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Explanation of Payroll Taxes

Employers are required to pay a number of state and federal taxes on behalf of their employees. Some taxes, such as Social Security, Medicare and income tax, are withheld from the employee. Others, such as FUTA and SUTA, are paid by the employer. Employers can use their employee's W-4 to help them calculate how much income tax to withhold.

  1. Social Security

    • Social Security is a mandatory retirement system designed for retirees, disabled workers and their dependents. Employers are required to withhold 6.2 percent of an employee's pay for a salary up to $102,000 and match each dollar paid by the employee.

    Medicare

    • Medicare provides medical benefits to working or retired seniors, and their spouses. Employers are required to withhold 1.45 percent of an employee's salary and match each dollar paid by the employee.

    FUTA

    • Employers are required to pay up to 6.2 percent of an employee's wages (up to $7,000 in wages) for FUTA, a federal unemployment tax.

    SUTA

    • Employers are required to pay SUTA, a state unemployment tax for each employee. The percentage varies by state.

    Depositing Taxes

    • Employers must make deposits monthly or semiweekly, either online via the Electronic Federal Tax Payment System (EFTPS) or through an authorized financial institution.

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