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Employer Payroll Taxes: Everything You Need to Know
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General
Understanding employer payroll taxes is important to stay compliant with federal and state regulations and running a smooth payroll system. This resource guides you to everything employers need to know about payroll taxes—from what they are to how they are calculated.
Table of Contents
What are Employer Payroll Taxes?
- Employer payroll tax is paid by an employer based on their employee wages.
- These taxes are separate from the amounts withheld from employee wages.
- These taxes are used to fund programs such as Social Security, Medicare, and unemployment benefits.
- Employers should withhold the correct tax amounts, pay their share, and file payroll tax forms like Form 941 and Form 940 regularly.
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Which payroll taxes are paid by employers?
These are the payroll taxes paid by the employers:
- Employer portion of Social Security & Medicare tax ( FICA)
- Federal Unemployment Tax Act ( FUTA)
- State Unemployment Tax Act (SUTA)
- State or Local Payroll Taxes (if applicable)
What are the current employer payroll tax rates?
Employer payroll taxes include the following percentages as of 2025:
| Tax Type | Rate |
|---|---|
| Social Security | 6.2% (on first $176,100 of wages) |
| Medicare | 1.45% (no wage limit) |
| Federal Unemployment (FUTA) | 6.0% (on earning of first $7,000; up to 5.4% credit available) |
| State Unemployment (SUTA) | Varies by state and experience rating |
How are employer payroll taxes calculated?
Employer payroll taxes are calculated based on the employee’s wage limit.
Employer Payroll Tax = (Gross Wages × Social Security Rate) + (Gross Wages × Medicare Rate) + (Wages up to $7,000 × FUTA Rate) + (Wages up to state limit × SUTA Rate)
Example 1:
Let us take an employee earning $50,000 annually. Calculate the Payroll tax.
- Social Security (6.2%) = $50,000 x 6.2% = $3,100
- Medicare (1.45%) = $50,000 x 1.45% = $725
- FUTA (after credit, 0.6% on $7,000) = $7,000 x 0.6% = $42
- SUTA (assume 2.7% on $7,000) = $7,000 x 2.7% = $189
Total Employer Payroll Tax = $4,056
When are employer payroll taxes due?
Employer payroll taxes are generally due based on the employer’s payroll schedule and tax liability. Here’s a breakdown:
1. Federal Payroll Tax Deposits
There are two ways to deposit your payroll taxes based on your total tax liability during the IRS lookback period.
Monthly Depositor
- Reported a total tax of $50,000 or lessduring the lookback period.
- Deposit your payroll taxes by the 15th of the following month.
Semiweekly Depositor
- Reported a total tax of more than $50,000 during the lookback period.
- Deposit deadlines:
| If the payday falls on | Then deposit your taxes by the following |
|---|---|
| Wednesday, Thursday, and/or Friday | Wednesday |
| Saturday, Sunday, Monday, and/or Tuesday | Friday |
2. IRS Employment Tax Forms
| Form | Purpose | Due Date |
|---|---|---|
| Form 941 | Quarterly federal tax return | Last day of the month following the quarter Quarter 1 - April 30 Quarter 2 - July 31 Quarter 3 - October 31 Quarter 4 - January 31 |
| Form 940 | Annual FUTA tax return | January 31 (or February 10 if FUTA taxes were deposited on time) |
3. State Payroll Taxes
- Due dates vary by state.
- Common schedules include monthly, quarterly, or annually.
- Check with your state’s Employment Department for specific deadlines.
Income Tax vs Payroll Tax
Let us discuss the differences between income tax and Payroll tax.
| Feature | Income Tax | Payroll Tax |
|---|---|---|
| Who Pays? | Employees (withheld by employer) | Both employers and employees |
| Purpose | General government revenue | Funds Social Security, Medicare, Unemployment |
| Based On | Total income | Wages paid |
| Who Collects? | IRS (Federal) & State tax agencies | IRS (FICA, FUTA), State agencies |
Penalties
Failing to file or deposit payroll taxes can result in penalties:
| Scenario | Penalty |
|---|---|
| Late Deposit | 2% to 15% of the unpaid tax, depending on how late the payment is |
| Late Filing | 5% of the unpaid tax per month, up to a maximum of 25% |
| Late Payment | 0.5% of the unpaid tax per month, up to 25% |
| Intentional Disregard or Fraud | May result in criminal charges, higher fines, and imprisonment |
| Trust Fund Recovery Penalty (TFRP) | 100% of the unpaid employee tax withheld (Social Security & Medicare) |
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