Income Tax

• The Internal Revenue Service mandates that employers withhold or deduct income taxes from their employees' paychecks. The amount of income taxes withheld from employees' paychecks is based upon the employees' wages. Generally, the more employees earn in their gross wages, the higher their taxes are. Many states and localities also have income taxes that employers are required to deduct from their workers' wages. Some states, like Florida, Wyoming, Alaska, Nevada, South Dakota, Texas and Wyoming, do not have income taxes.
  
  

Social Security Tax

• Employers generally are also required to deduct Social Security taxes from workers' paychecks. The federal government determines the amount of Social Security taxes employers must withhold from paychecks. As of April 2011, the rate of Social Security tax withheld from employees' paychecks is 4.2 percent. Employers pay the remaining 6.2 percent of the tax. Self-employed workers are also responsible for paying Social Security tax. Since they work for themselves, the IRS requires that they pay 10.4 percent of their gross wages for Social Security. Self-employed workers who had a tax liability of $1,000 or greater during the previous tax year must pay the taxes to the IRS every quarter using Schedule SE. Social Security tax is only deducted on the first $106,000 that employees and self-employed workers earn during a year.
  
  

Medicare Tax

• The IRS also requires employers to deduct Medicare tax from employees' regular paychecks. As of April 2011, the amount of Medicare tax is equal to 2.9 percent of employees' wages. Self-employed workers also pay 2.9 percent in Medicare tax. However, they pay their taxes directly to the IRS quarterly using Schedule SE.
  
  

State Tax Programs

• Some states require employers to deduct additional taxes from employees' wages. For example, California requires employers to deduct .011 percent in disability insurance taxes from employees' paychecks. The tax covers the cost for employees to take time away from work to recover from non-work-related injuries and illnesses. Paid family leave benefits are also provided to employees using the tax monies. For example, the taxes allow employees to receive wages while they are away from work caring for a seriously ill or injured spouse or child. As of April 2011, the most employers can deduct from workers' paychecks for the disability insurance tax is $1,026.48 per month. Employees can use the taxes to receive up to 55 percent of their normal wages for up to a year while they are absent from work.