Payroll tax
Payroll tax is the umbrella term for every tax an employer calculates, withholds, or owes because it paid wages.
Payroll tax is several taxes, not one: federal income tax withholding, FICAFICA. FICA is the federal law, and the payroll tax under it, that funds Social Security and Medicare through matching employee and employer shares.Click to open the term (Social Security and Medicare), and federal and state unemployment tax. Each tax carries its own wage basis and rate, so the pay types that count toward it are not identical across taxes. Federal income tax withholding and FICA are deposited together and reported on Form 941Form 941. Form 941 (Employer’s Quarterly Federal Tax Return) reports wages paid, federal income tax withheld, and both shares of Social Security and Medicare tax.Click to open the term, 943, or 944. A calculated tax does not by itself prove the deposit was made. A filed return does not by itself prove the agency accepted it.
Who pays each payroll tax?
Payroll taxes exist only because wages were paid. Withholding tax is the part of an employee’s wages you hold back and send to a tax agency on their behalf. It is the employee’s own tax, collected in advance, separate from the taxes you owe on your own account. Many states and some cities add state and local income tax on top of the federal taxes. More than a dozen states, plus DC, also layer on disability or paid-family-leave payroll taxes.
| TAX | WHO PAYS |
|---|---|
| Federal income tax withholding | The employee, from Form W-4 elections; you remit it to the IRS |
| FICA (Social Security and Medicare) | Employee and employer, each generally a matching share |
| FUTA | Employer only |
| State unemployment tax (SUTA or SUI) | Generally employer-paid; Alaska, New Jersey, and Pennsylvania also withhold an employee contribution |
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.