Employer Payroll Taxes

What are Employer Payroll Taxes?

Employers are required by law to pay employer payroll taxes for each of their employees. Social Security tax, state unemployment tax, Medicare tax, and federal unemployment tax make up the four parts of the employer payroll tax.

Additionally, income taxes, Social Security, and Medicare must be paid by employees. These taxes must be deducted from employees' paychecks by the employer.

The Components of Employer Payroll Taxes 

Employers are required to pay four different payroll taxes for each employee.

• Tax on Social Security

12.4% of an employee's base salary up to $147,000 is subject to the federal Social Security levy. Both the employer and the employee are accountable for paying 6.2% of this tax. Employers are obligated to deduct Social Security taxes from employees' paychecks.

• Tax on Medicare

The Medicare tax, which has no upper limit, is 2.9% of an employee's base pay. Together, the employer and employee are liable for paying 1.45% of this tax. The Medicare taxes that employees owe must be deducted from their paychecks by their employers.

Employees must also pay an additional 0.9% Medicare tax if their basic pay is greater than $200,000. While employers are not liable for paying any of this tax, they are accountable for deducting it from employees' paychecks, just like a number of other payroll taxes that are described below.

• Federal unemployment tax

The first $7,000 that a company pays to an employee in a given year is subject to a 6% federal unemployment tax. There is only one payer: the employer.

• VAT on state unemployment

State unemployment insurance contributions vary by state. In the majority of states, they are only covered by the employer, although some also charge unemployment taxes to the workers.

Employer Payroll Taxes to Be Paid

In contrast to state taxes, which have different payment schedules by state, employers are responsible for paying employer payroll taxes and withholding employee taxes to the IRS on a monthly or semi-weekly basis. The majority of payroll software solutions are made to make these payments simple.

Businesses must also file a number of payroll tax forms to the IRS. Forms 940 and 945 must be submitted annually, and Form 941 must be sent quarterly. A W-2 form for each employee must also be submitted annually by the employer.

There are penalties to pay if your company fails to file these tax papers or payroll taxes on time. Up to 15% of the annual amount your company owes in federal payroll taxes may be assessed as penalties for submitting Forms 940 and 945 after the deadline.

Conclusion

Social Security, Medicare, federal unemployment, and state unemployment taxes are all included in employer payroll taxes. Additionally, employers must withhold and remit social security, Medicare, and income taxes on behalf of the individuals they employ. Payroll taxes must be paid on time because failing to do so can result in severe fines from the IRS for businesses.