Employer Payroll Taxes are taxes that employers are legally required to withhold from employees’ wages and pay to federal, state, and local tax authorities. These taxes fund social programs like Social Security, Medicare, unemployment insurance, and sometimes state-specific benefits. Employers pay a portion themselves and also withhold and remit the employee’s share of certain taxes.
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Key Facts
- Includes Both Employer and Employee Contributions: Employers must pay their share and withhold the employee’s share of taxes such as Social Security and Medicare.
- Common Payroll Taxes:
- Federal Insurance Contributions Act (FICA): Social Security (6.2%) and Medicare (1.45%) tax rates matched by employer.
- Federal Unemployment Tax Act (FUTA): Paid solely by employers to fund unemployment benefits.
- State Unemployment Tax Act (SUTA): Employer-paid tax for state unemployment programs.
- State and Local Taxes: Varies by jurisdiction, may include disability insurance or other levies.
- Paid Periodically: Employers remit payroll taxes monthly or quarterly using forms like IRS Form 941 (quarterly federal tax return).
- Withholding Employee Taxes: Employers deduct employee’s tax obligations from paychecks and submit them along with employer taxes.
- Penalties for Non-Compliance: Failure to accurately withhold and remit payroll taxes can result in fines, interest, and legal consequences.
- Often Automated via Payroll Software: Payroll systems calculate, withhold, and remit taxes to ensure compliance.
1. What are employer payroll taxes?
Taxes employers must pay and withhold from employees’ wages to fund Social Security, Medicare, unemployment, and other programs.
2. Who pays payroll taxes?
Both employers and employees share some taxes (like Social Security and Medicare), but some taxes (e.g., FUTA) are employer-only.
3. How often must payroll taxes be paid?
Typically monthly or quarterly, depending on the size of the payroll and IRS/state requirements.
4. What happens if payroll taxes are not paid on time?
Employers may face penalties, interest charges, and legal action.
5. Can payroll taxes be automated?
Yes, most businesses use payroll software or third-party services to automate tax calculations and payments.
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