More often than not, in the preparation of the payroll of an organization, one or more questions arise. However, to avoid unnecessary issues while ensuring the smooth preparation of the payroll of an organization, it is advised that those in charge of preparing the payroll should seek help from adequate quarters, to avoid employee dissatisfaction, penalization from the tax office or payroll legislative issues. It is very common to see that people take net pay for gross pay or otherwise take them as synonyms, which they are not. You will find below a thorough explanation of how you can calculate the net pay from gross pay.

To start with, it is quite important that a distinction be made between ‘net pay’ and ‘gross pay’

What is Gross pay?

The term ‘gross pay’ refers to the total amount of money that is to be paid to an employee without any deductions. That is, the amount payable to an employee prior to deduction of taxes and other statutory dues.

What is net pay?

Net pay is the amount of money that is finally written on an employee’s check after all necessary deductions have been made from the gross pay.

It should be noted that the deductions from the gross pay of an employee includes: Federal, state and local taxes, Federal Insurance Contributions Act tax (FICA tax), which houses Medicare taxes and Social security taxes and so on.

An answer to the question “How can one calculate net pay from gross pay” could be simply represented in a formula:

Net pay = Gross pay – Deductions


So, let’s examine the case of a sample employee X, who works 50 hours a week and earns $15 per hour.

The gross pay for employee X would be: $15 multiplied by 50 which equals $750


Assuming the FICA tax, which includes the Social security tax and Medicare tax is as follows:

  • Social security tax = 7.5% of the gross pay
  • Medicare tax = 2% of the gross pay
  • Social security tax of employee X = 7.5/100 multiplied by $750 = $56.25
  • Medicare tax of employee X = 2/100 multiplied by $750 = $15

Total FICA tax = $56.25 + $15 = $71.25

Assuming Federal tax = $80 per week, $80 is also deducted from the gross pay, as federal tax.

Assuming the state tax is 4.24%, state tax payable by employee X will be:

4.24/100 multiplied by $750 = $31.8

Assuming the health insurance tax per week is  $60. $60 is subtracted from the gross pay

Net pay:

Since the net pay has been said to be : Gross pay – Deductions

Where the gross pay of employee X is = $750

Deductions to be made:

  • FICA tax = $71.25
  • Federal tax = $80
  • State tax = $31.8
  • Health insurance = $60

Total deductions = $243.05

Net pay = $750 – $243.05 = $506.95

So, this net pay calculated would be the amount to be written on employee X’s pay check.

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How to Calculate the Tax Liability for the Payroll

As a business owner, you have a responsibility to take into considerations taxes when processing payroll. You must make sure you correctly calculate your employee’s tax withholdings. Above all, you must make contributions to federal programs. These programs include unemployment insurance, social security and Medicare. This requirement is clearly stipulated under the Federal Unemployment Tax Act (FUTA) and Federal Insurance Contribution Act (FICA). You must also use payroll tax calculator to calculate your payroll tax liability accurately to avoid penalties.

Calculating Social Security Tax.

The social security tax rate changes and varies with time. As per now, the tax rate is 12.4 percent. This varies by year, therefore, you should verify with the IRS the current rates. For every business, this is split twice so that 6.2 percent is taken care of by the employer and the other half is paid by the employee. To calculate the social security tax, you multiply 6.2 percent or 0.062 by the payroll figure. As an employer, the law stipulates that you only contribute tax of up to the first 127,200 dollars of each of your employees earning as per this year. This wage limit will be 128,700 in 2018.

Calculating unemployment tax.

For this only the employer makes contributions to the Federal Unemployment Tax Act (FUTA). As per now, the employers are required to pay up to 6 percent for the first 7000 dollars that each employee makes. To be able to calculate this amount, you multiply 0.06 by each employee earning up to 7000 dollars. For example, if all your employees earn at least 7000 dollars, you will multiply 0.06 by 7000 dollars which will be equal to 420 dollars. If you have 2 employees, it will be 420 multiply by 2 hence a total of 840 dollars. But this tax rate varies with time too.

Calculating Medicare Tax

The Medicare tax rate is 2.9 percent as per now. Like for social security tax, this amount is split into two. The employer is responsible for 1.45 percent while the employee pays the other half. Medicare has no wage base limit. You, as the employer, pay taxes for the full amount that your employee earns. To calculate, you must multiply your total payroll by 0.0145 using a payroll calculator.  This Medicare tax percentage varies from year to year. It is wise to verify the exact percentage with the IRS.

Determine if you must pay Medicare surtax.

On 26th November 2013, a Medicare surtax of 9 percent became effective. It applies to employers with workers that reach a certain earning. This amount depends on the employees filing status as below.

Filing status                                               Threshold Amount

Married filing separately                                   125000

Married filing jointly                                         250000

Single                                                                 200000

Qualifying widow with dependent child            200000

Head of household (with qualifying persons)    200000

After calculating your contribution for the above, and them together to get the total. You can use the payroll tax calculator for this. Some are available online. This will help you and your business to stay compliant hence avoid penalties and being sued.

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Free Tax Calculator – What Can It Help You With?

Free Tax Calculator – What Can It Help You With?

Do you ever think about using a payroll tax calculator? To be honest, most people dismiss these calculators as they think they’ll cost a lot of money and are inaccurate. Yet, it does seem as though there are now more and more people looking into the possibility of using these calculators than ever before. Isn’t it time you used a free tax calculator? Not sure? Don’t worry you are not the only one who is a bit wary of such things but it might be a useful tool if you give it a try. Read on and find out what it can help you with.

Calculating Potential Tax Fees and Deductions

There are reasons why a paycheck calculator is used today and with a tax calculator it is very much possible to understand what deductions or tax costs are to be removed. When you dealing with a paycheck, you can use the calculators to determine what amount must be paid as tax and what other deductions are. For tax returns, you might be able to determine how much tax must be paid. These things can be highly useful to say the least and it’ll help in a major way to in order to make things less complicated.

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Free Tax Calculator – What Can It Help You With?

Avoiding Long and Confusing Calculations

Do you know how to calculate your taxes? To be honest, it doesn’t matter if you are trying to work out how much to deduct from an employee’s paycheck or how much tax you might owe, these calculations are difficult. It’s really not easy to understand these calculations as there are so much that goes into working them out. However, with a payroll tax calculator you might be able to make the task far easier. It’s something you might want to think about and in reality it’ll help too. You will find these calculators to be useful in many ways.

Don’t Make Things More Complicated

Do you want to make life even more difficult for you? Of course you don’t and it’s not necessary either. Using a tax calculator might be able to help you sort out your finances in advance and that will save you a lot of time. Making things more complicated for yourself is really stupid because it’s adding more stresses onto your shoulders. With a payroll calculator you can actually understand the simple deductions. This is why there are now even more people using these tools than ever before. You can benefit from them if you give them a chance.

Know the Score

It’s really quite important to make things as simple as possible and using the calculators can be very useful. You are not only going to get a simple way to deal with taxes and all sorts of things but making it easier to understand. You can get a free tax calculator, which won’t cost you a penny and it can produce accurate results as long as you input accurate data. The payroll tax calculator can be your new best friend and make your life easier in many ways.

Using a payroll tax calculator probably doesn’t enter your mind and yet it can be one of the most important tools of today in terms of tax repayments.

Calculators for Taxes and Paychecks

Using a payroll tax calculator probably doesn’t enter your mind and yet it can be one of the most important tools of today in terms of tax repayments. When you run a large business and have lots of employees trying to figure out the taxes and paychecks takes a very long time. It’s going to be a real pain, even when you have a professional to help you. However, what if you don’t have someone there to help? What are you going to do then? That’s going to be another headache on top of another and it’s not what you need but have you ever thought about how free online calculators can help?

Why Use the Paycheck Calculator

Paycheck calculators are going to help you come up with the right figures for each employee. You will enter data which relates to that employee such as their working hours and pay rate; and the calculator will include tax laws and benefits which must be calculated with the paycheck figures. This really will ensure the right figures are given so that no employee is short-changed or, in some cases, over-paid. It’s crucial for you and for them and the payroll tax calculator is incredibly easy to use too. This is why more and more are now choosing to use such things.

Using a payroll tax calculator probably doesn’t enter your mind and yet it can be one of the most important tools of today in terms of tax repayments.

Saving Time and Money

What you might not realize is that using certain calculators will make your job far easier when it comes down to paychecks and taxes. Yes, calculators can be wrong but, of course, it depends on what information you are providing. It’s really quite important to add the right data but when you do, you get effective results. This is why there are now more and more using these tools than ever before. However, you can actually save time and money. The paycheck calculator will ensure you don’t take any longer than necessary over the figures and you don’t lose money by paying the wrong amounts.

Keeping Things Simple

When you have responsibilities within your business for employees it’s a tough task and for most, they really struggle with it. However, this doesn’t always have to be like that. You can use some simple tools such as the payroll tax calculator and find out what you need to. It’s a lot easier and really it’s far more effective too. That’s why there are now more and more who are choosing to use these tools than ever before. You cannot blame them, however, as they are highly effective tools.

Get the Help When You Need It Most

The great thing about using the online payroll calculators is that you are able to get all the help you need when you need it. That is going to help you in many ways and really it’ll help avoid problems later. Far too many people don’t think or know about calculators that can potentially help them and it’s a waste to say the least. It’s time you looked into what tools could help your business today. The payroll calculator is one great tool but there are many more that can help.

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Benefits of Calculating and Estimating Your Taxes In Advance

Benefits of Calculating and Estimating Your Taxes In Advance

Using a tax or payroll tax calculator has become very popular today. With more people looking to avoid hefty tax bills, people are now looking to calculate and estimate their potential taxes well in advance. While this might sound a bit crazy, it can also be a smart solution to say the least. It’s conventional now to ensure you have an idea as to what’s going on within your business. However, do you know the benefits calculating your taxes in advance?

You Aren’t Going to Be Left with a Hefty Tax Bill at the End of the Year

What happens if you don’t hold back enough money or put money aside? You are going to have a hefty tax bill that you are going to struggle to pay. That’s not ideal to say the least and it could cause you a serious headache or two. It’s not what anyone really wants to deal with and in a sense it’s not necessary either. When you use the payroll calculator or the tax equivalent, you can actually calculate and estimate your taxes accurately well in advance. That essentially means you can plan for the future and if you aren’t currently paying enough now, you could put the money aside for when you are going to face a larger bill. It’s incredibly useful.

Benefits of Calculating and Estimating Your Taxes In Advance

Avoiding Trouble Later

While most people will say they will deal with their business taxes later and put them to one side, that’s not always the best solution to say the least. With the payroll tax calculator you can make life far easier and that is going to make a real difference. However, what you are also going to do is to actually avoid trouble with such things later. That is really useful because if you don’t have the time or patience to deal with these things, it’ll be one less worry for you. It’s very important, to say the least.

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Making Life Easier

Do you want to make life harder for yourself? Of course you don’t and it’s not necessary either. It has become far easier for you to take care of your taxes through the use of tax calculators. Yes, a lot of people don’t think about using them and yet they can provide you with a lot of help to say the least. That’s why it has become very important to think about using them and the payroll calculator can help in more ways than you think. These tools will make your job a little easier.

It’s Time to Change Your Approach

It’s not always easy to deal with taxes and finances as it’s a complicated old world and yet it’s vital. If you don’t get these things right they can come back and haunt you terribly which isn’t ideal to say the least. However, this doesn’t have to be the case for you. With the tax calculators you can find things to be far more effective. The payroll tax calculator can be a useful tool for you to use.