Payroll tax how does it work

If they do, add that amount to the final number. As the employer, you are required to withhold and pay the amount your employee is responsible for from her paycheck, and remit those funds on their behalf. The current tax rate for social security is 6.

The current rate for Medicare is 1. If so, the rules are a little different. Read more at the IRS website. You can learn all you need to know about social security in our CPA reviewed blog post. As an employer, you are responsible for matching what your employees pay in FICA taxes. However, the actual rate that employers pay is actually 0. Unfortunately, some states are currently ineligible for the full credit. You can learn more in our guide to FUTA.

Check out our full guide to FUTA for more info. Employers are also responsible for paying state and local city, county, etc. As with federal payroll tax, part of this tax is employer paid and part is employee paid. In addition to state payroll tax State Unemployment Tax, or SUTA , employers are also responsible for remitting state income tax on behalf of their employees.

Have all your SUTA questions answered in just a 3 minute read. You can find out more about payroll tax in your state and local area there. Payroll tax is complex. The calculations are nitpicky and penalties are steep.

An employer generally must withhold part of social security and Medicare taxes from employees' wages and the employer additionally pays a matching amount. You must deposit the taxes you withhold.

See requirements for depositing. The employee tax rate for social security is 6. Beginning January 1, , employers are responsible for withholding the 0. You are required to begin withholding Additional Medicare Tax in the pay period in which it pays wages and compensation in excess of the threshold amount to an employee.

There is no employer match for the Additional Medicare Tax. For additional information see our questions and answers. You pay FUTA tax only from your own funds. Paid for only by the employee, federal income tax is calculated based on the wages earned over the pay period and Form W-4 details. Typically, only employers pay unemployment taxes, but in a few states, employees also contribute.

The federal rate ranges from 0. Unlike the flat rate FICA taxes, calculating federal income taxes is a little more complex. See IRS publication T for more information. Second, look at the weekly pay period bracket table on T. Third, account for tax credits. So, if the first quarter of the year ends March 31, then the first Form would be due April They might also have to file three additional forms:.

With all of the numbers to juggle, calculating employer payroll taxes can quickly become complicated. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.

Preparing for employer payroll taxes when hiring employees Before new hires start working, they typically fill out Form W-4 so that their employers can withhold the correct amount of federal income tax from their pay. Federal income tax Paid for only by the employee, federal income tax is calculated based on the wages earned over the pay period and Form W-4 details. State and local income tax These taxes vary by location and are paid solely by the employee.