What are Payroll Taxes?

And what payroll taxes must I pay?

There are federal and state payroll taxes. The federal payroll taxes include; social security, medicare and federal unemployment taxes. The table below lists the conditions that you have to meet before you have to pay these taxes (or withhold them from your employees’ pay).

IF you …

THEN you need to …

Pay cash wages of $1,900 or more in 2015 to any one household employee.
Do not count wages you pay to:

  • Your spouse,
  • Your child under the age of 21,
  • Your parent (but there are cases where parent’s wages are counted!), or
  • Any employee under the age of 18 at any time in 2015 (see Wages not counted, later, for an exception).
Withhold and pay social security and Medicare taxes.

  • The taxes are 15.3% of cash wages.
  • Your employee’s share is 7.65%. (You can choose to pay it for your employee out of your own pocket and not withhold it.)
  • Your share is 7.65%.
  • In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional
    Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.
Pay total cash wages of $1,000 or more in any calendar quarter of 2014 or 2015 to household employees. Do not count wages you pay to:

  • Your spouse,
  • Your child under the age of 21, or
  • Your parent.
Pay federal unemployment tax.

  • The tax is 6% of cash wages.
  • Wages over $7,000 a year per employee are not taxed.

And then there are state payroll taxes. Most states require a state unemployment insurance (UI) tax, but the similarities end here. Each state has their own unique payroll tax code that differs widely.  Please contact your state’s employment development or labor department for details.