Payroll Tax basics for dummies

Basic Tax Structure:

FICA: Social Security	6.2%	6.2%
FICA: Medicare	1.45%	1.45%
Federal Income Tax (Corporate/Personal)	35% - 39%	17.4%
State Income Tax	0% - 9.5%	0% - 9.5%
Federal Unemployment (FUTA)	0.8%	NA
State Unemployment Insurance (SUI)	2.8%	NA

State Income Taxes differ as per the State. Check your state taxes at the below link:
http://www.taxadmin.org/fta/rate/ind_inc.html

For Contractors working for a different Employer: (Typically a C-corp firm)
If your client pays $50/hr and your employer cuts 20% of the billing.

Your Hourly payroll rate: $40/hr

Your Taxes: $10.02

Employer Taxes: $5.90

The Corporate tax of your employer is based on the
$10 – Expsenses (say $6) = $4 Net Income.
The employer pays taxes on $4 (35%) = $1.40

Employer’s Net profit after Tax: $4.10/hr (approx)

Employee’s Net profit after Tax: $29.98/hr

There might be some benefits like Health Insurance and 401K which employee might provide to you which gets reflected on your paystub. An employer will be entitled to tax exemption if he contributes 50% to these benefits.

You can find your Health Insurance quote at : http://www.ehealthinsurance.com/

Probably it would be <= $1/hr depending on your age and current health status.

The FUTA is applicable for the first $7000 for salary employer pays an employee.

	Employer	Employee
FICA: Social Security	$2.48	$2.48
FICA: Medicare	$0.58	$0.58
Federal Income Tax (Corporate/Personal)	$1.40	$6.96
State Income Tax (Texas)	$0.00	$0.00
Federal Unemployment (FUTA)	$0.32	$0.00
State Unemployment Insurance (SUI)	$1.12	$0.00
Total	$5.90	$10.02

Ref: http://www.wikipedia.com/