Millions of people are on edge about theirexpired unemployment benefitsand whether asecond round of stimulus checksis coming.

But theres another issue that keeps resurfacing as lawmakers wrangle over thenext stimulus bill: payroll taxes.

The Republican-proposed HEALS Act didnt include a payroll tax cut.

A woman takes an order from a customer at a small restaurant in Colorado.

This post refers to the 2020 tax season. For the most up-to-date info, check out ourrecent tax articles.

Democrats are widely opposed to the idea.

So what exactly are payroll taxes, and who would benefit from reducing them or temporarily eliminating them altogether?

8 FAQs: What Are Payroll Taxes and How Would Cutting Them Work?

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What are payroll taxes?

Payroll taxes are the taxes that are deducted from your paycheck for Social Security and Medicare.

Sometimes theyre referred to as Federal Insurance Contribution Act (FICA) taxes.

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For most employees, payroll taxes amount to 7.65% of earnings.

The remaining 1.45% goes toward Medicare.

Youll pay the full 1.45% no matter how much you earn.

Unlike Social Security taxes, Medicare taxes dont have a salary cap.

The money thats withheld is credited to your future retirement benefits.

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2.

How much do self-employed people pay?

Are 401(k) contributions subject to payroll taxes?

How much would a payroll tax cut save me?

The answer depends on how much you earn and how much the tax is reduced by.

Suppose the payroll tax was completely eliminated for a year and you earn $40,000.

How would a payroll tax cut help me if Im unemployed?

It wouldnt, at least not directly.

Of course, supporters argue that people will spend the extra money and create jobs.

Are payroll taxes taken out of unemployment benefits?

Whileunemployment is taxedas ordinary income, you wont pay payroll taxes on it.

Have payroll taxes ever been cut before?

The tax cut only reduced Social Security taxes.

Medicare taxes werent affected.

Would a payroll tax cut put my future Social Security and Medicare at risk?

Can Trump Really Pass a Payroll Tax Cut on His Own?

Otherwise, the tax bill will eventually come due.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder.

She writes the Dear Penny personal finance advice column.

Send your tricky money questions to[email protected].

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