StartEaseHelp / Employers
Who pays which payroll taxes?
Which payroll taxes come out of the employee's pay, which the employer pays on top, and where each shows in StartEase Payroll.
Which payroll taxes does the employer pay, and which come out of the employee's pay?
Federal income tax and the employee's share of Social Security and Medicare come out of the employee's pay. The employer pays its own share of Social Security and Medicare, federal unemployment tax (FUTA) and state unemployment tax (SUTA).
Why does it matter?
The cost of an employee is more than the pay. The approval page shows the total cost as the pay plus the employer's taxes. If you budget only the salary, you under-count what each person costs.
Who pays each tax?
| Tax | Who pays | How it works |
|---|---|---|
| Federal income tax | The employee, withheld from pay | The amount follows the employee's Form W-4. You deposit it with the other federal taxes and report it on Form 941. |
| Social Security and Medicare | Both | The employee's share is withheld from pay, and the employer pays its own share. Both go in the federal deposit and on Form 941. |
| Federal unemployment tax (FUTA) | The employer only | On the first $7,000 of each employee's pay in the year. Reported on Form 940. |
| State unemployment tax (SUTA) | The employer | At the rate your state assigns to your company, on each employee's wages up to a yearly limit. |
| State income tax | The employee, withheld from pay | Only where the state taxes income. |
Where do I see it in StartEase Payroll?
- Approve payroll shows Total cost (pay plus employer taxes), Net pay to people and Taxes to deposit.
- A pay stub separates Employee taxes (taken from the pay) from Paid by the employer (on top of the pay, not taken from the employee).
- The Cost calculator shows what a salary costs the company and what the employee takes home.
- Reports & forms shows the deposit, Form 941, Form 940 and the state reports.
Common mistakes
- Treating FUTA or SUTA as something taken from the employee. They are paid only by the employer.
- Budgeting only the salary and forgetting the employer's taxes.
- Leaving the state unemployment rate blank. A payroll cannot be approved without it.
Related guides
What is FUTA?, What is SUTA?, Federal tax deposits and Form 941, Your pay stubs and Federal payroll due dates.
Sources (government sites)