The following is a list of common tax and withholding terms along with a brief explanation of each. If you’re looking for information about tax forms or U.S. Bank Payroll, see also:

• Tax withholding terms to know when using U.S. Bank Payroll.
• Learn more about U.S. Bank Payroll.

To quickly find a specific item, you can use the CTRL + F function to search for the following items:

• Federal Income Tax (FIT) withholding
• Wage base limits
• State income tax (SIT)
• State Unemployment Insurance (SUI)
• Federal Unemployment Tax Act (FUTA)
• FUTA payment schedule
• FUTA Credit Reduction States
• SUI exemptions
• Federal Insurance Contributions Act (FICA)

Federal income tax (FIT) is withheld from employee earnings each payroll. It's calculated using the following information: 

• ​The amount earned (gross pay)
• Pay frequency    
• Employee's federal withholding allowance amount 
  • Elected on their W-4
• Any other additional withholding amounts specified by the employee 
  • Elected on their W-4
• Employee's marital status 
• Wage base limits 
• Exemptions 
• Pre-tax benefits 

Your employee’s federal income tax withholding will be withheld using the tax withholding information entered into their profile, and the current IRS tax tables.

The IRS has more details about the calculations on their website at irs.gov/publications/p15a. 

A taxable wage base limit is the amount of wages that are subject to taxes in a given time period. Once an employee has hit the wage base limit for a tax, the employee and/or employer are no longer responsible for paying that specific tax in the current year.

We'll stop applying a tax for an employee in payroll once the year-to-date wages hit the wage base limit. At the start of the next year, we'll reset the year-to-date amount so that the tax is applied again until the annual wage base limit is met. 

To review the wage base limit for the current year, visit the IRS’s website at irs.gov/publications/p15a.

State income tax (SIT) is withheld from employee earnings each payroll. It is calculated using the following information:  

• ​The amount earned (gross pay)        
• Pay frequency   
• Employee's state withholding allowance amount 
• Any other additional withholding amounts specified by the employee 
• Employee's marital status 
• Wage base limits 
• Exemptions
• Pre-tax benefits 

 Actual rates differ for each state. Calculate your employees' state income tax using the tax withholding information entered into their employee profile and the state's current tax tables. 

State unemployment insurance (SUI) helps pay money to workers who lose their job. This money is known as unemployment compensation. The employer usually pays this tax, and it does not come out of the employee's check. 

• Most states have their own wage base limit that will often increase annually.
• The rates are usually based on your company's past unemployment claims and the type of business you have. 
• The amount of SUI owed per payroll is based on the total gross earnings and SUI rate you entered for the state.

The federal unemployment tax act (FUTA) tax provides payments of unemployment compensation to workers who have lost their jobs. It is an employer-only paid tax. 

Find more information about FUTA on the IRS’s website at, irs.gov/individuals/international-taxpayers/federal-unemployment-tax  

If your FUTA liability exceeds the amount set by the IRS in any given quarter, a payment must be remitted by the last day of the month following quarter end. This is handled in your payroll account. 

The specific amounts can be found on the IRS’s website at, irs.gov/taxtopics/tc759

Each year some states may be known as credit reduction states. These states took a loan from the federal government to help pay their state unemployment insurance benefits. If the states are not on time in paying back that loan, the federal government reduces the FUTA credit given to employers. 

Employers in these states will owe a higher amount of tax that will be paid with the annual Federal Unemployment Form 940 in January. The US Department of Labor finalizes the list of credit reduction states every year in November. 

When a business or employee(s) are exempt from state unemployment, the business typically is no longer able to apply the FUTA Credit and is liable for additional FUTA. 

The federal insurance contributions act (FICA) consists of Social Security and Medicare taxes. It was created to help provide for retired workers and the disabled. The tax is calculated using flat percentages of taxable wages and is paid by both the employee and employer. 

Visit the IRS’s website for the rates of these calculations, at irs.gov/taxtopics/tc751