A payroll tax is a form of tax an employer pays to their state, local, and federal government based on a percentage of their overall employee pay. On the national level, employers generally make withholdings for federal income taxes, federal unemployment taxes, and social security and medicare taxes, each at a different tax rate. These payroll tax deductions must be reported on the employer’s federal tax return.
Both employer and employee are required to dedicate a portion of their federal payroll taxes to the Federal Insurance Contributions Act (FICA) tax, which supports the Social Security Administration. This also applies to self-employed workers, who are responsible for both the employer and employee portions of the tax under the Self-Employment Contributions Act (SECA).
Ascentis’ powerful payroll software can help you manage all your payroll tax compliance needs.