Payroll taxes

Payroll taxes are imposed by a government on employee wages and salaries. The taxes may be solely withheld from employee pay, or the employer may be required to match the withholding, or the employer is solely responsible for payment. In any case, the employer then remits the funds to the government. There are a number of payroll taxes that may be imposed, including the following:

  • Social security. Used to fund the social security retirement program.
  • Medicare. Used to fund the Medicare healthcare program for older citizens.
  • Unemployment. Used to bolster an unemployment compensation fund for laid off workers.

Local governments may add additional payroll taxes to cover local programs, typically for relatively small amounts.

The payroll taxes withheld from a person's pay are itemized on the remittance advice (pay stub) that accompanies each paycheck. The remittance shows gross pay, payroll taxes, other withholdings, and net pay.

Related Courses

Payroll Management