Ask Me Help Desk - Payroll details explanation needed

Hi,

I work in Washington, DC but lives in virginia. I am working as a consultant and the company pays me on Per-Hour basis. And recently I received a payroll and I would like to know the description , as its new to me.

There are 3 sections :
1) Earnings ( this is my gross earnings I guess) ?
2) Witholdings ( this is my tax I guess, ) , actually I need little desc for the items it has?
2.a) Social Security (certain amount)
2.b) Medicare (certain amount)
2.c) Federal Income Tax ( its written Filing status M 0, with certain amount)
2.d) Virginia Income Tax (certain amount)

3) Deductions (it has my health insurance, family and dental etc)

My questions is the following:
1) How much is the percentage of each cetagory in section 2 (2a/b/c/d)

2) How much is the contribution by my employer for any of the above (including items in section 2 and section 3).

3) I want to know the above in order to understand my payroll and also the contributions by my employer. (what other things employer pays apart from SS and medicare, corporate tax?

4) Also I am trying to judge how much my employer will make if I have a certain payrate /hr. E.g. if my salary is 100$/hr and the percentage we set is 70/30 (70 % of 100$ to me and 30 % of 100$ my employer), then how much will be the earnings of my employer , if we just calculate the SS+medicare+corporate tax. This is to get an idea, so that I can negotiate the rate.( and what will be the rate if I go for 75/25 or 80/20)... Just an approx value for all this.

I know I have asked too much but I am novice in all this.

Thanks

hsgh87

Quote:

Originally Posted by hsgh87

Hi,

I work in washington, DC but lives in virginia. I am working as a consultant and the company pays me on Per-Hour basis. And recently i received a payroll and i would like to know the description , as its new to me.

There are 3 sections :
1) Earnings ( this is my gross earnings i guess) ?
2) Witholdings ( this is my tax i guess, ) , actually i need little desc for the items it has?
2.a) Social Security (certain amount)
2.b) Medicare (certain amount)
2.c) Federal Income Tax ( its written Filing status M 0, with certain amount)
2.d) Virginia Income Tax (certain amount)

3) Deductions (it has my health insurance, family and dental etc)

My questions is the following:
1) How much is the percentage of each cetagory in section 2 (2a/b/c/d)

A. Social security is taxed at 6.2% of "social security wages," which includes your base wages plus the cost of certain employee benefits that your employer may be providing you (life insurance, for example) minus pre-tax contributions to your retirement plan and medical insurance plans. SS tax applies on your first $106,800 of wages in 2009.

B. Medicaire is taxed at 1.45% of social security wages. There is no limit on this.

C. Federal income tax is withheld at a rate commensurate with your wage rate and with the number of allowances you specified when you submited your W-4 to your employer. There are several methods your employer may use to determine the amount to withhold, depending on whether you are paid weekly, semi monthly, or monthly. You can learn all the gory details here:

http://www.irs.gov/pub/irs-pdf/p15.pdf
http://www.irs.gov/pub/irs-pdf/p15a.pdf

Go to page 24 of pub 15-A for the withholding tables.

D. Here is a calculator for determining the withholdng for VA: Virginia Department of Taxation

Quote:

Originally Posted by hsgh87

2) How much is the contribution by my employer for any of the above (including items in section 2 and section 3).

Your employer also pays the same amount as you to the IRS for SS and medicaire tax payments (i.e, 7.65% of your salary).

As for how much your employer pays for your medical and dental insurance - you'll have to ask your employer that.

Quote:

Originally Posted by hsgh87

3) I want to know the above in order to understand my payroll and also the contributions by my employer. (what other things employer pays apart from SS and medicare, corporate tax?

Whether your employer pays corporate income tax - to either the US or DC - depends on their profits. Few corporations make this info public. You can get an idea from the annual report if you work for a publicly held company, but be aware that what's stated in the annual report is typically not what they actually pay, due to issues such as different depreciation amounts stated in the annual report versus what they report to the IRS.

Quote:

Originally Posted by hsgh87

4) Also i am trying to judge how much my employer will make if i have a certain payrate /hr. E.g. if my salary is 100$/hr and the percentage we set is 70/30 (70 % of 100$ to me and 30 % of 100$ my employer), then how much will be the earnings of my employer , if we just calculate the SS+medicare+corporate tax. this is to get an idea, so that i can negotiate the rate.( and what will be the rate if i go for 75/25 or 80/20)...Just an approx value for all this.

I don't follow what you mean by "30% of 100$ to my employer" - please clarify. If your pay rate is $100/hour, and they withhold $30, NONE of that money goes to your employer - it all goes to pay taxes or to the medical insurance carrier. In addition, your employer must also pay an additional $7.65 as their contribution for SS and medicaire. As for corporate tax - if they are taxed at 30% of profits (just a guess), the money they pay you and their contributions for your medical insurance are considered to ne expenses, which reduce their profit, and hence also reduces their income tax liability. Does this help?

Quote:

Originally Posted by ebaines

A. Social security is taxed at 6.2% of "social security wages," which includes your base wages plus the cost of certain employee benefits that your employer may be providing you (life insurance, for example) minus pre-tax contributions to your retirement plan and medical insurance plans. SS tax applies on your first $106,800 of wages in 2009.

B. Medicaire is taxed at 1.45% of social security wages. There is no limit on this.

C. Federal income tax is withheld at a rate commensurate with your wage rate and with the number of allowances you specified when you submited your W-4 to your employer. There are several methods your employer may use to determine the amount to withhold, depending on whether you are paid weekly, semi monthly, or monthly. You can learn all the gory details here:

http://www.irs.gov/pub/irs-pdf/p15.pdf
http://www.irs.gov/pub/irs-pdf/p15a.pdf

Go to page 24 of pub 15-A for the withholding tables.

D. Here is a calculator for determining the withholdng for VA: Virginia Department of Taxation

Your employer also pays the same amount as you to the IRS for SS and medicaire tax payments (i.e, 7.65% of your salary).

As for how much your employer pays for your medical and dental insurance - you'll have to ask your employer that.

Whether your employer pays corporate income tax - to either the US or DC - depends on their profits. Few corporations make this info public. You can get an idea from the annual report if you work for a publically held company, but be aware that what's stated in the annual report is typically not what they actually pay, due to issues such as different depreciation amounts stated in the annual report versus what they report to the IRS.

I don't follow what you mean by "30% of 100$ to my employer" - please clarify. If your pay rate is $100/hour, and they withhold $30, NONE of that money goes to your employer - it all goes to pay taxes or to the medical insurance carrier. In addition, your employer must also pay an additional $7.65 as their contribution for SS and medicaire. As for corporate tax - if they are taxed at 30% of profits (just a guess), the money they pay you and their contributions for your medical insurance are considered to ne expenses, which reduce their profit, and hence also reduces their income tax liability. Does this help?

Hi,

Thanks for your reply.
The 30% of 100$ means that Since I am working as a consultant and if the client gives me 100$/hr, (and if the rate between me and my employer is decided for 70%/30%) then 70 dollar goes to me and 30 goes to the employer. e.g. last month payroll:
If 160 hrs in month and payrate is 100$/hr, then I got in my payroll the gross salary of 11200 (70$ * 160 hrs) and then all the taxes (SS, medicare, Fed inc tax and deductions are paid). So that's what I was asking that if my employer gets 30$/hr or 4800$/ month , then how much they net they get.

Harry

I missed that you are a consultant, not an employee. So you're asking what happens if they bill your time to the client at $100/hr, but pay you a salary of $70/hour, right? The $30 that they keep will cover the 7.65% they have to pay for SS and Medicaire, and is probably more than enough for the portion of medical benefits that they cover. But the company has other administrative expenses to support you - the accounting office that bills the client, payroll, HR, advertising, IT, etc. It's imposible to say how much is left over for the company as profit after those expenses.

I'm surprised that they are giving you medical benfits if you are a consultant.

Quote:

Originally Posted by ebaines

I missed that you are a consultant, not an employee. So you're asking what happens if they bill your time to the client at $100/hr, but pay you a salary of $70/hour, right? The $30 that they keep will cover the 7.65% they have to pay for SS and Medicaire, and is probably more than enough for the portion of medical benefits that they cover. But the company has other administrative expenses to support you - the accounting office that bills the client, payroll, HR, advertising, IT, etc. It's imposible to say how much is left over for the company as profit after those expenses.

I'm surprised that they are giving you medical benfits if you are a consultant.

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Lets leave the Adv, accounting and other costs aside . Now if they are getting $30/hr ($4800) and I am getting $70/hr ($11200).
1) How much is the social security we need to pay, I mean on which amount , we will apply 7.65%. If we take the above 70/30 option , what is the amount paid by me and employer. I know its same for both and its 7.65% but on whose income .
2) Also if my employer is paying certain amount of SS+med (7.65%) , which lets say will be deductible from the $4800 gross , then the corporate tax , which is 12-15% will be applied to the remaining money?
e.g. X= Gross Empl earning ($4800) - Social Security (7.65%)
Y (corp tax) = X - Corp tax (15%)
Net empl earning = gross income - x -y

Quote:

Originally Posted by hsgh87

------------------------
Lets leave the Adv, accounting and other costs aside . Now if they are getting $30/hr ($4800) and i am getting $70/hr ($11200).
1) How much is the social security we need to pay, i mean on which amount , we will apply 7.65%. If we take the above 70/30 option , what is the amount paid by me and employer. i know its same for both and its 7.65% but on whose income .

SS tax and medicaire applies to your salary amount, so it's 7.65% on the $70 amount, or $5.35. This amount is paid by both you and your employer. In other words, the government actually collects a total of 2*7.65%

Quote:

Originally Posted by hsgh87

Also if my employer is paying certain amount of SS+med (7.65%) , which lets say will be deductible from the $4800 gross , then the corporate tax , which is 12-15% will be applied to the remaining money?
e.g. X= Gross Empl earning ($4800) - Social Security (7.65%)
Y (corp tax) = X - Corp tax (15%)
Net empl earning = gross income - x -y

I am not an expert in corporate taxes, so I do not know if they are allowed to deduct SS taxes as an expense when calculating their taxes.

Quote:

Originally Posted by ebaines

SS tax and medicaire applies to your salary amount, so it's 7.65% on the $70 amount, or $5.35. This amount is paid by both you and your employer. In other words, the government actualy collects a total of 2*7.65%

I am not an expert in corporate taxes, so I do not know if they are allowed to deduct SS taxes as an expense when calculating their taxes.

Thanks a million for your advise and I really meant it.

Also do I need to close this question by assiging points etc, like in some other forums?

Quote:

Originally Posted by hsgh87

Thanks a million for your advise and i really meant it.

Also do i need to close this question by assiging points etc, like in some other forums?

You're welcome!

No points system here, although a "greenie" is always appreciated! If you want to comment on an answer you click on "Rate this Answer" and indicate that it was accurate (or not).