The tax system in the United States is complicated. Like it, love it, or hate it, it’s written by and for lawyers. Take a look at how the average worker’s paycheck is calculated to see how complicated it can be. It has become necessary for people to use complex calculators just to determine their tax liability or even how much money they’ll make.
The paycheck calculator is a very handy tool for both employees and employers. It provides an excellent and accurate resource for calculating federal, state, and other tax withholdings. Individuals who live from paycheck to paycheck or who have a tight budget may find paycheck calculators useful and necessary.
Paycheck calculators are perfect for financial institutions and for small and large size businesses. The calculator does a lot of deductions that are normally found on employee paychecks. Deductions such as allowances, pay frequencies, federal filling status, annual gross pay, annual federal taxes, FICA Medicare, annual state taxes, and additional withholdings and total withholdings can be easily calculated.
Companies with employees and other entities located in various states needs a calculator for each state. Some states are required to pay certain state and federal taxes and other states are exempt. In order to stay in state and federal compliance it is necessary to deduct the proper amount of taxes. There is a process to how withholdings are calculated. The amount of taxes withheld is determined by the amount of income that is actually taxable. The paycheck calculator can also be used to deduct other withholdings as well. Some deductions are voluntary and some are not.
For instance, federal income taxes are legal withholdings that must be deducted from each employee paycheck unless there is an exemption clause in place. Both businesses and individuals are mandated by law to have these taxes withheld from each paycheck. Certain taxes from stock sales, dividends and unearned contributions are also taxable under certain laws. Payroll taxes are enforced in all 50 states and these taxes are Medicare and taxes social security. There are a set percentage of these taxes that are deducted from each paycheck. It is usually 8% of all gross earnings even though these tax amounts vary from state to state.
Wage levies or wage garnishments are considered involuntary withholdings. Court orders stipulating deductions for unpaid bills, child support payments, and bankruptcy claims are part of the involuntary paycheck deductions. The calculator makes deducting these amounts quick and simple. If you’re outside the country you may have difficulty using some of these tools, because of region locking. However using the same kind of VPN that people use to bypass these and watch things like BBC iPlayer in Canada like this, can work just as well – remember though they are only valid for US workers.
Voluntary deductions include set amounts the employee chooses to withhold for various reasons. For example, many employees have a small percentage of their paycheck withheld and deposited into a saving or checking account. Other withholdings includes IRA funding, vacation accounts, medical insurance payments and union dues. This is only a small list of deductions that individuals may or may be not subject to.
What makes the paycheck calculator easy to use is the internet. Many websites offer the calculator as an interactive tool that many businesses use to manage their income. The calculator helps businesses to determine the exact amount of income that should be deducted from each paycheck. Employers, employees or financial consultants can download a calculator and use it for all of their financial transactions.
It is a great tool to use to determine if the right amount of taxes is being withheld. Sometimes employers make mistakes when they have several withholding to apply to one or more paychecks. The calculator takes away inaccuracies and eliminates costly mistakes.