Question

Employees are subject to taxes withheld from their paychecks. Please indicate the federal taxes that are withheld from most employee paychecks. Please let us know why deductions from employees earnings are classified as liabilities for the employer.

Answer 1

The federal taxes that are withheld from most employee paychecks are as follows:

6.2% Social Security tax

1.45% Medicare tax

In case earnings of employees are over $200,000, 0.9% Medicare surtax is included as a part of FICA taxes.

The deductions from employees’ earnings are classified as liabilities for the employer for two reasons:

1. It is the responsibility of employer to withhold the amount of FICA taxes from an employee’s wages
2. Employer is required to pay the employer’s portion i.e. 6.2% Social Security tax and 1.45% Medicare tax