Payroll Taxes and Employer Responsibilities

By hrlineup | 26.04.2020

There is a big difference between being an employer and being an employee. It all comes down to responsibility. As the employer, there are significant responsibilities, especially when it comes to being compliant with the law. One key aspect of compliance is the payroll and all the tax responsibilities attached to it. It is necessary for these taxes to be paid and some will be withheld as well. Although there are some taxes that the employees are responsible for, most are at the hands of the employer. Here is a quick look at some of the responsibilities that employers must be aware of.

The most essential of employer payroll taxes are the FICA taxes. These are important as since both the employee’s wages need to be held, and the employer needs to pay a portion. Employers offer an employee a gross pay, and then make the necessary deductions so that the employee receives their net pay. Here are some of the different taxes on paycheck: –

  1. Income tax – This often includes a combination of federal and state income tax.
  2. Federal Income Tax
  3. FICA Contributions at a value of 7.65%. This is half the value of the total tax. The employee is required to pay the other half. The FICA tax includes two tax responsibilities which are as follows: –
    1. Medicare tax which is normally withheld at 1.45%
    2. Social security tax which is withheld at 6.2% up to an annual maximum of $127,200 in earnings.
  4. State income taxes.

These components of payroll tax are known as statutory payroll tax deductions. In addition to these employer paid taxes, there are several other taxes that may be charged, depending on the state that the company is in. These include taxes for the school districts, county taxes as well as city tax. The taxes employers pay per employee include FUTA (Federal Unemployment Tax, and SUTA (State Unemployment Tax.

The different taxes on paycheck are the key responsibility of the employer, though there are other responsibilities that the employer has beyond the payroll. These include the following: –

  • Ensuring that all the taxes which have been withheld from the employees are deposited as required, and finally paid to the IRS and local tax authority.
  • Having detailed accounts of all the payroll expenses.
  • Reconciling all payroll expenses and payroll records through detailed reports.

 At the end of the year, the employer is responsibly for ensuring each employee has a Form W2 that allows for an annual summary of all the wages paid. Within this form, it will also clearly indicate the taxes that have been withheld. This form is filed with the IRS as well as any relevant taxing departments.

The taxes employers pay per employee a need to be properly calculated and tracked, to ensure that the company does not face any unnecessary fines or penalties. Smaller companies may face a challenge when it comes to figuring out all these taxes. In that respect, the best course of action would be to hire an accountant to help ensure that all taxes are properly filed with the right authorities.