Employment Taxes

Quick Links

Hot Topics

Paychex Payroll Services: Sign up Today!

Need Some Deductions for 2011?

Don't overlook these!

10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Employer's Liability for Employment Taxes

Employer's Liability for Employment Taxes

In addition to the taxes withheld from an employee's pay, the employer is also liable for federal employment taxes:

An employer is liable for the following federal employment taxes:

FICA taxes include: social security and Medicare taxes. (FICA stands for Federal Insurance Contributions Act.)

Social Security Tax

For 2011, the employee's share of the social security tax rate is reduced to 4.2%, from 6.2%, a 2% reduction. However, the employer's share of the tax remains 6.2%.

Medicare Tax

No change in 2011 for the Medicare tax; it remains 2.9%. The employer and employee each pay half of the 2.9% rate, 1.45%.

Federal Unemployment Taxes (FUTA)

FUTA tax is strictly an employer tax. Employees do not pay this tax. Only gross wages up to $7,000 paid to each employee is assessed FUTA taxes. For example, if you have two employees and paid gross wages of $15,000 to one of them and  $6,000 to the other, total FUTA wages subject to the tax is $13,000 ($7,000 plus $6,000).

For 2011, there are two FUTA tax rates:

Keep in mind, there is a credit of up to 5.4% for state unemployment taxes that reduces the FUTA liability to .8% (.008) for the first six months of 2011 and .6% (.006) for the last six months of 2011.

Only employers that pay all the required state unemployment fund contributions for 2011 by April 17, 2012 will receive the entire credit. The credit for payments made after April 17, 2012 is limited to 90% of the pre-deadline credit.

Reporting FICA and FUTA Taxes

If you're self-employed and have regular business employees as well as household employees, you have two options for reporting FICA and FUTA taxes:

  1. Report FICA and FUTA taxes and any income tax withholding for household employees annually of Schedule H, and report FICA taxes and any income tax withholdings for other employees quarterly on Form 941 and FUTA taxes annually of Form 940
  2. Report FICA taxes and any income tax withholding for all employees (household employees and other employees) quarterly on Form 941 and report FUTA taxes annually on Form 940.

Related Links