Federal Payroll Tax Rates 2011, 2012

While you only need to prepare your taxes once a year, you actually pay your taxes every time you receive your paycheck. When you get your paycheck, you will notice that a portion of your income is taken out to pay taxes. Payroll taxes are also known as withholding taxes, and they are paid to both the federal government and state government.

Federal payroll tax rates are determined by the US government, and they can vary from time to time, depending on the tax laws that are passed or extended. It is important that you keep yourself updated with the amount of federal payroll tax that you need to pay, so that you can plan your finances better.

The percentage of your paycheck that is withheld as federal payroll tax varies according to your income level and filing status. Presently, it can range from 10% to 35% of the salary or wage that you receive from your employer. If you are filing as a single person and you make $2,100 to $10,600 a year, you will have 10% of your pay withheld for federal payroll tax. If you are in the income tax bracket of $10,600 to $36,600, your income will be taxed at a rate of 15%. For the income bracket of $36,600 to $85,700, federal payroll tax rate is increased to 25%. A tax rate of 28% applies if you make between $85,700 and $176,500. For an annual income of $176,500 to $381,250, you have to pay a tax rate of 33%. If you earn more than $381,250, you will have 35% of your income withheld.

The same tax rates that are imposed on single persons also apply to those who are married, but the income brackets are different. If you are filing jointly as a married person and your annual income is between $7,900 and $24,900, your employer will withhold 10% of your income. The tax rate rises to 15% if you and your spouse make $24,900 to $76,900. If you earn between $76,900 and $147,250, you will be taxed at a rate of 25%. For the income bracket of $147,250 to $220,200, the federal payroll tax rate is 28%. If your income ranges from $220,200 to $387,050, the percentage of your income withheld will be 33%. The maximum rate of 35% applies if your income exceeds $387,050.

Other than withholding a part of your paycheck for federal income tax, your employer will also withhold a small portion for Social Security and Medicare taxes. These taxes do not vary according to income level, and they come with fixed rates. In 2011, Social Security tax rate is 4.2%, and Medicare tax rate is 1.45%. Your employer also has to pay his or her share of Social Security tax, which is 6.2% of your wage or salary.

If you want to calculate your federal payroll taxes, you can use one of the many free payroll tax calculators that are available online. These calculators are very easy-to-use, and they can give you very accurate calculations of your payroll taxes. As I mentioned above, QuickBooks Online Payroll offers a payroll withholding tax calculator which is very easy to use.

Another resource is TurboTax 2011 for preparing and filing your income tax return. You can use the free tax calculator to determine whether enough withholding is being taken out of your paycheck. Don't let your taxes take you by surprise. A little tax planning now can save you from a lot of future problems.