Washington state does not have a personal state income tax, so unlike employers in most other states, Washington state employers are not required to withhold state income tax from employee paychecks. However, employers in every state, including Washington, must withhold federal income tax, as well as federal social security and Medicare taxes. In addition, Washington state employers are allowed to withhold a stipulated amount of their industrial insurance liability from employee paychecks.
Federal Income Tax
Washington state employers must withhold federal income tax from employee paychecks. Withholding amounts are based on the withholding guidelines that employees provide on the W-4 forms they fill out at the outset of their employment and again if their withholding situation changes, such as if they marry or have children. The greater the number of exemptions an employee claims, the less money his employer withholds from his paychecks. An employee's filing status and number of exemptions matches fields on tax tables that the IRS mails to each employer at the beginning of each year.
Federal Social Security and Medicare Tax
Washington state employers, like employers in every other state, must withhold social security and Medicare taxes from employee wages. Social security tax is 5.65 percent of each employee's income up to $106,800, as of 2011. Income exceeding this amount is exempt. Medicare withholding is 1.45 percent of employee wages. Unlike social security tax, there is no maximum Medicare withholding. Unlike income tax withholding, there is no minimum amount an employee has to earn to be subject to these taxes.
Washington State Industrial Insurance
Washington state employers must pay the state for industrial insurance coverage in case employees are hurt at work. The amount that each employer must pay is based on his type of industry and the relative dangers associated with it. For example, industrial insurance is higher for construction workers than for office workers. In addition, industrial insurance rates depend on an employer's track record of keeping employees safe and avoiding injury in the workplace. The Washington state Department of Labor and Industries informs employers at the beginning of each year of their industrial insurance tax rate for that year, including a percentage that is allowed to be withhold from employee paychecks.
No State Income Tax
Just because Washington state employers do not withhold state income tax from employee paychecks does not mean that Washington state residents have a lower tax burden than residents of other states. Sales tax in Washington state is 9.5 percent, as of 2011, and 10 percent on prepared or restaurant food. This sales tax rate is higher than that of most other states, and provides the state with revenue that it might otherwise receive from income tax payments.
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