THIS IS WHERE YOUR TAXES GO
We all know part of our salary goes to Medicare, security, taxes, and other deductions. Sometimes, these deductions take a huge chunk of our income. But what exactly is taken from our paycheck?
Basically, there are three items taken from our paychecks: income taxes, Medicare, and Social security. All workers are mandated to pay federal income tax, which goes into the federal treasury. The state income tax is also paid into the state treasury in 41 states. In California, all employees are required to contribute to a disability fund, which is accessible in the event an employee is unable to work. Some states such as Alaska, New Jersey, and Pennsylvania require employers to pay for unemployment.
Employees pay Social security and Medicare while they work. They can withdraw from these funds when they retire or in other instances. The current rate for Social security is 4.2%, while Medicare is 1.45%. Rates may vary depending on the individual’s income.
On the other hand, employers are responsible for funding unemployment, which workers can draw from if they resigned or are fired. Rates differ by industry, as well as by state and federal fees. Employers also pay their Social Security and Medicare contribution, which is 6.2% at present.
In case the employer matches your 401(k) plan, offers pensions, or contributes to the health insurance premium you sign up for, all deductions or contributions will be reflected on the payslip.
What you and your employer contribute to Medicare goes into the Hospital Insurance Trust Fund, responsible for Medicare Part A and the succeeding administration costs; and the Supplementary Medical Insurance Trust Fund, paying for Medicare Parts B and D, as well as other program administration costs.
For Social Security, contributions go into a trust managed by various government members, including the Labor secretary, Health and Human Service secretary, and Treasury secretary. Employees also help pay for the benefits received by seniors who are disabled and survivors.