FAQs: What are the 4 Types Of Payroll Taxes? (Video Short)

Part 1: Understanding the Basics of Payroll Taxes

Introduction to Payroll Taxes

• Good day, folks. My name is Daniel Martinez from Freedom Tax Accounting, and today we are going to be covering the topic of payroll taxes. Now, payroll taxes, in itself, as a term, is a general umbrella term, I guess you can call it, that covers every single tax imposed over salaries, wages, and tips.

Federal Income Taxes

• The first one of which will be federal income taxes. Now, for federal income taxes, the responsibility of those taxes, or I guess who pays for those taxes, is the employee on his own. The employer has the responsibility of withholding that tax and sending it to the proper authorities, but it is the employee ultimately who pays that tax.

Social Security Tax

• The second of those taxes would be the Social Security tax. Social Security taxes basically represent the 6.2% of all salaries and wages earned by that employee. Now, it is again the employer’s responsibility to withhold that tax, but the employer also has the responsibility to contribute that or match, I should say, that 6.2% that the employee is allowing to be withheld.

Medicare Tax

• The third tax in line would be the Medicare tax. Now, Medicare, in percentage points, would represent the 1.45% from those salaries being paid to that employee. And again, the employer then will have the responsibility of matching that 1.45 and submitting those taxes to the proper authority.

Federal Unemployment Tax Act (FUTA)

• The fourth line item for these payroll taxes would be what is called the FUTA, or FUTA tax, which would basically stand for Federal Unemployment Tax Act. Now, those federal unemployment taxes are the sole responsibility of the employer. The employer has the obligation of paying 0.6% for each employee up to $7,000.

Part 2: Additional Payroll Taxes Explained

Additional Payroll Taxes

• We were going to cover today in section two what is considered or called referred to as additional payroll taxes. What are those additional payroll taxes? Well, there’s actually four of them.

Additional Medicare Taxes

• Number one, additional Medicare taxes. Well, what are those? It’s somewhat simple, somewhat complicated. Employees, no matter who you are, if you earn more than a certain amount of money, then you are subject to this additional Medicare tax. This Medicare tax is 0.9% of your income once you pass a certain threshold.

State Income Tax

• Now, the second tax to be covered is state income tax. Now, depending on which state you live, you may or may not be subject to this, along with Washington DC.

State Unemployment Tax

• The third additional tax would be the state unemployment tax. Much like the federal unemployment tax, the state unemployment tax usually follows the same thresholds of $7,000.

Local Taxes

• For the fourth one, will be local taxes. Again, depending on where you live, your city or your municipality may impose an additional income tax for the municipality, for the city itself.

And that is it for our segment on payroll taxes. If you have found this video to be informative, if you like the information you got here, please make sure to like this video, share this video, and we’ll see you next time.

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