Payroll Tax

Payroll taxes are taxes that employers and employees pay based on wages and salaries. They are distinct from income taxes, though both are often withheld from employee paychecks.

The main federal payroll taxes are FICA taxes (Social Security and Medicare) and FUTA (Federal Unemployment Tax). Most states also impose state income tax withholding and state unemployment tax (SUTA). Some localities impose additional payroll taxes.

Employers are responsible for withholding the employee's share of payroll taxes, paying the employer's matching share, and remitting all taxes to the appropriate agencies on time. Late or incorrect payroll tax deposits can result in significant IRS penalties, starting at 2% for deposits 1–5 days late and increasing to 15% for deposits more than 10 days late.