Money held from the paycheck
- Federal income tax withholding
- Employee Social Security and Medicare
- State or local withholding where applicable
Financial Clarity Center · Payroll taxes
Payroll taxes, in plain English.
FICA, FUTA, SUTA, withholding, deposits, and the part owners should never mistake for spare cash. Start with the question behind the acronym: who pays, when is it due, and what does it cost the business?
The map
Who pays what?
A pay stub shows the employee’s side. The business has a second side that does not reduce the employee’s take-home pay but does reduce the cost of keeping that role on staff.
Paid by the company separately
- Employer Social Security and Medicare
- FUTA, generally
- SUTA or state unemployment, commonly
Where context matters
- State disability or paid-leave programs
- Local taxes and assessments
- Benefits and workers’ compensation
Withheld money is not cash available to spend.
Employee federal withholding and the employee share of Social Security and Medicare are amounts the business is holding to remit. They are not working capital. A payroll processor can help with administration, but it does not remove the employer’s obligation to review reports, deposits, and filings.
The first acronym
FICA is the employer-and-employee conversation.
FICA means the Federal Insurance Contributions Act. In practical terms, it covers Social Security and Medicare taxes. Both sides generally contribute, but the rates and wage rules are not identical across every payroll tax.
Social Security / OASDI
Employee share6.2%
Employer share6.2%
2026 wage base$184,500
The employer’s 6.2% generally applies to each employee’s first $184,500 of covered wages in 2026. The wage base changes periodically.
Medicare / HI
Employee share1.45%
Employer share1.45%
Regular wage capNone
Regular Medicare tax has no annual wage cap. The employee’s additional 0.9% Medicare withholding after $200,000 of wages has no employer match.
In a simplified $80,000 example, the employer’s direct FICA cost is $4,960 of Social Security plus $1,160 of Medicare, or $6,120 before FUTA, SUTA, benefits, workers’ compensation, and other costs.
Unemployment taxes
FUTA is federal. SUTA is where state context takes over.
The two are often discussed together because both support unemployment systems. They are not one national rate, and the right state calculation depends on the employer’s assigned rate and wage base.
FUTA — Federal Unemployment Tax Act
The statutory FUTA rate is 6.0% on the first $7,000 of applicable wages per employee. Eligible employers may generally receive up to a 5.4% credit for qualifying state unemployment taxes paid properly and on time, producing a 0.6% effective-rate scenario ($42 after $7,000 of wages). Credit reductions and other circumstances can increase the tax.
SUTA, SUI, or state unemployment tax
There is no single national SUTA percentage. A state can set its own taxable wage base, rate range, experience-rating system, deadlines, and rules. Your assigned rate can change after claims, layoffs, a new-employer period, legislative changes, an acquisition, or other state-specific events.
- Do not use a neighboring company’s rate as yours.
- Check the current notice from your state agency.
- Enter your actual rate and wage base in the calculator below.
The part worth taking seriously
Withholding is not the company’s money.
Federal income-tax withholding is generally calculated from the employee’s Form W-4 and payroll rules. State, local, city, county, disability, and paid-family-leave amounts may also appear, depending on the work and residence situation.
These withheld amounts can be recorded as liabilities until they are remitted. That is different from the employer Social Security and Medicare match, which is an employer expense.
Payroll tax money is not working capital.
Do not use it to pay a vendor, make the next payroll, or bridge a slow month with the hope of replacing it later. If cash is tight, ask a qualified tax or financial professional about the situation before a deposit is missed.
Under applicable rules, people responsible for collecting, accounting for, or paying trust-fund taxes who willfully fail to do so can potentially face personal responsibility for unpaid amounts. Facts and circumstances matter; this is an educational warning, not an individualized legal conclusion.
Timing matters
A quarterly return does not always mean a quarterly payment.
Federal deposit schedules can depend on the employer’s prior payroll-tax liability and IRS rules. The filing can be quarterly while the money is due sooner. State deadlines and deposit rules vary too.
Form 941Employer’s quarterly federal tax return.
Form 940Employer’s annual federal unemployment tax return.
Form W-2Annual wage and tax statement for the employee.
Form W-3Transmittal of wage and tax statements.
Deposit frequency and due dates are not evergreen. Check current IRS and state guidance, your payroll notices, or your tax professional for the schedule that applies to your business.
Educational tool
What does this employee really cost?
Build a rough annual employer-cost view. The estimate separates compensation, employer payroll taxes, benefits, workers’ compensation, and SUTA so you can see what is included and what is not.
FUTA starts with the editable 0.6% full-credit assumption on the first $7,000. SUTA starts blank because there is no responsible default rate.
Inputs stay in this page and are not collected or sent anywhere.
Optional. Leave blank to use $0.
Optional annual estimate.
Starts at 0.6% full-credit assumption.
Enter an annual salary to calculate employer cost.
Estimated annual employer cost
Base compensation$0
Employer Social Security$0.00
Employer Medicare$0.00
FUTA (0.6%)$0.00
SUTAExcluded
Annual benefits$0.00
Workers’ compensation$0.00
Total estimate$0
SUTA is excluded until you enter your assigned rate and wage base.
This is employer cost, not employee withholding. It excludes every tax, benefit, overtime, paid-leave, workers’ compensation, state/local rule, and employer-specific adjustment not entered here.
Keep the system boring
Payroll-tax mistakes get expensive when they stay invisible.
This is a review list, not a fear list. A payroll processor can reduce administrative work, but owners should still know what is being filed, what was deposited, and which state notices need attention.
Treating withheld taxes as available cash
The liability is still there even when the bank balance looks comfortable.
Assuming a quarterly filing means quarterly payment
Deposit schedules can be monthly, semiweekly, or otherwise governed by current rules.
Forgetting state unemployment
SUTA may not appear in the same place as federal payroll deposits.
Using the wrong SUTA rate
Use the current rate notice assigned to your business, not a generic state estimate.
Missing annual wage-base changes
Federal and state wage bases can change; payroll settings need review.
Ignoring a payroll notice
A notice can change a rate, a deadline, or the amount the agency expects.
Misclassifying workers
Employee-versus-contractor questions can carry tax and legal consequences.
Not verifying deposits
Keep access to payroll reports, filings, confirmations, and EFTPS records.
Using a payroll company does not automatically transfer the employer’s legal responsibility. Verify the arrangement, keep records, and check current IRS and state guidance.
A smaller alphabet
Payroll terms you can actually use.
Open a definition when you need it. These are practical starting points, not substitutes for current, jurisdiction-specific guidance.
FICA
Federal Insurance Contributions Act. The federal law behind Social Security and Medicare payroll taxes.
FUTA
Federal Unemployment Tax Act. Generally an employer-paid federal unemployment tax with a $7,000 wage base.
SUTA / SUI
Common shorthand for state unemployment tax or insurance. Rates and wage bases vary by state and employer.
Trust-fund tax
Certain employee-withheld taxes held by the employer for remittance, including federal withholding and employee FICA shares.
Wage base
The amount of wages subject to a particular tax. A wage base is not necessarily the same for every payroll tax.
Experience rating
A state method that can affect an employer’s unemployment rate based on claims or other state-defined history.
Form 941
The employer’s quarterly federal tax return reporting wages, withholding, and employment taxes.
EFTPS
The Electronic Federal Tax Payment System, one place employers may use to make and review federal tax payments.
Payroll burden
A practical phrase for employer payroll costs beyond gross wages, such as employer taxes, benefits, and insurance.
Common questions
Payroll-tax answers in plain English.
These general explanations summarize the figures on this page. Confirm current requirements for your business.
What is a payroll tax?
A payroll tax is a tax connected to wages. Payroll includes employee amounts withheld from pay and employer-paid taxes, such as the employer share of Social Security and Medicare and federal unemployment tax.
What is the difference between FICA and FUTA?
FICA covers Social Security and Medicare. In 2026, the employer Social Security share is 6.2% up to the $184,500 wage base, and the employer Medicare share is 1.45%. FUTA is federal unemployment tax: 6.0% on the first $7,000 of applicable wages, with an eligible credit of up to 5.4% that can make the effective rate 0.6%.
How much are employer payroll taxes?
The amounts depend on wages and the employer’s circumstances. The employer FICA shares shown here are 6.2% for Social Security up to the $184,500 2026 wage base and 1.45% for Medicare. With the full FUTA credit, FUTA is 0.6% on the first $7,000, or $42 per employee. SUTA varies by state and employer.
Do employers pay SUTA?
Employers commonly pay state unemployment tax, also called SUTA or SUI. The rate and taxable wage base vary by state and employer, so use the current rate notice assigned to the business.
Is a quarterly return the same as a quarterly payment?
No. A federal payroll return can be quarterly while required tax deposits are due sooner. Deposit timing depends on current rules and the employer’s circumstances; state schedules can also differ.
Keep learning
You do not have to become a payroll-tax department.
If you are thinking about hiring, connect this page to Skyline’s separate owner questions about hiring and payroll rather than treating tax compliance as the whole hiring decision.
Read the owner question about adding an employeeSource notes for the 2026 values.
Federal payroll-tax values change. Confirm the current year’s rules before relying on a calculation, and check your state agency for SUTA rates, wage bases, and deadlines.
Estimate only. This page does not include every tax, benefit, overtime, paid-leave, workers’ compensation, state/local rule, or employer-specific adjustment. Payroll and employment-tax rules can change and may vary by state, locality, employee circumstances, and business structure. This material is educational and is not individualized tax or legal advice. Check current IRS and state guidance or speak with your tax professional.