Employer payroll taxes are taxes that employers are required to pay on behalf of their employees. The reason employers are required to pay these taxes is because it acts as a way for the government to fund important social welfare programs. It makes it so that the government is able to spread the cost of these programs across a large number of people and businesses, rather than relying on individual taxpayers to fund them.
What Are The Employer Payroll Taxes?
Below are the four types of payroll taxes that employers are required to pay.
Social Security
Social security taxes are a shared tax that both employers and employees pay a portion of. These taxes are used to fund retirement benefits for eligible workers.
Medicare
Medicare taxes are another shared tax that both employers and employees pay for. These taxes are used to fund health care benefits for eligible workers.
Federal Unemployment
Federal Unemployment taxes (FUTA) are an employer-only tax. These taxes are used to fund unemployment benefits for eligible workers.
State Unemployment
State unemployment taxes (SUTA) is another employer-only tax that is used to fund state unemployment insurance programs. These programs provide temporary financial assistance to eligible workers who have lost their jobs through no fault of their own. It is important to note that there are a few states (Pennsylvania, New Jersey, and Alaska) that require employees to pay a portion of this tax.
Employers are required to pay state unemployment taxes in addition to federal taxes because each state runs its own unemployment insurance program, which is separate from the federal program. This allows states to set their own eligibility requirements and benefits levels, and to fund these programs independently of the federal government.
How Much Payroll Tax Does The Employer Pay?
The amount of payroll taxes that an employer must pay primarily depends on the number of employees they have and the wages paid to each employee.
For the Social Security tax, the employer is required to pay a portion of the tax, which is currently 6.2% of each employee’s wages.
For the Medicare tax, the employer is required to pay a portion of the tax, which is currently 1.45% of each employee’s wages.
For the federal unemployment tax, the rate is currently 6% on the first $7000 of each employee’s wages.
For state unemployment tax, the rate varies depending on the state in which the employer is located, and the specific rate is typically based on the amount of wages paid to employees.
Some states will have different rates for different industries. For example, construction or agriculture might have different rates. It’s best for employers to consult with their state’s labor department to get the specific rate for their industry.
When Are Employer Payroll Taxes Due?
The IRS sets the deadlines for when payroll taxes have to be paid, but all employers are required to pay on a regular basis.
For payroll taxes such as Social Security and Medicare, employers must withhold these taxes from their employees’ wages each pay period and deposit them with the Internal Revenue Service (IRS) on a regular schedule. The schedule on which employers must deposit these taxes depends on the amount of taxes that the employer is required to pay. Most employers fall into the category of being required to deposit them monthly, while bigger companies that pay large amounts may be required to deposit semi-weekly.
For Federal unemployment taxes, employers are required to deposit them quarterly.And for State Unemployment taxes, the deposit schedule varies depending on the state. Some states require deposits to be made on a monthly basis, while others require deposits on a quarterly basis. Employers should check with their specific state agency.
As an employer it’s extremely important to stay on track with deposit schedules so that you stay in compliance with regulations and avoid interest charges and penalties.
Have Questions?
If you’re an employer that needs assistance with payroll or if you have questions about your current tax situation, reach out to us here at Minton CPA & Associates. We offer professional payroll and tax services. Our experts can provide guidance on tax planning and compliance, to help you minimize your tax liability and ensure that your business is operating in compliance with all payroll and tax laws and regulations. Contact us today by calling 757-546-2870.