Employers in Arkansas must withhold taxes from their employees' income and send the money to the relevant revenue department. According to an estimate by SurePayroll, an online payroll service, in 2011, an Arkansas worker with one dependent and an annual gross income of $40,000—or $3,333 monthly gross pay—will receive a net pay of approximately $2,633 after federal, state, Medicare and Social Security deductions.

Federal Taxes

As in all states, Arkansas employers must withhold the federal tax liability of their employees. If you are a self-employed, you must also withhold federal taxes from your income, although you must pay this in intervals of three months as part of estimated tax payments. Employers may chose from several methods to calculate their employees' taxes, such as the bracket method, percentage method and formula tables. The IRS provides detailed instructions on how to calculate federal taxes from paychecks (see Resources).

State Tax

Arkansas charges its workers with a state income tax based on a six-bracket system. As of 2011, the tax brackets ranged from 1 percent, for income from $0 to $3,900, to 7 percent, for income over $32,700. According to a report by the Tax Foundation in 2009, individual tax collections amounted to $778 per person, which placed Arkansas in 26th place in the states with highest income tax deductions.

Formula Method

Arkansas employers that use an electronic system to manage their payroll may use a formula method to calculate state tax deductions instead of the bracket system. To calculate the state tax deduction on a paycheck, the employer must consider several factors, including the employee's payment period, the standard deduction, which in 2011 was $2,000, as well as approved withholding exemptions and personal tax credits.

Medicare and Social Security

The employer and employee share the cost of Medicare and Social Security taxes. As of 2011, the employee tax rate for Social Security is 4.2 percent of income and 1.45 percent for Medicare. Note the base limit for Social Security is capped. As of 2011, the cap was $106,800. This means any income above $106,800 is not subject to taxation. There is no base wage limit for Medicare taxes.