Tax and Compliance Guide

Keeping paychecks accurate requires more than understanding gross and net pay—you also need to keep up with federal and state compliance rules. This overview summarizes the key tax regulations that influence the output of our calculators and outlines the forms you should update when your personal situation changes.

Federal Income Tax

  • IRS withholding tables: Employers use them to determine per-paycheck withholding based on data from your Form W-4.
  • Standard deduction & brackets: Updated annually; reflected in our federal tax calculator.
  • Adjusting withholding: Submit a new W-4 after marriage, divorce, dependents, or significant income changes to avoid surprises at tax time.

State Income Tax

State rules vary widely. Some states have flat rates, others tiered brackets, a few tax only certain types of income, and several have no income tax at all. Use the state tax calculator to compare take-home pay across states and check whether your state requires a separate withholding certificate (e.g., CA DE 4, NY IT-2104).

FICA (Social Security & Medicare)

  • Social Security: 6.2% employee rate on wages up to the annual wage base ($176,100 for 2025).
  • Medicare: 1.45% on all wages, plus an additional 0.9% once wages exceed the filing-status threshold.
  • Self-employed workers: Pay both employee and employer portions (15.3%) before claiming a deduction for half.

Supplemental Wage Withholding

Bonuses, commissions, PTO payouts, and severance may be taxed using supplemental rates. The federal flat supplemental rate is 22% (37% for very high supplemental amounts). States often publish their own supplemental guidelines. Our bonus and severance calculators model these payments as additional wages so you can estimate total withholding.

Quarterly Estimated Taxes

Freelancers, gig workers, and side hustlers should use the freelance or gig calculators to estimate net income and set aside money for quarterly estimated taxes. The IRS requires payments in April, June, September, and January to avoid penalties. Many states have parallel estimated tax schedules.

Recordkeeping Checklist

  1. Review pay stubs each pay period for accuracy.
  2. Update federal and state withholding forms promptly after life changes.
  3. Track supplemental payments (bonuses, PTO cash-out) separately to plan for higher tax bills.
  4. Maintain receipts for deductible expenses if you freelance or work multiple jobs.

Staying compliant is easier when you anticipate the tax impact of every type of pay. Use our calculators before changes occur so you can adjust withholding, set aside tax savings, and avoid unexpected balances due at filing time.