What is Payroll Tax?
The taxes withheld from paychecks and owed by employers - FICA, unemployment, and withholding.
Payroll Tax: definition
Payroll tax spans several distinct obligations. Some are withheld from the employee’s pay (income tax withholding, the employee share of FICA); others are paid by the employer on top of wages (the employer share of FICA, federal and state unemployment). Employers must calculate, withhold, remit, and report these on strict schedules - errors and late deposits carry meaningful penalties.
| Tax | Paid by | Purpose |
|---|---|---|
| Social Security (FICA) | Employee + employer | Retirement/disability (to a wage base) |
| Medicare (FICA) | Employee + employer | Medicare (no wage cap) |
| Income tax withholding | Employee (withheld) | Federal/state income tax |
| FUTA / SUTA | Employer | Unemployment insurance |
How Fintra handles it
Fintra calculates payroll taxes on each run - employee withholding and employer contributions across federal and state - remits and files them, and posts the expense and liabilities to the GL automatically. Because payroll and accounting are unified, the tax liabilities reconcile to the books, and multi-state rules are handled by the same engine.
Worked example
Frequently asked questions
What is the difference between FICA and income tax withholding?
FICA funds Social Security and Medicare and is split between employee and employer at fixed rates. Income tax withholding is the employee’s estimated federal and state income tax taken from each check based on their elections. Both are remitted by the employer.
What payroll taxes does the employer pay?
The employer pays its share of Social Security and Medicare (matching the employee’s), plus federal and state unemployment taxes (FUTA/SUTA). These are on top of gross wages, so the employer’s true labor cost exceeds the paycheck amount.
What happens if payroll taxes are filed late?
Late deposits and filings trigger penalties and interest, and payroll tax compliance is closely enforced. Automating calculation, remittance, and filing - as Fintra does - is the reliable way to avoid these costly errors.
How does Fintra handle payroll taxes?
Fintra calculates employee withholding and employer contributions across federal and state (including multi-state), remits and files them, and posts the expense and liabilities to the GL - with everything reconciling because payroll and accounting are unified.
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