These payroll taxes are calculated by using an employer’s total wage earnings. After that, various deductions arrive at home pay.
Although this procedure seems so easy on the surface, it would take a lot of attention and accuracy over the deduction calculation.
Statutory Payroll Tax Deductions
Payroll taxes must be checked accordingly to the employee’s paycheck each pay period. After that, employers can transmit these paychecks to various tax agencies.
However, you might think that what do these payroll tax deductions include? Then, keep reading below in the article. Payroll tax deductions include this:
- Federal income tax
- Social security tax with 6.2% in 2020 and 2021 on an annual basis on a maximum wage base of $ 137,700 for the year 2020 and $ 142,800 for the year 2021
- Medicare tax with 1.45% on an annual basis
- Additional Medicare tax with 0.9% for the employer’s earnings of approximately $ 200,000
- State income tax
Voluntary Payroll Deductions
Voluntary payroll deductions are withheld only if the employee has agreed to the deduction. These voluntary deductions include the following:
- Health insurance premiums like dental, medical, eye care, and much more.
- Retirement plan contributions like 401 (K) plans.
- Life insurance premium plans
- Employee stock purchase plans like ESOP plans and ESPP plans.
- Job relating expenses inclusion like meals, union dues, uniforms, and much more.
Employer Payroll Tax Responsibilities
- Payment of shared payroll taxes of the employee
- Deposition of tax while the employee’s paychecks pay it.
- Preparing reconciliation report
- Prepare finance report to keep accounting for the expenses of payroll taxes
- File payroll tax returns
FICA Taxes
FICA is nothing but Federal Insurance Contributions Act. This FICA tax stands for both Social Security and Medicare taxes. This FICA tax involves up to a total of 15.3%. This is contributed as below:
- Social security employer contribution of 6.2%
- Social security employee contribution of 6.2%
- Medicare employer contribution of 1.45%
- Medicare employee contribution of 1.45%
Employer Payroll Taxes
Companies are responsible for paying some part of their annual income for these taxes. These taxes are determined through the employer’s gross pay. The portion of an employer’s payroll taxes includes the following:
- Social security taxes of about 6.2% in the years 2020 and 2021, too, on an annual basis
- Medicare taxes of 1.45%
- State unemployment taxes (SUTA)
- Federal unemployment taxes (FUTA)