Payroll Tax

Payroll taxes are the result of laws and regulations that permit certain government agencies to require employers to withhold and remit employee income taxes, payroll taxes, and to match certain other employee taxes.

Income Taxes

Employee Income taxes are separate from payroll taxes because they are considered to be trust fund taxes, or money held in a government trust for future remittance back to the employee.  Income taxes include Social Security Tax and Medicare Tax.

Payroll Taxes

Employees only receive a portion of their gross payroll wages because employers are required to deduct certain payroll taxes from their total amount earned as wages. Furthermore, employers must pay additional taxes on top of the employees gross payroll.  These payroll taxes must then be forwarded to different tax agencies and include the following payroll taxes:

Employee Payroll Taxes

   IRS federal income tax

   Social security withholding tax

   Medicare tax- paid by both employee and employer

   State income tax withholding

   Various local tax- city, county, school

Employer Payroll Taxes

   Social security income tax- employer matching

   Medicare taxes- employer matching

   Federal unemployment tax (FUTA Tax)

   State unemployment tax (SUTA Tax)

All employers are required to pay their share of payroll taxes and make regular tax deposits for both employee and employer payroll taxes.  Payroll tax deposits will require various reconciliation reports and payroll tax returns along with any deposits made.

Most payroll bureaus, such as PaySmart, provide these various tax deductions, reporting, and payments on behalf of their customers.

Good People, Great Payroll Tax Management