Payroll Taxes 101: A Simple Guide for Admins

When it comes to taxes, it’s easy to feel overwhelmed trying to distinguish which are which, who’s responsible for paying them and what the process is — especially when you’re managing them for a business.

For those who are new to payroll taxes, here is a simple guide for beginners to help break it down and guide you through the process.

What Is Payroll Tax?

Payroll taxes are taxes that are paid on the salaries, wages and tips of employees. Unlike income tax, which is a progressive tax that is also withheld from employees’ paychecks to be remitted to the general fund of the U.S. Treasury, payroll taxes are used to fund specific programs: Social Security and Medicare. These programs show up on pay stubs as “FICA” and “MedFICA”.

Both Social Security and Medicare taxes fall under the Federal Insurance Contributions Act (FICA), and both employees and employers pay for them. However, it is the employers’ responsibility for collecting and paying these taxes on behalf of their employees through their payroll process.

What’s the Difference Between Payroll Tax and Income Tax?

In a nutshell: For payroll tax, employees pay a flat rate. For income tax, the amounts will vary based on the amount employees earn. Both taxes are taken out of employees’ paychecks by employers and submitted to the government on the employees’ behalf.

How Much Is Payroll Tax?

U.S. tax income forms on a desk

This number is dependent on the amount of employees a business has and how much they are paid. It’s calculated based on a set percentage of employees’ gross wages rather than a specific dollar amount.

The percentage for payroll tax is 15.3% of an employee’s gross taxable wages, which is comprised of Social Security (12.4%) and Medicare (2.9%). But because the taxes are split evenly between both employee and employer, employers payroll tax rates are 7.65% (6.2% for Social Security and 1.45% for Medicare). If you are self-employed, however, you must pay the full portion of FICA tax (15.3%).

When Are Payroll Taxes Due?

Monthly: Employers are responsible for making monthly deposits before or on the 15th day of the month after the month when employees have been paid. For instance, if a business paid its employees in April, it must make a deposit on its employees’ behalf no later than May 15.

Semi-Weekly: When it comes to semi-weekly deposits, these use a specific schedule:

  • Any payrolls distributed on Saturday, Sunday, Monday or Tuesday must have deposits submitted by the next Friday.
  • Any payrolls distributed on Wednesday, Thursday or Friday must have deposits submitted by the next Wednesday.

Next-Day: For those who have a payroll tax obligation of at least $100,000, a deposit must be made the next day. This is a required process for the remainder of that year as well as the year after.

How Do You Make a Payroll Tax Deposit?

If the total tax liability you have for the quarter is $2,500 or less, payroll tax deposits can be paid with Form 941. If you owe more than $2,500, you must make your deposit electronically via the EFTPS online system, provided by the IRS.

PER: Providing You Support for Payroll Services and Beyond

woman helping with payroll taxes

At PER, we understand the challenges that come with payroll and taxes, especially when your company is growing quickly. Our team is equipped with a team of experts who can work with you to set up a comprehensive system for payroll automation, deductions, verification and much more, helping you stay on track and avoid things like wage claims or expensive penalties.

When you work with our team at PER, we support you with:

  • Eliminating the need to sign paychecks
  • Alien expiration monitoring
  • New-hire reporting compliance
  • Verification of employment
  • E-Verify administration
  • Special labor reports (upon request)
  • Payroll tax reporting and year-end W2s
  • Issuing W2s to employees
  • Comprehensive payroll deductions
  • Job management reports
  • Social security verification
  • Garnishment and levy administration
  • And more!

Our goal is to help free up your time so you can focus on growing your business. Learn more about how PER can help you with payroll taxes and other HR/administrative duties today. Or, if you’re ready, schedule a free consultation online now!


Ready to grow your business?