What Taxes Does The Employer Pay? Employer Taxes Explained

Employers are not only responsible for paying an employee’s wages, but they are also responsible for federal and state taxes. Employers are responsible for Social Security taxes, Medicare taxes, federal and state unemployment taxes as well as state-specific payroll taxes.  Let’s explore how payroll taxes work and what the employer versus the employee is responsible for when it comes to paying. 

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Quick Overview: Taxes Employers Are Responsible For

Employers must ensure that several different types of taxes are appropriately paid and deducted from the employee’s paycheck. Some of these taxes are shared with the employee, while others are paid by the employer.  

1. Social Security Tax  

Employees are required to pay 6.20% in Social Security taxes. The employer must match that rate. The total rate is 12.4%. However, there’s a wage base limit on these taxes. In 2026, once your income hits $184,500, you won’t be subject to Social Security taxes.

2. Medicare Tax

Employees pay 1.45% in Medicare taxes. Employers are required to match that rate. There’s no wage cap, so this tax applies to all earnings. Higher earners pay an additional 0.9% tax, but employers are not required to match this contribution. 

Here’s an example: An employee who makes $60,000 will owe $870 in Medicare taxes. The employer will pay the same amount. 

3. Federal Unemployment Tax (FUTA)

The employer is solely responsible for FUTA. This helps fund unemployment benefits. The standard FUTA rate is 6.0%. Typically states receive a state unemployment tax credit that reduces the FUTA to 0.6%. FUTA has a limit. It applies only to the first $7,000 per employee per year. 

4. State Unemployment Tax (SUTA)

Each state sets its own SUTA unemployment tax rate and wage base. The employer cost is location-dependent. If you’re a new employer, you pay a default or standard rate. These rates may change once the employer builds an unemployment history. Based on the unemployment claims, the rate can fall or rise. More unemployment claims can cause the rate to go higher. 

5. State-Specific Employer Taxes

Some states require additional payroll taxes in addition to what’s required by the federal government. For example, California and New York require state disability taxes, which provide state disability benefits. Other states require paid family leave contributions as well as workforce training or employment initiatives. 

Do Employers Pay Federal Income Tax for Employees?

Employers do not pay federal income taxes for their employees. This responsibility falls on the employee. However, the employer does play a role in the process. The employer is responsible for withholding, depositing and reporting the tax. 

Withholding 

Your employer will withhold the taxes based on your W-4 election. This amount will be deducted from your gross pay. 

Depositing

Your employer will deposit these funds to the IRS via the Electronic Federal Tax Payment System (EFTPS). These deposits can be made monthly or semi-weekly. 

Reporting 

To prove that the employer deposited these withholding amounts, a quarterly return should be filed along with an annual summary. This is to make sure the withholding amounts match what the employer sent the IRS. 

Self-Employment Tax vs. Employer Payroll Taxes

Self-employed individuals have double the tax liability. These individuals pay both the employer and employee portion of taxes. The self-employment tax is 15.3% that includes 12.4% in Social Security and 2.9% in Medicare. 

How Much Do Employers Pay Per Employee?

Employers pay Social Security (6.2%) and Medicare (1.45%) for a total of 7.65% of wages.  

Here’s a breakdown of total employer payroll tax costs for $40,000: 

• Social Security (6.2%): $2,480

• Medicare (1.45%): $580

• Total employer payroll taxes: $3,060

Here’s a breakdown of total employer payroll tax costs for $100,000: 

• Social Security (6.2%): $6,200

• Medicare (1.45%): $1,450

• Total employer payroll taxes: $7,650

Tax Filing and Payment Deadlines for Employers

Employers must make their payroll deadlines on time. Here’s what employers are required to do: 

Meet Payroll Deadlines

Payroll depends on the employer’s total tax liability in the past 12 months: 

• If the employer reports tax liability less than $50,000, payments are due by the 15th of the following month.

• If the employer reports tax liability that’s $50,000 or more, the schedule is based on the employer’s payday. 

• If the employer reports tax liability of $100,000 or more in a single day, the employer must make the deposit the next business day. 

Pay Quarterly Returns 

Every quarter, employers are required to file Form 941 to report wages and withholdings.

• Q1: Due April 30, 2026

• Q2: Due July 31, 2026

• Q3: Due November 2, 2026 

• Q4: Due February 1, 2027  

File Annual Requirements

By the start of the year, the employer must provide tax documents to workers and the government.

• W-2s and 1099-NECs. This form must be provided to employees/contractors and filed with the SSA/IRS by February 2, 2026. 

• Form 940 (FUTA). The annual federal unemployment tax return is also due February 2, 2026. 

What Happens If An Employer Doesn’t Pay Payroll Taxes?

If an employer fails to pay payroll taxes, there are several consequences. 

IRS Penalties and Interest

The IRS will penalize the employer based on a tiered system dependent on the number of days late. For example, if the employer is one to five days late, it’s a 2% penalty on the unpaid amount. If the employer is 16 or more days late, it’s 10% of the unpaid amount. 

Interest is 7% per year and compounded daily. 

Trust Fund Recovery Penalty 

This penalty is one of the harshest against employers. If the employer cannot withhold the proper amount of taxes, then liability will be 100% against responsible persons. Responsible persons may include owners, bookkeepers, corporate officers and board members. 

Personal Liability 

Personal liability extends to personal assets like cars, homes and personal bank accounts. These assets can be used to satisfy debt. 

Ways Employers Can Reduce Payroll Tax Burden

Here are ways that employers can reduce their payroll tax burden: 

• Claiming payroll tax credits. The Work Opportunity Tax Credit (WOTC) permits employers to hire workers from certain eligible groups to claim credits. 

• Using retirement contributions. If employers make contributions to qualified retirement plans, they can reduce their tax burden. 

• Taking advantage of R&D or industry credit. Businesses that are involved in certain research initiatives can qualify for tax credits. 

• Proper worker classification. Making sure that individuals are correctly designated as employees or independent contractors can help to avoid unnecessary payroll taxes. 

Final Takeaway 

Employers are required to match the employee’s contribution for Social Security and Medicare.  While the employee is still responsible for some of their contributions to FICA and state and local income taxes, employers are solely responsible for unemployment taxes. Employers also have reporting requirements and consequences if they fail to pay their payroll taxes.  

FAQs

What percentage of payroll taxes does the employer pay?

Employers are responsible for 7.65% of each employee’s wages including 6.2% for Social Security and 1.45% in Medicare. Sometimes employers are also responsible for federal and state unemployment taxes.  

What’s the percentage of federal income tax withheld?

Federal withholding tax rate varies based on income and filing status. Income tax rates range from 10% to 37% in 2026.

Do employers pay more taxes than employees?

Employers and employees generally pay the same amount of taxes. However, the employer’s financial burden is higher because of federal and state obligations. 

Are payroll taxes deductible for employers?

For employers, payroll taxes are deductible as a business expense. 

Do small businesses pay different employer taxes?

Generally, small businesses pay the same payroll tax rate, but unemployment tax rates may vary from state to state. 

Sources 

• SSA.gov - Social Security Maximum Taxable Earnings 

• IRS.gov - No. 751, Social Security and Medicare Withholding Taxes

• IRS.gov - Federal Unemployment Tax

• IRS.gov - Understanding Employer Taxes

• IRS.gov - Self Employment Taxes

• IRS.gov - Form 941

• IRS.gov - Employment Tax Due Dates

• IRS.gov - Failure to Deposit Penalty