What payroll taxes am I responsible for as an employer?
You have two types of payroll tax obligations. Some taxes come directly out of your pocket as the employer. Others you withhold from employee wages and remit to the government on their behalf. Both are your responsibility to handle correctly and pay on time.
Taxes you pay directly include your half of FICA, which covers Social Security at 6.2% and Medicare at 1.45%. That adds 7.65% on top of every dollar of wages you pay. You also pay federal unemployment tax (FUTA) at 6% on the first $7,000 of each employee’s wages, though credits for state unemployment payments usually reduce this to 0.6%.
Taxes you withhold from employees include their half of FICA, which matches your contribution at 7.65%. You also withhold federal income tax based on the W-4 form each employee submits. For employees earning over $200,000, you must withhold an additional 0.9% Medicare tax on wages above that threshold.
In Massachusetts, you withhold state income tax at a flat 5% rate. You also pay state unemployment insurance, which varies based on your experience rating and industry. New employers typically start around 2.42% on the first $15,000 of each employee’s wages. Massachusetts also requires Paid Family and Medical Leave contributions. The employer pays a portion and withholds the rest from employee wages.
When you add up the employer-paid taxes, you’re looking at roughly 10% or more on top of gross wages before you even factor in benefits or workers’ comp insurance. This is why labor costs more than the hourly rate or salary you agree to pay someone.
Deposit schedules depend on your total tax liability. Most small employers deposit monthly. Larger employers deposit semi-weekly. Miss a deposit deadline and penalties start immediately. The IRS treats payroll tax failures seriously because you’re handling money that belongs to the government and your employees.
Quarterly filings include Form 941 to the IRS and state wage reports. Year-end brings W-2 preparation and additional reconciliation filings. Getting any of these wrong creates problems that compound quickly through penalties and interest.
Many business owners underestimate how much time and attention payroll compliance requires. Calculating withholdings correctly, making deposits on schedule, filing quarterly reports, and staying current on rate changes takes consistent effort. A Andover, MA payroll service can handle these obligations so you focus on running your business instead of tracking tax deadlines.
If you’re handling payroll yourself and want to ensure everything is set up correctly, or if you’d rather hand off the entire process, managed payroll covers wage calculations through year-end W-2s. The cost of professional help is usually less than the penalties for getting it wrong.
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