Last updated: June 2026
Payroll taxes are the taxes employers must withhold, pay, deposit, and report when they run payroll for employees in the United States. In practical terms, payroll taxes usually include federal income tax withholding, Social Security tax, Medicare tax, federal unemployment tax, and applicable state payroll taxes such as state income tax withholding and state unemployment tax.
For employers, payroll taxes are not just deductions on a paycheck. They are an ongoing compliance responsibility tied to wage calculations, deposit schedules, reporting deadlines, employee classification, multi-state registrations, and year-end forms. If you run payroll for a small business, startup, remote team, or growing U.S. workforce, understanding payroll taxes is essential to avoiding penalties and payroll disruption.
If you want a broader payroll foundation first, you can also explore what payroll is, how payroll works in the U.S., and payroll processing and compliance in the USA.
Quick Answer: What Are Payroll Taxes?
Payroll taxes are taxes connected to employee wages that employers must manage through payroll.
They usually fall into three categories:
- taxes withheld from employee wages, such as federal income tax and the employee share of Social Security and Medicare
- taxes paid by employers, such as the employer share of Social Security and Medicare, plus the federal unemployment tax
- state and local payroll-related taxes, which vary depending on where employees work
For most employers, payroll tax management means handling both the employee withholding side and the employer contribution side accurately and on time.
Main Payroll Taxes in the U.S.
| Payroll tax | Who pays it | Withheld from employee pay? | Employer responsibility |
|---|---|---|---|
| Federal income tax | Employee | Yes | Withhold, deposit, and report it correctly |
| Social Security tax | Employee and employer | Yes for employee share | Withhold employee share, pay employer share, and report both |
| Medicare tax | Employee and employer | Yes for employee share | Withhold employee share, pay employer share, and report both |
| Additional Medicare Tax | Employee | Yes, above threshold | Withhold when required and report it correctly |
| Federal unemployment tax (FUTA) | Employer | No | Calculate, deposit, and report it |
| State income tax | Employee in many states | Usually yes | Withhold and report based on state rules |
| State unemployment tax (SUTA/SUI) | Usually employer | Usually no | Register, calculate, deposit, and file based on state rules |
This table is the simplest way to understand the topic: some payroll taxes are withheld from employees, some are paid directly by employers, and some involve both.
What Payroll Taxes Do Employers Pay?
One of the most common payroll questions is not just what payroll taxes are, but which payroll taxes employers actually pay.
In the U.S., employers are generally responsible for:
- Withholding federal income tax from employee wages
- withholding the employee share of Social Security and Medicare taxes
- paying the employer share of Social Security and Medicare taxes
- Withholding Additional Medicare Tax when required
- paying federal unemployment tax, or FUTA
- managing state income tax withholding where applicable
- managing state unemployment tax obligations where applicable
The IRS employment taxes guidance explains that employers must deposit and report federal income tax withheld, Additional Medicare Tax withheld, and both the employer and employee Social Security and Medicare taxes. The IRS also maintains detailed employer rules in Publication 15.
If your team is growing, this is also a good place to review a payroll compliance checklist and common payroll risks.
2026 Payroll Tax Rates Employers Should Know
Employers searching for payroll tax information usually want more than definitions. They want the current numbers.
As of 2026:
- Social Security tax is 6.2% for the employee and 6.2% for the employer, up to the annual wage base.
- The 2026 Social Securitywage base is $184,500, according to the Social Security Administration.
- Medicare tax is 1.45% for the employee and 1.45% for the employer, with no wage base limit, according to IRS Topic No. 751.
- Additional Medicare Tax is 0.9% on wages above $200,000 paid to an employee in a calendar year, and there is no employer match, according to the IRS Additional Medicare Tax guidance.
- FUTA is 6.0% on the first $7,000 of wages paid to each employee. Many employers effectively pay 0.6% after the standard maximum credit, depending on state unemployment circumstances, according to IRS Topic No. 759 and the IRS FUTA credit reduction page.
These figures are one reason this page should feel employer-first. Businesses are usually not looking for a general academic definition alone. They want to know what they must calculate, withhold, match, and file.
Types of Payroll Taxes in the U.S.
Federal income tax withholding
Federal income tax is withheld from employee wages based on the employee’s Form W-4, wages paid, and the IRS withholding rules. Employers are responsible for withholding the correct amount and depositing it on time.
This tax is paid by the employee, but the employer is responsible for administering it correctly through payroll. The IRS Publication 15-T is the main official reference for withholding methods.
Social Security tax
Social Security tax is part of FICA. In most payroll situations, both the employee and the employer pay 6.2% on covered wages up to the annual wage base. For 2026, that wage base is $184,500, according to the SSA contribution and benefit base page.
Medicare tax
Medicare tax is also part of FICA. Employers and employees generally each pay 1.45%, and there is no wage base limit. All covered wages remain subject to Medicare tax.
Additional Medicare Tax
Additional Medicare Tax is an employee-only tax of 0.9% on wages above $200,000 paid to an employee in a calendar year. Employers must begin withholding it once wages cross that threshold, even though there is no employer match.
Federal unemployment tax (FUTA)
FUTA is an employer-paid payroll tax used to fund unemployment programs at the federal level. It is not withheld from employee wages. In 2026, the standard FUTA rate is 6.0% on the first $7,000 paid to each employee, according to IRS Topic No. 759.
State income tax withholding
Many states require employers to withhold state income tax from employee wages. The exact rules vary by state, and some states do not impose state income tax at all.
For businesses with remote employees or operations in multiple states, this is often where payroll tax complexity increases.
State unemployment tax (SUTA or SUI)
State unemployment taxes are generally paid by employers and vary by state. Registration rules, wage bases, tax rates, filing schedules, and local requirements can differ widely, especially for multi-state employers.
Employer vs Employee Payroll Tax Responsibility
| Tax type | Employee pays | Employer pays | Employer only withholds? |
|---|---|---|---|
| Federal income tax | Yes | No | Yes |
| Social Security | Yes | Yes | No |
| Medicare | Yes | Yes | No |
| Additional Medicare Tax | Yes | No | Yes |
| FUTA | No | Yes | No |
| State unemployment tax | Usually no | Usually yes | No |
This distinction matters because many searchers are actually asking an employer-side question even when they search a broad phrase like what are payroll taxes.
Payroll Taxes Examples for Employers
Here are a few simple payroll tax examples to make the topic easier to apply in real business situations.
Case 1: Salaried employee in one state
A small business pays a salaried employee every two weeks. The employer withholds federal income tax, Social Security tax, and Medicare tax from the employee’s wages. The employer also pays its own share of Social Security and Medicare, plus FUTA and applicable state unemployment taxes.
Case 2: Hourly employee with overtime
An hourly employee works overtime in a week. Payroll taxes still apply to taxable wages, but the overtime pay changes the gross wage amount used for withholding and employer payroll tax calculations. The employer must calculate gross pay correctly before taxes are withheld and reported.
Case 3: Remote employee in another state
A company based in one state hires a remote employee in another. The employer may need to register in that employee’s work state, apply the correct withholding rules, and handle state unemployment obligations there. This is one reason many businesses also study remote work and employment compliance.
Case 4: Higher-earning employee
If an employee’s wages exceed $200,000 during the calendar year, the employer must begin withholding the 0.9% Additional Medicare Tax in the pay period where that threshold is crossed. The employer does not match this additional amount.
Payroll Tax vs Income Tax
Payroll tax and income tax are related, but they are not the same thing.
Payroll tax usually refers to employment-related taxes tied directly to wages and payroll processing. This includes Social Security, Medicare, unemployment taxes, and the employer’s payroll tax responsibilities.
Income tax usually refers to the federal, state, or local income tax withheld from an employee’s wages based on the employee’s withholding setup and applicable tax tables.
In practice, employers manage both through payroll. That is why many business owners use the phrase payroll taxes broadly, even though some of those amounts are employee taxes and some are employer-paid obligations.
Why Payroll Taxes Matter for Small Businesses
For small businesses, payroll tax mistakes can create problems quickly. A missed deposit, incorrect withholding amount, late filing, or classification error can trigger penalties, employee frustration, and difficult year-end corrections.
That risk increases when a business is:
- hiring across multiple states
- managing remote teams
- paying bonuses or supplemental wages
- switching payroll systems or providers
- growing without a dedicated payroll specialist
If that sounds familiar, related guides like how to determine payroll taxes, how to figure payroll taxes, what payroll taxes do employers pay, and 8 common year-end payroll mistakes to avoid can support the reader’s journey well.
Payroll Taxes and Worker Classification
Payroll taxes apply differently depending on whether a worker is classified as an employee or an independent contractor. Employees generally go through employer payroll, with tax withholding and employer payroll tax obligations attached. Independent contractors generally handle their own self-employment tax and income tax payments directly.
This is why classification errors can create payroll tax risk. If a business treats someone like a contractor when they should have been classified as an employee, the employer can face back taxes, penalties, and compliance issues.
That is also why this article should link to worker classification factors and the contractor management page.
Common Payroll Tax Forms Employers Deal With
Most employers deal with a mix of payroll-related forms during the year. The exact set depends on business structure, employee locations, and payroll setup, but common federal forms include:
- Form W-4 for employee withholding setup
- Form 941 for quarterly federal payroll tax reporting
- Form 940 for annual FUTA reporting
- Form W-2 for annual wage and tax reporting
- Form W-3 for transmitting W-2 information
For year-end reporting, the SSA employer services page is a useful authoritative source for W-2 filing information. The IRS also maintains detailed employer tax guidance through Publication 15 and Publication 15-T.
How Employers Can Reduce Payroll Tax Errors
Employers can reduce payroll tax mistakes by building a more disciplined payroll process. That usually means:
- keeping employee tax forms current
- using a clean payroll calendar
- validating taxable wage calculations
- checking multi-state tax setups before onboarding remote hires
- reconciling payroll records regularly
- reviewing year-end forms before filing
- watching deposit schedules and due dates carefully
- using payroll support when internal resources are stretched
It also helps to align payroll with wage-and-hour compliance expectations. The U.S. Department of Labor FLSA page is a useful source for wage and hour basics that often intersect with payroll accuracy.
When to Consider Payroll Support
If your business is growing, hiring in multiple states, or managing payroll with a lean internal team, payroll taxes can become a real operational burden. At that stage, businesses often move from basic payroll software reliance to a more supported payroll model.
Useful next steps for readers include payroll services for small business USA, managed payroll services for mid-size businesses USA, and the broader U.S. payroll services page.
Types of Employers Pay in the U.S Frequently Asked Questions
What are payroll taxes?
Payroll taxes are taxes tied to employee wages that employers must withhold, pay, report, and deposit through payroll. They typically include federal income tax withholding, Social Security, Medicare, unemployment taxes, and applicable state payroll taxes.
What payroll taxes do employers pay?
Employers typically pay the employer share of Social Security and Medicare, federal unemployment tax, and state unemployment taxes. They are also responsible for withholding employee taxes correctly.
What is the Social Security wage base for 2026?
The 2026 Social Security wage base is $184,500, according to the Social Security Administration.
What is the FUTA rate in 2026?
The standard FUTA rate in 2026 is 6.0% on the first $7,000 of wages paid to each employee, according to IRS Topic No. 759. Many employers may effectively pay 0.6% after the standard maximum credit, depending on eligibility.
Are payroll taxes the same as income tax?
No. Income tax is one part of what runs through payroll, but payroll taxes also include employer-paid employment taxes such as FUTA and the employer share of FICA taxes.
Do employers pay federal income tax for employees?
Employers usually do not pay employees’ federal income tax for them. Instead, they withhold the required amount from employee wages and deposit it with the IRS.
Do payroll taxes apply to contractors?
Generally not in the same way. Independent contractors are usually not processed through employee payroll withholding. Instead, they typically manage self-employment taxes themselves, assuming the classification is correct.
When does the Additional Medicare Tax start?
Employers must begin withholding Additional Medicare Tax when they pay an employee wages above $200,000 in a calendaryear. There is no employer match for this additional tax, according to the IRS.
