The tax system in the USA is very complicated as per the Internal Revenue Service (IRS) system. If you are an employer where you are paying the employees then you need to understand different types of taxes in USA. The business owner must pay the employment taxes on behalf of employees to the respective authorities. However, you need an expert tax consultant to understand and implement different types of taxes in USA for employees. Failing to pay the relevant taxes in the USA can lead to severe penalties. So, to help you understand the several tax types in the USA, we put here some of its important highlights.

What are the different types of taxes in USA?

Employment taxes are very complicated to understand in the US.

Here are some of the main types of taxes in USA for employees that must be considered:

  • Federal Income tax

The federal government imposes a tax on personal income. Employers usually withhold federal income tax from their employees’ paychecks, and the amount varies based on factors such as income, filing status, and allowances claimed on Form W-4.

  • Social Security tax

This tax funds the Social Security program, which provides retirement and disability benefits and it is one of the main types of taxes in USA. Employees and employers each contribute a percentage of the employee’s income, up to a certain limit. As per the cutoff of January 2022, the Social Security tax rate is 6.2%.

  • Medicare tax

This tax funds the Medicare program, which provides healthcare benefits for seniors. Similar to Social Security, employees and employers each contribute a percentage of the employee’s income. The Medicare tax rate is 1.45%, and there’s an additional 0.9% for high-income earners.

  • State Income tax

Apart from federal income tax, some states have their own income tax. State income tax rates and rules vary by state, and some states may not have an income tax at all.

  • Local Income tax

In addition to federal and state taxes, some local jurisdictions impose income taxes. These can include city or county taxes, and the rates and rules depend on the specific locality.

  • FICA tax

It is a combination of Medicare taxes and Social Security. FICA stands for Federal Insurance Contributions Act, and it encompasses both the employee and employer contributions to Social Security and Medicare.

  • Unemployment tax

Employers pay state unemployment and federal taxes to fund unemployment benefits for workers who lose their jobs. Employees don’t directly pay this tax, but it indirectly affects them as employers may factor it into their overall labor costs.

These are some of the main types of taxes in USA for employees that must be taken into consideration by employers. The tax laws always keep on changing, so it is important to get guidance from the tax experts while filing the taxes.

If you are looking for experts to handle employee taxes by considering all types of taxes in USA then Meru Accounting is the best choice. Meru Accounting is a well-known tax consultant service provider in the USA. We provide tax consultant services for businesses in the USA. Our expert team has proper knowledge of different types of taxes in USA for employees. 


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