Which Payroll Taxes Are Paid by Employers and Have No Employee Paid Portion?

Payroll taxes are an essential part of every business’s compliance obligations. These taxes fund key public services like Social Security, Medicare, and unemployment insurance. However, not all payroll taxes are split between employers and employees. Some taxes are solely the responsibility of employers.  Some of these taxes are entirely the employer’s burden and require no payment from the employees. Businesses must manage these responsibilities to stay in compliance and make sure their accounts payable systems function properly.

1. FUTA, the Federal Unemployment Tax Act

Payroll taxes under the Federal Unemployment Tax Act (FUTA) are paid only by employers. When an employee loses their job, it pays for unemployment benefits. The current rate of FUTA tax is 6%, although the majority of employers are eligible for a tax credit of up to 5.4%, which lowers the effective rate to 0.6%. Each employee’s first $7,000 of pay is used to calculate FUTA tax. Employee contributions to FUTA are not mandatory, so the employer is directly in charge of this tax, which is often managed using accounts payable systems.

2.  State Unemployment Tax Act (SUTA)

The State Unemployment Tax Act (SUTA) is an employer-paid levy that is comparable to FUTA. Like FUTA, SUTA has state-specific rates and pay bases. Employers are required to pay SUTA taxes, and these amounts must be accurately tracked and reported within the company’s accounts payable systems.

3. Employer’s Part of Medicare and Social Security Taxes

While Social Security and Medicare taxes are split between employers and employees, it’s crucial to recognize that employers are responsible for an equal portion of these taxes. Employers contribute 1.45% of wages to Medicare and 6.2% of wages to Social Security. The employer’s share of payroll taxes is a substantial component, even if employees also contribute. To maintain compliance and correct financial reporting, payroll tax obligations within accounts payable systems must be carefully managed.

4. Insurance for Workers’ Compensation

Insurance for workers’ compensation is another duty that lies solely on the employer. Benefits are provided by this insurance to workers who sustain illnesses or injuries at work. Although not a tax, it is an obligatory expense that needs to be included in the business’s budget, much like payroll taxes. The cost of workers’ compensation varies based on the industry, location, and the company’s claim history.

5. Federal Insurance Contributions Act (FICA) taxes

While Social Security and Medicare taxes are included in FICA taxes, the employer’s portion of these contributions is the main emphasis. As previously stated, employers match the 1.45% Medicare tax and the 6.2% Social Security tax paid by employees. Employers are responsible for making sure that these contributions are accurately computed and quickly deposited via their accounts payable systems.

6. State-Specific Payroll Taxes on Employers

Payroll taxes are supplementary in certain states and are fully covered by employers. For instance, employment training programs in California are funded by the Employment Training Tax (ETT). Employers need to be aware of any state-specific taxes that need to be controlled inside their accounts payable systems, as each state has its own set of requirements.

7. Contributions to Federal Income Tax Withholding

Employers compute, withhold, and submit these taxes to the IRS even though federal income tax is deducted from employee paychecks. The procedure of handling these withholdings is a crucial component of accounts payable systems and overall payroll tax compliance, even though it is not an employer-paid tax in and of itself.

8. Local Payroll Taxes 

Employers may be required to pay payroll taxes levied by local governments in some places. The rates and applicability of these taxes vary greatly, but they nonetheless constitute an extra financial burden that needs to be managed by accounts payable systems. Employers are responsible for making sure they comply with local laws, whether it is a county or city tax.

Conclusion-

Keeping track of employer-paid payroll taxes is essential to the financial stability of your company. Meru Accounting provides professional help in optimizing accounts payable processes to guarantee that payroll tax requirements are fulfilled precisely and effectively. Our staff offers complete assistance, from figuring out tax obligations to smoothly incorporating these payments into your accounting procedures. Working with Meru Accounting will provide you the peace of mind that your payroll taxes are handled correctly, allowing you to concentrate on expanding your company.