Everything You Need To Know About Employer Payroll Taxes

Everything You Need To Know About Employer Payroll Taxes

As a business owner, you have many responsibilities, including paying your employer payroll taxes to the right authorities. You will need to amp up your accounting skills or hire a payroll expert to handle these taxes.

In this blog, we have come up with all the required details for payroll taxes paid by employers.

Let’s get started by understanding what employer payroll taxes are!

What Are Employer Payroll Taxes?

A part of the employee’s salary is withheld by the employer and paid as taxes to the government. We refer to this as employer payroll taxes. These taxes are paid by employers on behalf of their staff members. Federal, state, and local income taxes are a few examples of them. The employer sometimes also funds employees’ FICA and federal and state unemployment taxes.

  • The employer calculates and then withholds a certain amount of funds from the employee payroll to pay taxes.
  • Payroll taxes are paid by both employers and employees; each contributes a portion of the total sum.
  • These tax funds are usually used to fund programs like Social Security, Medicare, local infrastructure, etc.

Types of Payroll Taxes to Know

Types of Payroll Taxes to Know

Here are the important types of payroll taxes you must know about:

1. Social Security Tax

Employer payroll taxes, such as Social Security tax, are paid equally by the employer and the employee. The annual wage base limit of this tax is $168,600. Both parties pay 6.2% of the taxes, totaling 12.4%. Self-employed people also have to pay an additional 12.4%.

2. Medicare Tax

Employee and employer contributions are made towards Medicare taxes. These funds are used for the Affordable Care Act (ACA), which aims to provide affordable healthcare facilities. The employees pay 1.45% of their wages to contribute a total of 2.9% to this fund.

3. Federal Unemployment Tax

The federal government has mandated employers to pay federal unemployment tax to assist individuals who are out of work financially. The employees pay 6% of the first $7000 an employee receives annually. There might be some variations in the regulations as per the state and union laws.

4. State Unemployment Tax

In most states, the employer contributes to the state unemployment funds. In some states, employees are also mandated to pay a part of this tax fund. Employers must consult the state authorities for the exact details of the tax rates and regulations.

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How to Calculate Employer Payroll Taxes?

Your payroll specialist can help you review all the government requirements for calculating and withholding payroll taxes in detail for your organization.

Here is how you can manage the payroll taxes paid by employer for your business:

Step 1: Calculate Gross Taxable Wages

To calculate employer payroll taxes, first of all, you will need to know the gross taxable wages. After deducting any pre-tax or non-taxable income, you must take these gross wages. This can include health savings account (HSA) contributions, 401(k) plan contributions, etc.

Gross Wages- Deductions = Gross Taxable Wages

Step 2: Calculate Employer Tax Levies

With the taxable wages, you can easily calculate the gross employer taxes. Here are the details needed to calculate. Also, remember that the IRS and tax authorities can update the rules and regulations for taxation, and you need to be updated with the latest information.

  • FICA taxes (Social Security at 6.2% and Medicare at 1.45%)
  • Unemployment taxes (6% on the first $7,000 of FUTA plus, if applicable, SUTA)

When Should Payroll Taxes Be Paid?

Unless you are a small business, payroll taxes must be filed electronically. It is the duty to be updated with the latest regulations and file for payroll taxes.
Late fees can be levied if you fail to file payroll taxes on time, so your business will not want to miss the due dates.

At the start of the year, you can choose between two deposit schemes: monthly or semi-weekly. If you choose the monthly scheme, your tax filing dates are due on the 15th of every month. The maximum late fee that can be imposed is 15%. Hence, you need to be prompt when filing these taxes.

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What Happens if Payroll Tax Payments are Late or Unpaid?

As a business or a responsible employee, you must file your payroll taxes. Please finish this by the deadline to avoid late fees and penalties.

Depending on the delay in payment, there are various percentages of charges that can be levied. Here are some details:

  • One to five days late incurs a 2% penalty.
  • Lateness of six to fifteen days incurs a 5% penalty.
  • A 10% penalty applies if the payment is made 16 days late or within 10 days after receiving the first IRS notification.
  • 10 days following the first IRS notice results in a maximum penalty of 15%.

How can Employers Avoid Payroll Tax Penalties?

How can Employers Avoid Payroll Tax Penalties

Government agencies levy a certain amount of penalties if taxes are paid outside the due dates or with proper documentation. You can help your company avoid these fines by taking the following actions.

  • Budget for tax payments to avoid any late-paying penalties: This might be one of the most common pieces of advice you get. But, setting up a budget at the start of a financial year will help keep your finances on track and avoid any mishaps at the time of payment.
  • Automate payroll management using HRM software: As a business owner, you will have to wear a lot of hats, and it can be difficult to keep track of employees’ payrolls. However, as it is an important part of paying payroll taxes, you can get help using online HRM software like Moon HRM. These tools will help you keep track of your finances, profits, and employee payrolls on a single dashboard. You can monitor the gross amount of wages paid to your employees to calculate the necessary payroll taxes. This will help you avoid any miscalculations during your tax payment.
  • Stay up to date with IRS announcements and resources: As the tax regulations are updated relatively quickly, payroll managers should keep track of all the latest updates, announcements, and resources to avoid miscalculations or the latest updates while filing payroll taxes.


Payroll taxes can be tough to manage and pay on time, as there are a lot of intricacies and details to be looked into. But with the above guide and tips, we hope this blog has helped you manage your payroll taxes for your business easily.

To track employee wages and your overall business finances, you can use automated employee payroll and HRM software like Moon HRM. With Moon HRM, you can manage your entire employee productivity and payroll at the tip of your fingers.