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How to Calculate the Tax Deductions on Your Paycheck

How to Calculate the Tax Deductions on Your Paycheck. Assignment. Open up a Microsoft Word document and answer the following questions What are payroll taxes? How do they affect your monthly income? What are the four different payroll taxes that will be applied to your paycheck?.

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How to Calculate the Tax Deductions on Your Paycheck

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  1. How to Calculate the Tax Deductions on Your Paycheck

  2. Assignment • Open up a Microsoft Word document and answer the following questions • What are payroll taxes? • How do they affect your monthly income? • What are the four different payroll taxes that will be applied to your paycheck?

  3. Example Bi-weekly Paycheck Stub Directions: Answer the following questions on your Microsoft word document What are the total hours calculated on this check? What are the total earnings listed for this paycheck before taxes? What pre-tax deductions are taken out of this paycheck? What after–tax deductions are taken out of this paycheck? What does YTD mean?

  4. Federal Income Tax • In order to calculate your federal income tax withheld, you have to use the Federal Income Tax calculator: http://www.irs.gov/individuals/article/0,,id=96196,00.html • BUT, since this is a little complex, we will safely ballpark that you can deduct 10% of your total wages

  5. State Income Tax • In order to calculate your state income tax withheld, you can use the Illinois Revenue site: http://www.revenue.state.il.us/Publications/Sales/SalesTaxRates/FixedRatesIncome.htm • What is the Withholding (Payroll) tax rate in Illinois?

  6. Social Security/Medicare Tax • Social Security Tax is currently 6.2%. • To calculate, multiply 6.2% (0.62) by your total income • Medicate tax is currently 1.45% • To calculate, multiply 1.45% (0.0145) by your total income

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