Payroll taxes include the following:

Social Security Tax:  This is also known as the FICA tax (Federal Insurance Contributions Act).  Basically, the employer and the employee pay 7.65% each.  The rate is actually a composite of two sections:  6.2% for Social Security (limited to wages of up to $102,000) and 1.45% for Medicare (which there is no wage limit).  The employer can only deduct the 7.65% amount.

Federal Unemployment Tax:  Called the FUTA tax (Federal Unemployment Tax Act), this is paid solely by the employer and the rate is 6.2% (for up to $7,000 in wages).  But this is often lower because of a credit for the payment of state unemployment taxes.

A company is required to pay FUTA tax if:

• $1,500 or more is paid to one or more employees during any calendar quarter (beginning in January, April, July, or October)
• There are one or more employees for at least part of a day in any 20 or more different weeks during the year

Federal Income tax:  This is the federal income tax the employer withholds, which is based on the employee’s earnings and exemptions (indicated on Form W-4).

State Payroll Taxes:  This is for state unemployment, income and disability taxes.