A taxpayer who claims exempt on a W-4 form turned into an employer has Social Security and Medicare taxes taken out of a regular paycheck, according to the Internal Revenue Service. As of 2014, the Social Security tax rate is 6.2 percent and Medicare tax rate is 1.45 percent.Know More
An employee who claims exempt on income tax withholding has 7.65 percent of his income withheld for tax purposes, but none of the federal income taxes a person normally pays, explains the IRS. For a $500 paycheck, $38.25 is taken out by the employer to pay Social Security and Medicare taxes. The highest withholding rate for a paycheck is for a taxpayer who is single with no allowances for dependents.
A W-4 form is filled out when a taxpayer first works for a company. The withheld amount may change based on an employee's status, and the withheld amount may change even if the employee still works for the same company. Circumstances that may change withheld amounts include divorce and an event that changes the number of allowances, states the IRS. Each allowance reduces the amount of income tax withheld on each check. Taxpayers may change their withholding amount at any time, and the withheld amount is taken into account when taxpayers file annual income tax returns.Learn more about Taxes
A taxpayer completes a W-9 tax form by entering his full legal name on the first line, the name of his business on the second line if necessary, tax classification and Social Security number, according to TurboTax. The W-9 form is submitted to an employer rather than the IRS.Full Answer >
To reduce taxes on a retirement lump sum payment, report the taxable part of the distribution made before 1974 — as detailed on the 1099-R form — as capital gains or roll the money into another qualifying retirement account so that it is not taxed, advises the Internal Revenue Service. To do this, you must have been born before Jan. 2, 1936.Full Answer >
If a taxpayer receives an advance or allowance for a car from an employer, the tax consequences depend on whether the employer uses an accountable or non-accountable reimbursement plan. Accountable plans are not taxable, while non-accountable reimbursement plans are taxable.Full Answer >
There are several fax numbers for the Internal Revenue Service depending on whether the matter is business or personal and the geographic location where the taxpayer resides, explains the IRS. The best way to determine the correct number is to visit the IRS website.Full Answer >