Revenue Service (IRS) tax form completed by an employee in the United States to indicate his or her tax situation (Tax exemption, exemptions, status, etc.) to the employer. The W-4 form tells the employer the correct amount of federal tax to withhold from an employee's paycheck. Motivation The W-4 is based on the idea of "allowances"; the more allowances claimed, the less money the employer withholds for tax purposes. The W-4 Form is usually not sent to the IRS; rather, the employer uses the form in order to calculate how much of an employee's salary is withheld. An employee may claim allowances for oneself, one's spouse, and any dependents, along with other miscellaneous reasons, such as being single with only one job. In the latter case, this creates an oddity in that the employee will have one more exemption on the W-4 than on the 1040 tax return. This is not a tax deduction in itse ...
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Withholding Tax
Tax withholding, also known as tax retention, Pay-as-You-Go, Pay-as-You-Earn, or a ''Prélèvement à la source'', is income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ... paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In most jurisdictions, tax withholding applies to employment Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cropped away black border edge.jpg, 300px, ''Hip, Hip, Hurrah!'' ... income. Many jurisdictions also require withholding taxes on payments of interest In finance Finance is the study of fin ...
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Payroll Tax History
A payroll is the list of employees of some company that is entitled to receive payments as well as other work benefits and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks performed, payroll can also refer to a company's records of payments that were previously made to employees, including Salary, salaries and wages, Bonus payment, bonuses, and Withholding tax, withheld taxes, or the company's department that deals with Remuneration, compensation. A company may handle all aspects of the payroll process in-house or can outsource aspects to a payroll processing company. Payroll in the U.S. is subject to federal, state and local regulations including Fair Labor Standards Act of 1938, employee exemptions, Records management, record keeping, and Taxation in the United States, tax requirements. Frequency Companies typically process payroll at regular intervals. This interval varies from company to company and may d ...
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Medicare (United States)
Medicare is a national health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance Insurance is a means of protection from financial loss. It is a form of risk management Risk management is the identification, ev ... program in the United States, begun in 1965 under the Social Security Administration The United States Social Security Administration (SSA) is an Independent agencies of the United States government, independent agency of the Federal government of the United States, U.S. federal government that administers Social Security (United ... (SSA) and now administered by the Centers for Medicare and Medicaid Services The Centers for Medicare & Medicaid Services (CMS), is a federal agency within the United States Department of Health and Human Services (HHS) that administers the Medicare program and works in partnership with state governments to administer M ... (CMS). It primarily provides ...
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Social Security (United States)
In the United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ..., Social Security is the commonly used term for the federal Federal or foederal (archaic) may refer to: Politics General *Federal monarchy, a federation of monarchies *Federation, or ''Federal state'' (federal system), a type of government characterized by both a central (federal) government and states or ... Old-Age, Survivors, and Disability Insurance (OASDI) program and is administered by the Social Security Administration The United States Social Security Administration (SSA) is an independent agency A regulatory agency or regulatory authority, is a Public benefit corporation Public-benefit corporation is a term that has different meanings in different jurisdic .... The original Social Security Act ...
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Internal Revenue Service
The Internal Revenue Service (IRS) is the revenue service A revenue service, revenue agency or taxation authority is a government agency responsible for the intake of government revenue, including taxes and sometimes non-tax revenue. Depending on the jurisdiction, revenue services may be charged with ta ... for the United States federal government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States The United States of America (USA), commonly known as the United States (U.S. or US), or Ameri ..., which is responsible for collecting taxes and administering the Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large The ''United States Sta ..., the main body of the federal statutory ta ...
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