Commission Earnings and Tax Withholding

Oct 13, 2025 by wbrum.org 13 views

Introduction

As a technician, earning a significant amount of money in commissions, it's essential to understand how much is withheld from the paycheck for various taxes. In this article, we will explore the calculations for Social Security, Medicare, and Federal Income Tax withholding based on the given commission earnings.

Commission Earnings and Tax Withholding

A technician, who is married, earned $2624 in commissions over the last two weeks. To determine the amount withheld for Social Security, Medicare, and Federal Income Tax, we need to consider the tax rates and withholding limits.

Social Security Tax Withholding

Social Security tax is a payroll tax that funds the Social Security program. The tax rate is 6.2% of the employee's earnings, and the maximum taxable earnings are $160,200 for the year 2023. However, since the technician's earnings are only for two weeks, we need to calculate the maximum taxable earnings for this period.

Calculating Maximum Taxable Earnings for Two Weeks

To calculate the maximum taxable earnings for two weeks, we can use the following formula:

Maximum Taxable Earnings for Two Weeks = (Maximum Taxable Earnings for the Year / 52) x 2

Maximum Taxable Earnings for Two Weeks = ($160,200 / 52) x 2 Maximum Taxable Earnings for Two Weeks = $6,153.85 x 2 Maximum Taxable Earnings for Two Weeks = $12,307.70

Since the technician's earnings are only $2624, the entire amount is subject to Social Security tax withholding.

Social Security Tax Withholding Calculation

Social Security Tax Withholding = 6.2% of Earnings Social Security Tax Withholding = 0.062 x $2624 Social Security Tax Withholding = $162.88

Medicare Tax Withholding

Medicare tax is a payroll tax that funds the Medicare program. The tax rate is 1.45% of the employee's earnings, with no maximum taxable earnings.

Medicare Tax Withholding Calculation

Medicare Tax Withholding = 1.45% of Earnings Medicare Tax Withholding = 0.0145 x $2624 Medicare Tax Withholding = $37.95

Federal Income Tax Withholding

Federal Income Tax withholding is based on the technician's tax filing status and the number of allowances claimed. For simplicity, let's assume the technician is single and claims one allowance.

Federal Income Tax Withholding Calculation

To calculate the Federal Income Tax withholding, we need to use the 2023 federal income tax withholding tables. Based on the technician's earnings and tax filing status, the Federal Income Tax withholding would be approximately 22% of the earnings.

Federal Income Tax Withholding = 22% of Earnings Federal Income Tax Withholding = 0.22 x $2624 Federal Income Tax Withholding = $575.28

Total Tax Withholding

The total tax withholding for the technician would be the sum of Social Security tax, Medicare tax, and Federal Income Tax withholding.

Total Tax Withholding = Social Security Tax Withholding + Medicare Tax Withholding + Federal Income Tax Withholding Total Tax Withholding = $162.88 + $37.95 + $575.28 Total Tax Withholding = $776.11

Conclusion

In conclusion, based on the given commission earnings, the technician's paycheck would have the following amounts withheld for Social Security, Medicare, and Federal Income Tax:

Social Security tax withholding: $162.88
Medicare tax withholding: $37.95
Federal Income Tax withholding: $575.28
Total tax withholding: $776.11

Q: What is the purpose of Social Security tax withholding?

A: Social Security tax withholding is a payroll tax that funds the Social Security program, which provides financial assistance to retired workers, disabled workers, and the survivors of deceased workers.

Q: How is Social Security tax withholding calculated?

A: Social Security tax withholding is calculated as 6.2% of the employee's earnings, with a maximum taxable earnings limit of $160,200 for the year 2023.

Q: What is the purpose of Medicare tax withholding?

A: Medicare tax withholding is a payroll tax that funds the Medicare program, which provides health insurance coverage to eligible individuals.

Q: How is Medicare tax withholding calculated?

A: Medicare tax withholding is calculated as 1.45% of the employee's earnings, with no maximum taxable earnings limit.

Q: What is the purpose of Federal Income Tax withholding?

A: Federal Income Tax withholding is a tax on an individual's income, which is used to fund the federal government's activities.

Q: How is Federal Income Tax withholding calculated?

A: Federal Income Tax withholding is calculated based on the employee's tax filing status, the number of allowances claimed, and the employee's earnings.

Q: Can I claim more than one allowance for Federal Income Tax withholding?

A: Yes, you can claim more than one allowance for Federal Income Tax withholding, but each additional allowance reduces the amount of Federal Income Tax withheld.

Q: How can I determine my tax filing status for Federal Income Tax withholding?

A: Your tax filing status for Federal Income Tax withholding is determined by your marital status, number of dependents, and other factors. You can use the IRS's tax tables or consult with a tax professional to determine your tax filing status.

Q: Can I change my tax filing status or number of allowances for Federal Income Tax withholding?

A: Yes, you can change your tax filing status or number of allowances for Federal Income Tax withholding, but you must notify your employer in writing and provide documentation to support the change.

Q: What happens if I underpay or overpay my taxes through Federal Income Tax withholding?

A: If you underpay your taxes through Federal Income Tax withholding, you may be subject to penalties and interest on the underpaid amount. If you overpay your taxes through Federal Income Tax withholding, you may be eligible for a refund of the overpaid amount.

Q: Can I claim a refund for overpaid taxes through Federal Income Tax withholding?

A: Yes, you can claim a refund for overpaid taxes through Federal Income Tax withholding, but you must file a tax return and claim the refund within a certain time period.

Q: How can I determine if I am eligible for a refund for overpaid taxes through Federal Income Tax withholding?

A: You can determine if you are eligible for a refund for overpaid taxes through Federal Income Tax withholding by reviewing your tax return and consulting with a tax professional.

Q: What is the deadline for filing a tax return and claiming a refund for overpaid taxes through Federal Income Tax withholding?

A: The deadline for filing a tax return and claiming a refund for overpaid taxes through Federal Income Tax withholding is typically April 15th of each year, but this may vary depending on your tax filing status and other factors.

Conclusion

In conclusion, payroll taxes and income tax withholding can be complex and confusing, but understanding the basics can help you navigate the process. If you have any further questions or concerns, consult with a tax professional or the IRS for guidance.