payroll tax

(noun)

A tax levied when an employer pays its employees.

Related Terms

  • corporate tax
  • Social Security

Examples of payroll tax in the following topics:

  • Corporate and Payroll Taxes

    • Two examples of these are corporate and payroll taxes.
    • Corporations are also subject to a variety of other taxes including: property tax, payroll tax, excise tax, customs tax and value-added tax along with other common taxes, generally in the same manner as other taxpayers.
    • Payroll taxes are taxes that employers are required to pay when they pay salaries to their staff.
    • Payroll taxes generally fall into two categories: deductions from an employee's wages, and taxes paid by the employer based on the employee's wages.
    • Corporations, such as CBS, whose headquarters are pictured above, are subject to multiple forms of tax, from corporate income tax to payroll taxes.
  • Social Insurance

    • Social Security is funded through payroll taxes called Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax (SECA).
    • Medicare is funded through revenue from FICA and SECA payroll taxes, as well as through premiums paid by Medicare enrollees and general fund revenue from the federal government.
    • Benefits are generally paid by state governments, and are funded in large part by state and federal payroll taxes levied against employers.
    • These payroll taxes were established by the Federal Unemployment Tax Act (FUTA), and allow the IRS to collect federal employer taxes used to fund state workforce agencies.
    • It provides benefits to retirees, surviving family members, and disabled workers who have contributed to the Social Security Trust Fund through payroll taxes.
  • Federal Income Tax Rates

    • When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax or profit tax.
    • Individual income taxes often tax the total income of the individual, while corporate income taxes often tax net income.
    • Payroll taxes generally fall into two categories: deductions from an employee's wages and taxes paid by the employer based on the employee's wages.
    • In the United States, payroll taxes are assessed by the federal government, all fifty states, the District of Columbia, and numerous cities.
    • Most jurisdictions imposing payroll taxes require reporting quarterly and annually in most cases, and electronic reporting is generally required for all but small employers.
  • Individual Taxes

    • In U.S. constitutional law, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership.
    • Payroll taxes are imposed on employers and employees and on various compensation bases.
    • These include income tax witholding, social security and medicare taxes, and unemployment taxes.
    • Sales tax is calculated as the purchase price times the appropriate tax rate.
    • The estate tax is an excise tax levied on the right to pass property at death.
  • The Federal Tax System

    • These include taxes on income, payroll, property, sales, imports, estates and gifts, as well as various fees.
    • Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes.
    • State taxes are generally treated as a deductible expense for federal tax computation.
    • Payroll taxes are imposed by the federal and all state governments.
    • Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax.
  • Other Current Liabilities: Sales Tax, Income Tax, Payroll, and Customer Advances

    • Other current liabilities reported on the balance sheet are sales tax, income tax, payroll, and customer advances (deferred revenue).
    • The sales and use tax is a tax paid to a governing body by a seller for the sales of certain goods and services.
    • Sales tax payable can be accrued on a monthly basis by debiting sales tax expense and crediting sales tax payable for the tax amount applicable to monthly sales.
    • If the book-tax difference is carried over more than a year, it is referred to as a deferred tax.
    • Income tax payable can be accrued by debiting income tax expense and crediting income tax payable for the tax owed; the payable is disclosed in the current liability section until the tax is paid.
  • How Taxes Work in the United States

    • Each has its own authority to tax.
    • For example, states can set their own sales and payroll taxes that apply only within the state.
    • Similarly, local governments can impose a variety of taxes, such as property taxes.
    • Federal taxes are created by the US Congress, which passes laws mandating what is taxed and the amount of the tax.
    • Disputes over tax rules are generally heard in the United States Tax Court before the tax is paid, or in a United States District Court or United States Court of Federal Claims after the tax is paid.
  • Tax Incidence, Efficiency, and Fairness

    • Tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare.
    • In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare.
    • Tax incidence is said to "fall" upon the group that ultimately bears the burden of, or ultimately has to pay, the tax.
    • For example, United States Social Security payroll taxes are paid half by the employee and half by the employer.
    • In this example, consumers bear the entire burden of the tax; the tax incidence falls on consumers.
  • Tax Loopholes and Lowered Taxes

    • Tax evasion is the term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means.
    • Tax avoidance is the legal utilization of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law.
    • The term tax mitigation's original use was by tax advisors as an alternative to the pejorative term tax avoidance.
    • Both tax avoidance and evasion can be viewed as forms of tax noncompliance, as they describe a range of activities that are unfavorable to a state's tax system.
    • These include taxes on income, payroll, property, sales, imports, estates, and gifts, as well as various fees.
  • Managing Disbursements

    • There are several problem areas to watch out for, such as payroll, purchasing, inventories, and insurance.
    • Payroll is a hefty cash outflow and requires special attention.
    • One obvious trend in payroll management is to implement a flexible work force, since the flow of work fluctuates.
    • A firm can also increase payroll float times by simply distributing payroll checks after the point when banks will clear checks.
    • These costs include storage, insurance, spoilage, handling, taxes, and financing.
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