Final answer:
Federal withholding tax from an employee's pay includes 6.2% for Social Security and 1.45% for Medicare. The total withholding also includes federal income tax, determined by the IRS and the individual's W-4 form. Independent contractors must pay both the employee and employer portions of the payroll tax.
Step-by-step explanation:
The amount of federal withholding tax deducted from an employee's pay can vary based on a number of factors, including income level and filing status. However, for payroll taxes, an employee typically sees 6.2% deducted from their paycheck for Social Security and 1.45% for Medicare. These are the standard rates, but the actual amount of federal taxes withheld can also include federal income tax, which is determined by the IRS's tax tables and the information the employee provides on their W-4 form.
If you are a member of the "gig economy" and receive a 1099 tax statement, then you are considered an independent contractor and so you must pay both the employee and employer portions of the payroll tax. For higher earners, it's important to note that the Social Security tax is capped at a certain level of income ($118,500 in 2015, with adjustments for inflation in subsequent years).
Deductions from an employee's wages for taxes are legally mandated, and the employer is responsible for withholding these taxes and paying them to the government. These payments are a form of pay-as-you-earn (PAYE) tax that covers income tax and contributions to social security and other insurance programs.