On October 23rd, 2014, we updated our
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Gross & Net Pay
• Gross pay is the amount of salaries or
wages being paid by an employer before
any deductions have been taken out.
• Net pay is the remaining amount after
deductions from the gross pay.
Common Payroll Deductions
• Retirement contributions, insurance
premiums, child care, child support, tax
levies, and other court orders.
• They can be either Voluntary or
• A payroll register is a report on which is
summarized the wage and deduction
information for employees for a specific
• It is important because it determines what
kind of deductions and wages the
• Step 1:
Determine if you are required to pay FICA tax. Any person who is in a standard employee/employer
relationship is required to pay tax on all taxable income. Anyone completing work which is
considered employment under FICA law or receives funds as compensation for time spent are also
required to pay FICA taxes.
• Step 2:
Calculate your total taxable income for the pay period. This includes all earning as part of an
employee/employer relationship, such as tips, commissions, overtime, piecework earnings and any
taxable benefits. Deduct any heath and dental premiums from this amount, as they are non-taxable.
• Step 3:
Look up the current percentage taxation rate for OASDI and the Medicare or Hospital Insurance
Program. These rates are updated and maintained by the Internal Revenue Service, complete with
instructions on the method used to calculate the amounts to be deducted from your pay.
• Step 4:
Multiply the current percentage tax rate against the taxable earnings for the period for both OASDI
and Medicare or HI to calculate the amount of the deduction. The rates and limits differ between the
two programs, although they are combined in the FICA tax amount.
• Step 5:
Compare the amounts deducted from your payroll statement against your calculation to ensure that
the correct limits and percentages are used.
Determine the value of your total withholding allowances (exemptions) as claimed on your current
W-4 Form by multiplying each allowance (exemption) by the semi-monthly amount of $152.08.
Subtract the amount of any salary reductions, such as PERS, TIAA/CREF, or health insurance
premium from your total semi-monthly gross earnings.
Subtract STEP 1 from STEP 2 to determine your taxable gross wages.
Use the tables below to calculate the amount of federal income taxes. Be sure to use the
appropriate table based upon your marital status (single or married) as marked on your current W-4
Have your W-2 earnings statement, supplied by your employer, on hand when you sit down to
calculate your state income tax.
Total up all the income you have received throughout the year from all sources--work, capital gains,
investments, inheritances, prizes, grants and bursaries.
Add up the total amount of the tax deductions for which you qualify. Everyone enjoys a basic federal
deduction, but you may qualify for others, depending on your situation. This is particularly true of
business owners and supporters of dependents.
Subtract the total amount of your tax deductions from your annual income. The figure you will be left
with is your taxable income.
Figure out the tax bracket in which you fall.
Multiply your taxable income by the decimal representation of your percentage tax rate to calculate
how much you owe to the state of Arizona.
Consult the Arizona Department of Revenue to stay abreast of any changes in state taxation rates
and regulations (see Resources below).
Payroll tax Liabilities
• A business' payroll tax liability consists of
not only the taxes required to be withheld
from employees' wages (Social Security
tax, Medicare tax and federal income tax)
but also the employer's matching share of
Social Security and Medicare taxes. The
business' liability is reported quarterly on
Form 941 or annually on Form 944 but
payroll tax deposits must be made
according to deposit schedules.
How to file taxes
Determine whether you have to file a federal income tax return. If your income is low, you may not
have to file. But even children have to file if they meet certain income levels or have certain types of
Find out what filing status you qualify for. In some circumstances you have a choice of filing
statuses. Some filing statuses are better than others.
Determine how many personal and dependent exemptions you have. Personal exemptions are for
yourself and your spouse. Anyone can be your dependent if he or she qualifies.
Calculate your income. Many types of money you receive can be taxable income, but some types
Calculate your income adjustments. You are allowed to subtract some things from your income and
lower your taxes.
Calculate your deductions. You can choose between a standard deduction and itemized deductions.
Deductions lower the amount of your income that is subject to taxes.
Determine your income tax. Taxable income minus adjustments, minus deductions, and minus
exemptions equals the income on which you are taxed. Tax tables or schedules will tell you how
much your income tax is.
Determine your credits. You can get credits against your income tax for certain situations or
Determine your additional taxes. In some circumstances - for example, if you are self-employed –
you may have to pay additional taxes.
Find out your total payments. This includes taxes withheld by your employer, estimated tax
payments you made, and the earned income credit. The total is how much you have paid or has
been paid for you.
Find out the amount you have overpaid or underpaid. This will be your refund or the amount of tax
you still have to pay. You could have a penalty for underpaying your taxes, but only if you were
off by a significant amount.
Get the right tax forms and fill them out.