What are Payroll Taxes?

Payroll taxes include several types of payments related to employment.   The key ones are:

1. Federal withholding taxes: These are paid to the IRS on your behalf via the Electronic Federal Tax Payment System (EFTPS). We will also file your quarterly 941 (or annual 944) reports.
2. FICA – stands for Federal Insurance Contributions Act and consists of two types of taxes; Social Security and Medicare taxes.
   • Social Security Taxes: These taxes fund the federal Social Security program. Both employers and employees contribute.  The rate is 6.2% for each, based on the first $176,100 in wages for the 2025 tax year.
   • Medicare Taxes: Medicare provides health insurance to people aged 65 or older and younger people with disabilities. The Medicare tax rate is 1.45% for both employers and employees for all taxable income.
3. Additional Medicare Tax: When an employee’s wages exceed $200,000 in a year, an extra 0.9% Medicare tax applies.
4. Federal Unemployment Tax (FUTA): Employers pay FUTA tax at a rate of .6% (which is the percentage after the FUTA credit reduction is applied) on the first $7,000 of gross wages paid to each employee. This employer paid tax helps provide support to state unemployment programs and is subject to change under certain circumstances depending on your state.
5. State withholding taxes: Most states have state withholding taxes which are withheld from employees. Some states have fixed rates and some have graduated rates based on earnings.
6. State unemployment taxes: All states, Puerto Rico, U.S. Virgin Islands and the District of Columbia have unemployment taxes with varying calculations and which vary based primarily on how many of your ex-employees have made claims and received unemployment compensation.  These taxes are paid by the employer.
7. Local taxes: Some states allow localities such as cities, counties or school districts to impose taxes with a variety of calculation methods based on where an employee lives and/or works.

How Often do Payroll Taxes Change?

Payroll tax changes can occur annually or more frequently.  Federal, state and local governments adjust wage caps, income tax brackets, calculation methods and non-taxable contributions to adapt to changing conditions.  Additionally, when you switch your pay frequency, the amount withheld per pay period for taxes and other deductions may change.

It is essential to stay informed and adhere to these adjustments.  Using a trusted payroll provider makes this less stressful by removing the burden of keeping up with all of the particulars involved with federal, state and local payroll taxes.

How Will CPS Help with My Payroll Taxes?

Corporate Payroll Services has over 30 years of expertise in navigating complex tax laws and regulations, staying up to date with changes, and minimizing errors.  We can handle the intricacies of calculating taxes, deductions, and withholdings, as well as filing the necessary forms and returns in a timely manner.

Take some of the stress out of running your small business.  Let CPS keep your employees paid on time and your payroll taxes filed correctly.