View source for Payroll tax

{{short description|Tax imposed on employers or employees}}
{{Use dmy dates|date=September 2023}}
{{Taxation}}
[[File:Payroll and income tax by country.png|thumb|350px|right|Payroll and [[income tax]] by OECD Country]]

'''Payroll taxes''' are taxes imposed on employers or employees. They are usually calculated as a percentage of the salaries that employers pay their employees.<ref name="know">{{cite journal|title=The Knowledge Tax|journal=University of Chicago Law Review|date=2015|volume=82|page=1981|ssrn=2551567}}</ref> By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true [[Tax incidence|economic incidence]] of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages.<ref name="know" /><ref>{{cite book|title= Historical Effective Federal Tax Rates: 1979 to 2004|date=December 2006|publisher=Congressional Budget Office|page=3|url=http://www.cbo.gov/publication/42871}}</ref><ref>{{Cite web | title=CBO's analysis of effective tax rates assumes that households bear the burden of the taxes that they pay directly, such as individual income taxes and employees' share of payroll taxes. CBO assumes—as do most economists—that employers' share of payroll taxes is passed on to employees in the form of lower wages than would otherwise be paid. Therefore, the amount of those taxes is included in employees' income, and the taxes are counted as part of employees' tax burden.| url=http://www.cbo.gov/sites/default/files/EffectiveTaxRates2006.pdf | page=3}}</ref><ref>{{cite web|url=http://www.americanbenefitscouncil.org/documents/bush_taxbenefits_1pager.pdf|archive-url=https://web.archive.org/web/20100713154141/http://www.americanbenefitscouncil.org/documents/bush_taxbenefits_1pager.pdf|title=Incidence of Payroll Taxes is Fully on Employees |archive-date=13 July 2010|date=13 July 2010|access-date=31 March 2018}}</ref> Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in [[human capital]], such as higher education.<ref name="know" />

==National payroll tax systems==

===Australia===
{{See also|Taxation in Australia#Payroll taxes}}

Payroll taxes in Australia are levied by state governments and not at a federal level. Payroll tax rates and the threshold at which these are levied vary between states.

===Bermuda===

In [[Bermuda]], payroll tax accounts for over a third of the annual national budget, making it the primary source of government revenue.<ref>{{cite web|url=http://www.gov.bm/portal/server.pt/gateway/PTARGS_0_2_11057_311_1794_43/http%3B/ptpublisher.gov.bm%3B7087/publishedcontent/publish/gov__top_level__org__house_/whats_happening/national_budget_statement_2009.pdf|title=Bermuda Government Budget Statement 2009|website=www.gov.bm|access-date=31 March 2018|archive-date=19 February 2012|archive-url=https://web.archive.org/web/20120219050613/http://www.gov.bm/portal/server.pt/gateway/PTARGS_0_2_11057_311_1794_43/http%3B/ptpublisher.gov.bm%3B7087/publishedcontent/publish/gov__top_level__org__house_/whats_happening/national_budget_statement_2009.pdf|url-status=dead}}</ref>  The tax is paid by employers based on the total remuneration (salary and benefits) paid to all employees, at a standard rate of 14% (though, under certain circumstances, can be as low as 4.75%). Employers are allowed to deduct a small percentage of an employee's pay (around 4%).<ref>{{cite web|url=http://www.taxbermuda.gov.bm/guide_payroll.htm|title=Types of taxes in Bermuda|last=david.wellman|date=2 March 2016|website=www.taxbermuda.gov.bm|access-date=31 March 2018}}</ref>  Another tax, [[social insurance]], is withheld by the employer.

===Brazil===
{{See also|Taxation in Brazil}}

In [[Brazil]], employers are required to withhold 11% of the employee's wages for Social Security and a certain percentage as Income Tax (according to the applicable [[tax bracket]]). The employer is required to contribute an additional 20% of the total payroll value to the Social Security system. Depending on the company's main activity, the employer must also contribute to federally funded insurance and educational programs.

There is also a required deposit of 8% of the employee's wages (not withheld from him) into a bank account that can be withdrawn only when the employee is fired, or under certain other extraordinary circumstances, such as serious illness (called a "Security Fund for Duration of Employment"). All these contributions amount to a total tax burden of almost 40% of the payroll for the employer and 15% of the employee's wages.

===Canada===
{{See also|Taxation in Canada#Payroll taxes}}

The [[Northwest Territories]] in Canada applies a payroll tax of 2% to all employees. It is an example of the second type of payroll tax, but unlike in other jurisdictions, it is paid directly by employees rather than employers. Unlike the first type of payroll tax as it is applied in Canada, though, there is no basic personal exemption below which employees are not required to pay the tax.<ref>{{cite web|url=http://www.fin.gov.nt.ca/taxation/payroll/index.htm|title=1403 - Management Controls - July 2008|last=Cherie_Arrow|website=www.fin.gov.nt.ca|access-date=31 March 2018|archive-date=8 March 2015|archive-url=https://web.archive.org/web/20150308121024/http://www.fin.gov.nt.ca/taxation/payroll/index.htm|url-status=dead}}</ref>

[[Ontario government|Ontario]] applies a health premium tax to all payrolls on a sliding scale up to $900 per year.<ref>{{cite web|url=http://www.rev.gov.on.ca/english/taxes/healthpremium/rates.html|archive-url=https://archive.today/20110717175634/http://www.rev.gov.on.ca/english/taxes/healthpremium/rates.html|url-status=dead|archive-date=17 July 2011|title=Ontario Health Premium Rate Chart|website=gov.on.ca|access-date=31 March 2018}}</ref>

===China===
{{See also|Taxation in China}}

In [[China]], the payroll tax is a specific tax that is paid to provinces and territories by employers, not by employees. The tax is deducted from the worker's pay. The Chinese Government itself requires only one tax to be withheld from paychecks: the PAYG (or pay-as-you-go) tax, which includes medicare levies and insurances.

Tax calculations and contributions differ from city to city in China, and each city's data will be updated yearly.

Taxable Income = Gross Salary – Social Benefits – ¥3,500 IIT = Taxable Income x Tax Rate – Quick Deduction Net Salary = Gross Salary – Social Benefits – IIT

===Croatia===
{{See also|Taxation in Croatia}}

In [[Croatia]], the payroll tax is composed of several items:
* national income tax on personal income ({{langx|hr|porez na dohodak}}), which is applied incrementally with rates of 0% (personal exemption = 3800 HRK), 24% (3800-30000 HRK) and 36% (30000 HRK - )
* optional local surcharge on personal income ({{langx|hr|prirez}}), which is applied by some cities and municipalities on the amount of national tax, currently up to 18% (in [[Zagreb]])
* pension insurance ({{langx|hr|mirovinsko osiguranje}}), universal 20%, for some people divided into two different funds, one of which is government-managed (15%) and the other is a personal pension fund (5%)
* health insurance ({{langx|hr|zdravstveno osiguranje}}), universal 16.5%
* health insurance exemption exists for the population below 30 years of age as part of government policy to encourage youth employment.

=== Czech Republic ===
{{See also|Taxation in the Czech Republic}}
The income tax in the Czech Republic is progressive. The primary tax rate is 15% of gross income, but for an annual salary that is 48 times bigger than the average monthly salary (38.911 CZK in 2022, around 1.600 EUR), the rate is 23%. That applies only to the difference. The minimum wage to pay income tax is 27.840CZK in 2021 (approx. 1140EUR).<ref>{{Cite web |last=Mečířová |first=Lucie |date=22 March 2022 |title=Zrušení solidární daně: Kdo bude odvádět 23% daň z příjmů? |url=https://www.finance.cz/535624-dan-z-prijmu-23-procent/ |website=Finance.cz}}</ref>

For people with trade certificates, the rate applies only to 40% of their revenue. The remaining 60% can be deducted as a standard expense. Freelancers also have to file an Income tax return every year.

Taxpayers can apply a few tax deductions, such as a deduction for a child (starting at approx. 600EUR annually in 2021), for being a student (approx. 160EUR in 2021), for a dependent spouse (approx. 1000EUR in 2021) and more.<ref>{{Cite web |date=2 April 2022 |title=Slevy na dani |url=https://www.mesec.cz/danovy-portal/dan-z-prijmu/slevy-na-dani/ |website=Měšec.cz}}</ref>

Health and social insurance are mandatory and a part of a payroll tax. The health insurance rate is 13,5%. For employees with a salary higher than the minimum wage (16.200CZK in 2022, approximately 660EUR), 9% pay the employers, and only 4,5% pay the employees. Trade license workers pay it themselves. Categories that do not have to pay health and social insurance are, for example, students or people registered at the unemployment department. The social insurance rate is 31,5% for employees (6,5% paid by the employee and 25% by the employer) and 29,2% for freelancers.<ref>{{Cite web |date=2 April 2022 |title=Sociální a zdravotní pojištění |url=https://www.mesec.cz/danovy-portal/dan-z-prijmu/socialni-a-zdravotni-pojisteni/ |website=Měšec.cz}}</ref>

The income tax makes up to half of the national income. The health and social insurance make another 30-40%.<ref>{{Cite web |last=Stehnová |first=Jana |date=25 November 2019 |title=Jak a proč nakládá stát s penězi a kde se o tom poučit? |url=https://www.transparency.cz/jak-a-proc-naklada-stat-s-penezi-a-kde-se-o-tom-poucit/ |website=Transparency International Česká republika}}</ref>

===Finland===
{{See also|Taxation in Finland}}
{{Expand section|There are several payroll taxes on income. Please see the article "Taxation in Finland" and summarise their content here|date=May 2024}}
In Finland, there are several payroll taxes:
*paid by employees on their income:
:* pension insurance fee (''työeläkevakuutusmaksu''): employees<ref name="definition of employment">The Employees Pensions Act (first link) provides that the employee contributes to a pension fund by paying a part from their ''compensation for employment'' – i.d., from their wages or their salary. What constitutes ''employment'' is defined in the Employment Contracts Act (second link):
*{{cite act|author=Ministry of Justice|title=Työntekijän eläkelaki|url=https://www.finlex.fi/fi/lainsaadanto/2006/395|at=s 2(1)(2)|language=fi|trans-title=Employees Pensions Act|access-date=26 May 2024}}
*{{cite act|author=Ministry of Justice|title=Työsopimuslaki|url=https://www.finlex.fi/fi/lainsaadanto/2001/55|at=ch 1 ss. 1(1), 1(2) and 1(3)|language=fi|trans-title=Employment Contracts Act|access-date=26 May 2024}}</ref> 17–68 years of age<ref name="EPA s4subs2para1.2">{{cite act|author=Ministry of Justice|title=Työntekijän eläkelaki|url=https://www.finlex.fi/fi/lainsaadanto/2006/395|at=ss. 4(2)(1) and 4(2)(2)|language=fi|trans-title=Employees Pensions Act|access-date=26 May 2024}}</ref> pay a 7,15% fee<ref name="employee PIF 2004 decree">{{cite act|author=Ministry of Justice|title=Sosiaali- ja terveysministeriön asetus työntekijän työeläkevakuutusmaksuprosenteista vuonna 2024|url=https://www.finlex.fi/fi/lainsaadanto/saadoskokoelma/2023/1008|at=s 1|language=fi|trans-title=Decree of the Ministry of Social Affairs and Health on an Employee's Pension Insurance Fee Percentages in 2024|access-date=26 May 2024}}</ref> on their gross earned income<ref name="EPA s152subs2">{{cite act|author=Ministry of Justice|title=Työntekijän eläkelaki|url=https://www.finlex.fi/fi/lainsaadanto/2006/395|at=s 152(2)|language=fi|trans-title=Employees Pensions Act|access-date=26 May 2024}}</ref>
:* unemployment insurance fee (''työttömyysvakuutusmaksu''): employees 18–65 years of age<ref name="FIN 555/1998 s12subs1 s12Asubs1para1.2">The Act on the Financing of Unemployment Benefits (555/1998) section 12 subsection 1 (first link) provides that everyone employed in Finland is required to pay unemployment insurance fee. The section 12a subsection 1 paragraphs 1–2 (second link) provide for the age limit:
*{{cite act|author=Ministry of Justice|title=Laki työttömyysetuuksien rahoituksesta|url=https://www.finlex.fi/fi/lainsaadanto/1998/555|at=s 12(1)|language=fi|trans-title=Act on the Financing of Unemployment Benefits|access-date=26 May 2024}}
*{{cite act|author=Ministry of Justice|title=Laki työttömyysetuuksien rahoituksesta|url=https://www.finlex.fi/fi/lainsaadanto/1998/555|at=ss. 12a(1)(1) and 12a(1)(2)|language=fi|trans-title=Act on the Financing of Unemployment Benefits|access-date=26 May 2024}}</ref> pay a 0.79% fee<ref name="FIN 555/1998 s18subs1">{{cite act|author=Ministry of Justice|title=Laki työttömyysetuuksien rahoituksesta|url=https://www.finlex.fi/fi/lainsaadanto/1998/555|at=s 18(1)|language=fi|trans-title=Act on the Financing of Unemployment Benefits|access-date=26 May 2024}}</ref> on their gross earned income
:* health insurance daily allowance contribution (''sairausvakuutuksen päivärahamaksu''): employees<ref name="FIN 1224/2004 ch1s2subs1">{{cite act|author=Ministry of Justice|title=Sairausvakuutuslaki|url=https://www.finlex.fi/fi/lainsaadanto/2004/1224|at=ch 1 s 2(1)|language=fi|trans-title=Health Insurance Act|access-date=27 May 2024}}</ref> 16–68 years of age<ref name="FIN 1224/2004 ch18s5subs1.2">{{cite act|author=Ministry of Justice|title=Sairausvakuutuslaki|url=https://www.finlex.fi/fi/lainsaadanto/2004/1224|at=ch 18 ss. 5(1) and 5(2)|language=fi|trans-title=Health Insurance Act|access-date=27 May 2024}}</ref> pay a 1.01% contribution on their entire gross earned income if it equals to, or exceeds €16,499<ref name="FIN 1026/2023 s2subs1">{{cite act|author=Ministry of Justice|title=Valtioneuvoston asetus sairausvakuutusmaksujen maksuprosenteista vuonna 2024|url=https://www.finlex.fi/fi/lainsaadanto/saadoskokoelma/2023/1026|at=s 2(1)|language=fi|trans-title=Decree of the Government on the Percentages of Health Insurance Contributions in 2024|access-date=27 May 2024}}</ref>

===France===
{{See also|Taxation in France}}

In France, statutory payroll tax only covers employee and employer contributions to the social security system. Income tax deductions from the payroll are voluntary and may be requested by the employee, otherwise, employees are billed 2 mandatory income tax prepayments during the year directly by the tax authority (set at 1/3 of the prior year's final tax bill). Employee payroll tax is made up of assigned taxes for the three branches of the social security system and includes both basic and supplementary coverage. Different percentages apply depending on thresholds that are multiples of the social security earnings ceiling (in 2012 = 36,372 euro per year).<ref>{{in lang|fr}} {{cite web |url=http://www.urssaf.fr/employeurs/baremes/baremes/taux_des_cotisations_du_regime_general_01.html |title=Urssaf.fr - Espace Employeurs |access-date=2011-04-22 |url-status=dead |archive-url=https://web.archive.org/web/20110427164228/http://www.urssaf.fr/employeurs/baremes/baremes/taux_des_cotisations_du_regime_general_01.html |archive-date=2011-04-27 }}</ref>

Contributions for salaries between the minimum wage and 1.6 times the minimum wage are eligible to relief (known as Fillon relief) of up to 28 percentage points of employer contributions, effectively halving employer non-wage costs.<ref>{{Cite web |url=http://www.eale.nl/Conference2008/Programme/PapersB/add73074_5LFbCf6RFA.pdf |title=Unknown |access-date=11 January 2012 |archive-date=2 August 2021 |archive-url=https://web.archive.org/web/20210802195431/https://eale.nl/Conference2008/Programme/PapersB/add73074_5LFbCf6RFA.pdf |url-status=dead }}</ref>
{| class="wikitable"
|+Social security contributions
!Social Insurance Fund
!Employee (Up to cap)
!Employee (Over cap)
!Employer (Up to cap)
!Employer (Over cap)
|-
|Medical, Maternity, Invalidity, Death, Solidarity
| colspan="2" rowspan="2" |None
| colspan="2" |13%
|-
|Family Benefits
| colspan="2" |5.25%
|-
|Old Age Minimum
|6.9%
|0.4%
|8.55%
|1.9%
|-
|Unemployment
|0.95%
|None
|4.05%
| rowspan="2" |None
|-
|Insolvency
| colspan="2" rowspan="3" |None
|0.3%
|-
|Accident
| colspan="2" |Variable
|-
|Autonomy & Solidarity Contribution
| colspan="2" |0.3%
|-
|Pension Supplement
|3.1%
|1.2%
|4.65%
|0.8%
|-
|Housing Aid
| colspan="2" |0.5%
| colspan="2" |0.5%
|-
|General Social Contribution
| colspan="2" |9.2%
| colspan="2" rowspan="2" |None
|-
|Social Security Debt Reimbursement
| colspan="2" |0.5%
|}

===Germany===
{{See also|Taxation in Germany}}

German employers are obliged to withhold wage tax on a monthly basis. The wage tax withheld will be qualified as prepayment of the income tax of the employee in case the taxpayer files an annual income tax return. The actual tax rate depends on the personal income of the employee and the tax class the employee (and his/her partner) has chosen. The choice of tax class is only important for withholding tax, and therefore for immediately disposable&nbsp;income. The choice of tax class has no effect on tax refunds.<ref>{{Cite web |title=Gross Net Salary Calculator {{!}} LohnTastik |url=https://lohntastik.de/gns/gross-net-salary-calculator |access-date=2022-08-09 |website=lohntastik.de |language=en}}</ref>

In addition to income tax withheld, employees and employers in Germany must pay contributions to finance social security benefits. The social security system consists of four insurances, for which the contribution will be (nearly) equally shared between employer and employee (old age insurance, unemployment insurance, health insurance and nursing care insurance). Contributions are payable only on wages up to the social security threshold:
{| class="wikitable"
|-
! Annual amounts 2019 !! Threshold West Germany !! Threshold East Germany
|-
| Health- and Nursing Care insurance || 53,100 Euro || 53,100 Euro
|-
| Old Age- and Unemployment insurance || 78,000 Euro || 69,600 Euro

|}

In addition, there are some insurances which are covered by the employee only (accident insurance, insolvency insurance, contribution to the maternity allocation, contribution for sick pay allocation for small companies).
The following table shows employee and employer contributions by category for the year 2015.

{| class="wikitable"
|-
! category !! Employee !! Employer !! Notes
|-
| Old Age (pension) || 9.35% || 9.35% ||
|-
| Health || 7.3% || 7.3% || In addition, the health insurance will impose a surcharge up to 0.9%, to be paid by the employee only.
|-
| Unemployment || 1.5% || 1.5% || 
|-
| Nursing Care || 1.175% || 1.175% || 1.425% childless employees over 23 years old
1.675% in Saxony
|-
| Accident || || 1.6% || depends on risk covered
|-
| Sick Pay (AOK, 80%) || || 0.7% || Depends on coverage and health insurance.
|-
| Maternity (AOK) || || 0.24% || 
|-
| Insolvency (AOK) ||  || 0.15% || Payment of outstanding salary in case of bankruptcy
|}

===Greece===
{{See also|Taxation in Greece}}

An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security as in many other EU member states. The employer's contribution amounts to 28.06% of the salary. The employee's contribution is 16%. {{Citation needed|date=March 2020}}<ref>{{Cite web |title=Deductions from compulsory employers' actual social contributions |url=https://ec.europa.eu/eurostat/documents/1015035/2041357/GFS_interpretation_deductions_from_compulsory_employers_social_contributions_2019-11-06/9b10f4c9-9750-8012-c3ad-2fdbfd4574f2 |website=European Commission}}</ref>

===Hong Kong===
{{Main|Salaries tax}}

In [[Hong Kong]], salaries tax is capped at 15%.<ref name="GovHK">{{cite web|title=Tax Computation of Salaries Tax and Personal Assessment|url=http://www.gov.hk/en/residents/taxes/etax/services/tax_computation.htm|publisher=Hong Kong Government|access-date=22 November 2010|date=June 2010}}</ref> Depending on income, employers fall into different tax brackets.<ref name="GovHK" />

===Sweden===
{{See also|Taxation in Sweden}}

In 2018, the Swedish social security contribution paid by the employer is 31.42 percent, calculated on top of the employee's salary. The percentage is lower for old employees.<ref>{{cite web|url=http://www.ekonomifakta.se/sv/Fakta/Arbetsmarknad/Arbetsgivaravgift/Sociala-avgifter/|title=Sociala avgifter - Ekonomifakta|website=Ekonomifakta|access-date=7 April 2010|archive-date=14 November 2015|archive-url=https://web.archive.org/web/20151114163818/http://www.ekonomifakta.se/sv/Fakta/Arbetsmarknad/Arbetsgivaravgift/Sociala-avgifter/|url-status=dead}}</ref> The other type of Swedish payroll tax is the income tax withheld ([[Pay-as-you-earn tax|PAYE]]), which consists of municipal, county, and, for higher income brackets, state tax. In most municipalities, the income tax comes to approximately 32 percent, with the two higher income brackets also paying a state tax of 20 or 25 percent respectively. The combination of the two types is a total [[marginal tax]] effect of 52 to 60 percent.<ref>{{Cite web |url=https://www.skatteverket.se/omoss/varverksamhet/statistikochhistorik/skattpaarbete/kommunalochstatliginkomstskatt.4.3152d9ac158968eb8fd2a1d.html |title=Kommunal och statlig inkomstskatt |website=www.skatteverket.se |language=sv |access-date=2018-06-22 |archive-date=2018-06-22 |archive-url=https://web.archive.org/web/20180622140143/https://www.skatteverket.se/omoss/varverksamhet/statistikochhistorik/skattpaarbete/kommunalochstatliginkomstskatt.4.3152d9ac158968eb8fd2a1d.html |url-status=dead }}</ref>

According to a 2019 study in the ''American Economic Review'', a large employee payroll tax cut for young workers did not lead to increases in wages for young workers, but it did lead to an increase in employment, capital, sales, and profits of firms with many young workers.<ref>{{Cite journal|last1=Seim|first1=David|last2=Schoefer|first2=Benjamin|last3=Saez|first3=Emmanuel|date=2019|title=Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers' Tax Cut in Sweden|journal=American Economic Review|language=en|volume=109|issue=5|pages=1717–1763|doi=10.1257/aer.20171937|issn=0002-8282|doi-access=free}}</ref><ref>{{Cite web|url=https://www.aeaweb.org/research/charts/swedish-tax-cuts-young-workers|title=American Economic Association|website=www.aeaweb.org|access-date=2019-06-16}}</ref>

===United Kingdom===
{{Main|Taxation in the United Kingdom#Personal taxes}}

In the [[United Kingdom]], [[pay as you earn]] (PAYE) income tax and Employees' [[National Insurance]] contributions are examples of the first kind of payroll tax, while Employers' National Insurance contributions are an example of the second kind of payroll tax. There are currently (February 2022) five PAYE income tax bands in Scotland and four elsewhere; see {{format link|Taxation in the United Kingdom#Personal taxes}} for details. Both income tax and National Insurance contributions are paid only on income above a lower threshold. This threshold is progressively eliminated for the highest earners, beginning at £100,000 per year.<ref name="hmrc.gov.uk">{{cite web|url=https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions|title=Rates and allowances: National Insurance contributions - GOV.UK|website=www.gov.uk|access-date=31 March 2018}}</ref>

===United States===
[[File:Median household income and taxes.png|300px|right|Median household income and taxes]]

{{See also|Taxation in the United States|Federal Insurance Contributions Act tax}}
In the United States, payroll taxes are also called '''employment taxes''' by the Internal Revenue Service.<ref>{{cite web |title=Employment Taxes |url=https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes |publisher=IRS |access-date=9 April 2022}}</ref>

In the United States, payroll taxes are assessed by the federal government, some of the 50 states and numerous cities. These taxes are imposed on employers and employees and on various compensation bases and are collected and paid to the taxing jurisdiction by the employers. Most jurisdictions imposing payroll taxes require reporting quarterly and annually in most cases, and electronic reporting is generally required for all but small employers.<ref>A tutuorial is available online from the [[Internal Revenue Service]] (IRS) explaining various aspects of employer compliance, see [http://www.tax.gov/virtualworkshop/ Video Tutorial] {{Webarchive|url=https://web.archive.org/web/20231130112630/https://www.tax.gov/virtualworkshop/ |date=30 November 2023 }}.</ref>

====Social Security and Medicare taxes====
{{Main|Federal Insurance Contributions Act tax}}

[[File:Payroll tax history.jpg|frameless|400px|center|Payroll tax rates history]]

Federal social insurance taxes are imposed on employers<ref>{{cite web|url=https://www.law.cornell.edu/uscode/text/26/3111-|title=26 U.S. Code § 3111 - Rate of tax|website=LII / Legal Information Institute|access-date=31 March 2018}}</ref> and employees,<ref>[https://www.law.cornell.edu/uscode/text/26/3101- 26 USC 3101].</ref> ordinarily consisting of a tax of 12.4% of wages up to an annual wage maximum ($118,500 in wages, for a maximum contribution of $14,694 in 2016) for [[Social Security (United States)|Social Security]] and a tax of 2.9% (half imposed on employer and half withheld from the employee's pay) of all wages for [[Medicare (United States)|Medicare]].<ref>Note that an equivalent Self Employment Tax is imposed on self-employed persons, including independent contractors, under [https://www.law.cornell.edu/uscode/text/26/1401- 26 USC 1401]. Wages and self employment income subject to these taxes are defined at [https://www.law.cornell.edu/uscode/text/26/3121- 26 USC 3121] and [https://www.law.cornell.edu/uscode/text/26/1402- 26 USC 1402] respectively.</ref> The Social Security tax is divided into 6.2% that is visible to employees (the "employee contribution") and 6.2% that is visible only to employers (the "employer's contribution"). For the years 2011 and 2012, the employee's contribution had been temporarily reduced to 4.2%, while the employer's portion remained at 6.2%,<ref>{{cite web|url=https://www.irs.gov/pub/irs-pdf/p15.pdf|title=IRS.gov|website=irs.gov|access-date=31 March 2018}}</ref> but Congress allowed the rate to return to 6.2% for the individual in 2013.<ref>{{cite web|url=https://money.cnn.com/2013/01/02/smallbusiness/fiscal-cliff-payroll-taxes/|title=Smaller paychecks coming - bosses say, don't blame us|first=Jose|last=Pagliery|website=CNN|date=2 January 2013|access-date=31 March 2018}}</ref> To the extent an employee's portion of the 6.2% tax exceeded the maximum by reason of multiple employers, the employee is entitled to a refundable [[tax credit]] upon filing an income tax return for the year.<ref>[https://www.law.cornell.edu/uscode/text/26/31- 26 USC 31(b)] and [https://www.law.cornell.edu/uscode/text/26/6413- 26 USC 6413(c)].</ref><ref>{{cite book |last1= O'Sullivan |first1= Arthur |author-link=Arthur O'Sullivan (economist) |first2=Steven M. |last2=Sheffrin |title=Economics: Principles in Action |url= https://archive.org/details/economicsprincip00osul |url-access= limited |publisher=Pearson Prentice Hall |year=2003 |location=Upper Saddle River, New Jersey 07458 |page=[https://archive.org/details/economicsprincip00osul/page/n383 367] |isbn=0-13-063085-3}}</ref>

====Income tax withholding====
{{Main|Tax withholding in the United States}}

Federal, state, and local [[withholding tax]]es are required in those jurisdictions imposing an income tax. Employers having contact with the jurisdiction must withhold the tax from wages paid to their employees in those jurisdictions.<ref>The determination of whether a person performing services is an employee subject to payroll tax or an independent contractor who self assesses tax is based on [http://www.mdc.edu/hr/Operations/AFS/IRSFactorTest.pdf 20 factors] {{Webarchive|url=https://web.archive.org/web/20110501081919/http://www.mdc.edu/hr/Operations/AFS/IRSFactorTest.pdf |date=2011-05-01 }}.  See [https://www.irs.gov/pub/irs-pdf/p15_09.pdf IRS Publication 15 and the tutorial referenced above].  For Federal requirements, see [https://www.law.cornell.edu/uscode/html/uscode26/usc_sup_01_26_10_C_20_24.html 26 USC 3401-3405].</ref> Computation of the amount of tax to withhold is performed by the employer based on representations by the employee regarding their tax status on IRS [[Form W-4]].<ref>{{cite web|url=https://www.irs.gov/pub/irs-pdf/fw4.pdf|title=IRS Form W-4|website=irs.gov|access-date=31 March 2018}}</ref>

Amounts of income tax so withheld must be paid to the taxing jurisdiction, and are available as refundable [[tax credits]] to the employees. Income taxes withheld from payroll are not final taxes, merely prepayments. Employees must still file income tax returns and self assess tax, claiming amounts withheld as payments.<ref>[https://www.law.cornell.edu/uscode/text/26/31- 26 USC 31].</ref>

====Unemployment taxes====
{{Main|Federal Unemployment Tax Act}}

Employers are subject to unemployment taxes by the federal<ref>[https://www.law.cornell.edu/uscode/text/26/3301- 26 USC 3301].</ref> and all state governments. The tax is a percentage of taxable wages<ref>As defined in [https://www.law.cornell.edu/uscode/text/26/3306- 26 USC 3306(b)].</ref> with a cap. The tax rate and cap vary by jurisdiction and by employer's industry and experience rating. For 2009, the typical maximum tax per employee was under $1,000.<ref>State tax rates and caps vary.  For example, Texas imposes up to 8.6% tax on the first $9,000 of wages ($774), while New Jersey imposes 3.2% tax on the first $28,900 for wages ($924).  Federal tax of 6.2% less a credit for state taxes limited to 5.4% applies to the first $7,000 of wages (net $56).</ref> Some states also impose unemployment, disability insurance, or similar taxes on employees.<ref>See, e.g., [http://lwd.dol.state.nj.us/labor/employer/ea/ea_index.html New Jersey] {{Webarchive|url=https://web.archive.org/web/20110503192451/http://lwd.dol.state.nj.us/labor/employer/ea/ea_index.html |date=2011-05-03 }}.</ref>

====Reporting and payment====
Employers must report payroll taxes to the appropriate taxing jurisdiction in the manner each jurisdiction provides. Quarterly reporting of aggregate income tax withholding and [[Social Security tax]]es is required in most jurisdictions.<ref>See, e.g., IRS [https://www.irs.gov/uac/about-form-941 Form 941]. Electronic filing may be required.</ref> Employers must file reports of aggregate unemployment tax quarterly and annually with each applicable state, and annually at the Federal level.<ref>See, ''e.g''., [https://www.irs.gov/pub/irs-pdf/f940.pdf IRS Form 940].</ref>

Each employer is required to provide each employee an annual report on IRS [[Form W-2]]<ref>{{cite web|url=https://www.irs.gov/pub/irs-pdf/fw2.pdf|title=IRS Form W-2|website=irs.gov|access-date=31 March 2018}}</ref> of wages paid and Federal, state and local taxes withheld. A copy must be sent to the IRS, and some state governments also require a copy. These are due by January 31 and February 28 (March 31 if filed electronically), respectively, following the calendar year in which wages are paid. The Form W-2 constitutes proof of payment of tax for the employee.<ref>See IRS [https://www.irs.gov/pub/irs-pdf/iw2w3.pdf Form W-2 Instructions]. Note that some states and cities obtain their W-2 information from the IRS and from taxpayers directly.</ref>

Employers are required to pay payroll taxes to the taxing jurisdiction under varying rules, in many cases within one banking day. Payment of Federal and many state payroll taxes is required to be made by [[electronic funds transfer]] if certain dollar thresholds are met, or by deposit with a bank for the benefit of the taxing jurisdiction.<ref>See [https://www.law.cornell.edu/uscode/text/26/6302- 26 USC 6302] and IRS [https://www.irs.gov/pub/irs-pdf/p15_09.pdf Publication 15] for Federal requirements. EFT is required for Federal payments if aggregate Federal tax payments, including corporate income tax and payroll taxes, exceeded $200,000 in the preceding year. See, e.g., [http://www.state.nj.us/treasury/taxation/njit31.shtml NJ Income Tax - Reporting and Remitting], New Jersey requirements for weekly EFT payment where prior year payroll taxes exceeded $10,000.</ref>

====Penalties====
Failure to timely and properly pay federal payroll taxes results in an automatic penalty of 2% to 10%.<ref>[https://www.law.cornell.edu/uscode/text/26/6656- 26 USC 6656].</ref> This is called the [[Trust Fund Recovery Penalty]]. Similar state and local penalties apply.  Failure to properly file monthly or quarterly returns may result in additional penalties. Failure to file Forms W-2 results in an automatic penalty of up to $50 per form not timely filed.<ref>[https://www.law.cornell.edu/uscode/text/26/6721- 26 USC 6721].</ref> State and local penalties vary by jurisdiction.

A particularly severe penalty applies where federal income tax withholding and Social Security taxes are not paid to the IRS. The penalty of up to 100% of the amount not paid can be assessed against the employer entity as well as any person (such as a corporate officer) having control or custody of the funds from which payment should have been made.<ref>[https://www.law.cornell.edu/uscode/text/26/6672- 26 USC 6672].</ref>

== See also ==
* [[List of countries by tax rates]]

==References==
{{Reflist|colwidth=30em}}

==External links==
*[https://web.archive.org/web/20150209164829/https://www.ato.gov.au/businesses/pathway.asp?pc=001%2F003%2F024&mfp=001%2F003&mnu=9898#001_003_024 Payroll tax in China]
*[https://web.archive.org/web/20060819230250/http://www.ato.gov.au/nonprofit/content.asp?doc=%2Fcontent%2F33750.htm&page=3&H3 Payroll tax (Chinese Tax Office)]
*[https://www.irs.gov/publications/p15/ar02.html#en_US_publink1000237177 US Payroll Tax Tables]
*[https://web.archive.org/web/20161101112704/http://tax-tables.org/withholding.html US Payroll Tax Tables by ZIP Code]
*[https://www.irs.gov/pub/irs-pdf/p15.pdf IRS publication 15] - detailed information on federal payroll tax in the U.S.
*[https://www.irs.gov/Individuals/International-Taxpayers/Trust-Fund-Recovery-Penalty/ Trust Fund Recovery Penalty] irs.gov
{{Employment}}

[[Category:Wages and salaries]]
[[Category:Withholding taxes]]
[[Category:Taxation-related lists]]
[[Category:Payroll]]