The Federal Insurance Contributions Act (FICA) is a payroll tax that funds two federal programs: Social Security and Medicare. Use our free payroll tax calculator to automatically calculate FICA withholding for any pay period and any state.

Both employers and employees pay FICA taxes, split equally between both parties. Here’s how the rates break down:

Social Security tax: 6.2% paid by the employee + 6.2% paid by the employer = 12.4% total. This applies to wages up to $168,600 per year (2024 wage base).

Medicare tax: 1.45% paid by the employee + 1.45% paid by the employer = 2.9% total. There is no wage cap for Medicare.

Additional Medicare tax: Employees earning over $200,000 pay an extra 0.9%, but employers do not match this portion.

Federal taxes (apply to all US employees)
Federal income tax: Based on the employee’s W-4 filing status and withholding allowances. Rates range from 10% to 37%.
Social Security tax: 6.2% of gross wages, up to $168,600/year.
Medicare tax: 1.45% of all gross wages. An additional 0.9% applies to wages over $200,000.

State and local taxes (vary by location)
State income tax: Applies in 41 states. Rates vary from under 1% to over 13%.
Local income tax: Some cities levy additional local income taxes.

Other potential deductions*
State unemployment insurance (SUI): Some states withhold a small employee share.
State disability insurance (SDI): Applies in California, New York, New Jersey, Hawaii, and Rhode Island.

*The exact amount withheld depends on the employee’s pay rate, filing status, pay frequency, and state.

Gross pay and net pay are the two numbers that define every paycheck and understanding the difference is essential for both employers and employees.

Gross pay is the total amount of compensation earned before any deductions. For hourly workers, it’s the hourly rate multiplied by hours worked (including any overtime). For salaried employees, it’s their annual salary divided by the number of pay periods.

Net pay (often called “take-home pay”) is what’s left after all deductions are subtracted from gross pay.

Example: An employee earns $3,000 gross in a pay period. After $450 in federal and state taxes, $229.50 in FICA, and $150 in health insurance, their net pay is approximately $2,170.50.

Biweekly pay: Paychecks are issued every two weeks on the same day (e.g., every other Friday); employees are paid 26 times per year.

Semi-monthly pay: Paychecks are issued on two fixed dates each month — typically the 1st and 15th, or the 15th and last day of the month; employees are paid 24 times per year.

Which is better?
Biweekly is more common and generally simpler for hourly workers (easier to track overtime). Semi-monthly can simplify accounting since pay periods always align with the calendar month.
Fingercheck supports both schedules and automatically calculates withholding correctly for each.

The Federal Unemployment Tax Act (FUTA) is a federal payroll tax that funds unemployment benefits for workers who lose their jobs. Unlike most payroll taxes, FUTA is paid exclusively by employers, meaning nothing is withheld from employee paychecks.

Rate: 6% on the first $7,000 of each employee’s wages per year (the “FUTA wage base”)
Maximum FUTA per employee: $420 per year ($7,000 × 6%)
Credit: Employers who pay state unemployment taxes (SUTA) on time can receive a credit of up to 5.4%, reducing the effective FUTA rate to just 0.6%
Effective maximum with credit: $42 per employee per year

When is FUTA paid? FUTA deposits are typically due quarterly. If your FUTA liability is $500 or less in a quarter, you can carry it forward. Annual reporting is done on Form 940, due January 31.

FUTA vs. SUTA: FUTA is the federal version. Every state also has its own State Unemployment Tax (SUTA), with rates and wage bases that vary by state. Fingercheck calculates both automatically.

Employers are responsible for filing several federal (and state) payroll tax forms throughout the year. Here are the essential ones:

Quarterly federal forms:
Form 941: Employer’s Quarterly Federal Tax Return. Reports income taxes, Social Security, and Medicare taxes withheld from employee paychecks. Due: April 30, July 31, October 31, and January 31.

Annual federal forms:
–Form 940: Employer’s Annual Federal Unemployment (FUTA) Tax Return. Due January 31.
-Form W-2: Wage and Tax Statement. Sent to each employee showing their annual earnings and withholdings. Due to employees by January 31.
-Form W-3: Transmittal of Wage and Tax Statements. Accompanies W-2s sent to the Social Security Administration.
–Form 1099-NEC: Reports compensation paid to independent contractors ($600 or more). Due January 31.

New hire reporting:
New hires must be reported to your state’s new hire reporting agency within 20 days of their start date.

State-specific forms: Each state has its own unemployment tax forms, income tax withholding returns, and reporting requirements. Use Fingercheck’s payroll tax information hub for a state-by-state breakdown.

The simple rule: Invoice = “Please pay us.” Receipt = “Thank you for paying us.”

An invoice is sent before payment is received. It’s a formal request for payment that outlines what was provided, how much is owed, and when payment is due. Invoices are used to bill clients for products or services.

Key elements of an invoice:
– Invoice number and issue date
– Payment due date and payment terms (e.g., Net 30)
– Itemized list of products or services with prices
– Total amount owed

A receipt is issued after payment is received. It confirms that a transaction has been completed and serves as proof of purchase for both the buyer and seller.

A professional invoice should include eight key elements to ensure you get paid on time and stay compliant with bookkeeping requirements:

1. Your business name and contact information: Legal business name, address, phone, and email

2. Client’s name and contact information: Who you’re billing

3. Invoice number: A unique identifier for tracking and reference (e.g., INV-0042)

4. Invoice date: When the invoice was created

5. Payment due date: When payment is expected (e.g., “Due within 30 days” or a specific date)

6. Itemized list of services or products: Description, quantity, rate, and line total for each item

7. Total amount due: Subtotal, any applicable taxes, discounts, and the final balance

8. Payment instructions: How you accept payment (bank transfer, check, credit card, etc.)

Optional but recommended:
– Late payment policy (e.g., 1.5% monthly interest on overdue balances)
– Your business logo for a professional appearance
– Notes or thank-you message

Correctly classifying workers as employees or independent contractors is one of the most important (and most audited) decisions a small business makes. Getting it wrong can result in back taxes, penalties, and legal liability.

Employees:
– Work under your direction and control (you set their hours, tools, and how the work is done)
– Receive a W-2 at year-end
– You withhold income taxes, Social Security, and Medicare from their paychecks
– You pay the employer share of FICA and FUTA
– May be eligible for benefits (health insurance, PTO, retirement)

Independent contractors:
– Control how, when, and where they do their work
– Receive a 1099-NEC if paid $600 or more in a year
– Responsible for paying their own taxes (self-employment tax)
– You do not withhold taxes or pay employer-side FICA/FUTA
– Not eligible for employee benefits

The IRS test: The IRS uses a three-factor test (behavioral control, financial control, and type of relationship) to determine classification. When in doubt, file Form SS-8 to request an official determination.

1. Payroll Tax Calculator Calculate federal and state payroll tax withholdings instantly for any employee, pay rate, or state. Covers all 50 states with up-to-date tax rates.

2. State Payroll Calculators Dedicated calculators for every U.S. state, including states with complex local taxes like California, New York, and Pennsylvania.

3. Invoice Generator Create professional, itemized invoices in minutes. Customize with your business name, logo, and payment terms — then download as a PDF and send.

4. Work Order Generator Generate work orders for field service jobs, maintenance tasks, or project assignments. Includes all the fields your team needs: job description, assigned employee, materials, and client info.

5. Payroll Tax Information Hub A centralized reference for federal and state tax forms, rates, and filing deadlines — organized by state for quick lookup.