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Simple English definitions for legal terms
payroll tax
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A quick definition of payroll tax:
A payroll tax is a type of tax that is taken out of an employee's paycheck by their employer. This tax is used to fund government programs and services, such as Social Security and Medicare. It is important for employees to understand how much they are paying in payroll taxes and what those taxes are being used for.
A more thorough explanation:
A payroll tax is a type of tax that is deducted from an employee's paycheck by their employer. The tax is calculated as a percentage of the employee's wages and is used to fund various government programs and services.
- One example of a payroll tax is the Federal Insurance Contributions Act (FICA) tax, which is used to fund Social Security and Medicare programs.
- Another example is state unemployment insurance taxes, which are used to provide benefits to workers who have lost their jobs.
These examples illustrate how payroll taxes are used to fund important government programs that benefit both employees and employers.