Federal Taxes

• Employers are required to withhold federal taxes from employees' monthly or biweekly wage. There are three types of taxes that employers must withhold: Social Security tax, Medicare tax and personal income tax. Social Security tax and Medicare tax also require that employers pay a percentage of it out of their own pocket for each employee. Every time an employee receives a paycheck, what they really receive is their gross income (the total income you earned) minus all payroll taxes employers must pay along with any other allowable deductions.
  
  

Social Security and Medicare

• The purpose of Social Security tax is to help build funds for retirement and help you to build Social Security credits, which are used in case you must apply for a Social Security program such as Disability. As of 2011, Social Security tax corresponds to 4.2 percent of your wage (either biweekly or monthly). Your employer is required to pay 6.2 percent of your wage in Social Security tax. Medicare tax helps you to build funds that will pay for your Medicare Part A when you retire. As of 2011, both you and your employer are required to pay 1.45 percent of your wage in Medicare tax.
  
  

Income Tax

• Income tax is the federal tax levied on your income. Unlike Social Security tax and Medicare tax, your employer is not required to pay income tax based on your income. How much you must pay in income tax depends upon your annual wage and your filing status. As your wage gets higher, so does the percentage you must pay in income tax. You can be required to pay either 10, 15, 20, 25, 28, 33 or 35 percent of your wages. In order for your employer to know what to deduct, you must fill out form W-4.
  
  

State Taxes

• Many states also require that your employer withhold taxes from your wage. The most common type of taxes employers are required to withhold for state purposes are also income taxes. Levels of state income taxes depend upon each state's laws and sometimes upon your wage. You must find out your state laws to know whether or not you are required to pay state income taxes out of your paycheck.