A Quick Guide To Payroll Tax The term Payroll tax actually includes the Social Security tax, Medicare tax and Federal income tax. The Social Security tax provides benefits for retired workers, the disabled their dependents and it has a payroll tax rate of 6.2%. There is a maximum annual amount of Social Security tax withheld per employee. Social Security taxes are not withheld on amounts over the earnings limit. In 2004, the earnings limit was $87,900, and the maximum Social Security tax was $5,449.80. The Medicare tax provides medical benefits for certain individuals when they reach age 65 and has a payroll tax rate of 1.45%. Federal income tax is used to fund national programs such as defense, community development, and law enforcement. All employees must complete Form W-4, the Employee's Withholding Allowance Certificate, which is used by employers' payroll tax departments to determine how much federal income tax to withhold from the employee's paycheck. There are a number of online payroll tax calculators that employees can use to check if they are having the right amount of money withheld. This is just as important to see if too little payroll tax is being withheld as too much payroll tax to make sure that you don't have any nasty surprises when you file your tax return because you actually owe more tax than was withheld. The amount of payroll tax that is withheld from an employee is sent to the federal government. If the payroll taxes are withheld, but not paid to the government, the employee is covered. The IRS will go after the employer but it is important to keep your check stubs as documentation of the withholding in case you get an incorrect W-2 Form. A W-2 form is the document which you will receive at the beginning of February or March that indicates the total amount of money you have earned and which portion was withheld for as payroll tax. The whole issue of payroll tax may seem very confusing; especially to a first-time employer but there are plenty of books that can help to clarify the procedures involved. There are also a number of websites that can offer advice on all aspects of payroll tax from an employee's perspective as well as an employer's. In fact, there are very few gray areas when it comes to payroll tax and the procedures, processes and deadlines are extremely well set out and documented thoroughly by a variety of sources. Find more information and tips about payroll by visiting http://www.payroll-software-directory.com Tax  Net Inc, the parent company of “the Home Based Tax Preparer”, has developed a system where qualified professionals can work at home and provide better service at a lower price to the consumer. Tax Net Inc and all the divisions are proud members of the Better Business Bureau of Denver/Boulder, Colorado.    There are three divisions of the Home Based Tax Preparer. CPA Moms/Dads Tax Moms/Mr Tax Moms Next Day Tax Cash  Regulatory and Disclosure Information for the following web sites: www.cpamoms.com www.cpadads.com www.taxmoms.com www.asktaxmoms.com www.askcpamoms.com www.nextdaytaxcash.com We do not render or offer to render personalized investment advice, financial planning advice, tax planning, or tax preparation through this medium. This medium is limited to providing you with general information about services and provides a way for you to contact us. The information in this web-site is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, and does not purport to be complete and is not intended as the primary basis for investment or tax decisions. It should also not be construed as advice meeting the particular investment needs of any investor.  Any tax information communicated, shared, faxed or emailed to Tax Net Inc or any of their divisions is held in strict confidentiality.   This information is not used, sold or shared with any other business entity or individuals.