Which taxes are matched by employer

The tax rate for Social Security was originally set in at 1 percent of taxable earnings and increased gradually over time. The current rate was set in , although it has been modified twice in response to economic downturns. In and , the rate for employees was temporarily lowered to help alleviate the hardship resulting from the Great Recession.

However, employers are responsible for withholding any deferred taxes from employee wages and paying them by the end of Since , the taxable maximum has generally been increased each year based on an index of national average wages. Each year, about 6 percent of the working population earns more than the taxable maximum, which has been the case since Proponents of increasing or eliminating the limit on earnings subject to the Social Security payroll tax argue that it would make the tax less regressive and be part of a solution to strengthen the Social Security trust funds.

Another argument is that removing the taxable maximum would adjust for the fact that higher-income individuals generally have longer life expectancies and thus receive Social Security benefits for a greater amount of time.

Opponents argue that increasing or removing the taxable maximum would weaken the link between the amount individuals pay in Social Security taxes and the amount they receive in retirement benefits. Opponents also contend that while low-income earners may pay a greater share of their income in Social Security taxes than those who are wealthier, they also receive a disproportionate share of government transfer payments that are not subject to the tax.

Those opponents cite programs that have been created to — at least partially — offset the regressive nature of the Social Security payroll tax.

Some economists anticipate that if the limit were lifted, employers might respond by shifting taxable compensation to a form of compensation that is taxed at a lower rate. For example, employers could decrease wages but increase retirement benefits, which are deductible under the corporate income tax, in an effort to offset the additional payroll taxes they would owe. Employees and employers each contribute 1. Since , an additional 0. For , HI tax revenues were 1.

You are required to begin withholding Additional Medicare Tax in the pay period in which it pays wages and compensation in excess of the threshold amount to an employee. There is no employer match for the Additional Medicare Tax. For additional information see our questions and answers.

You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay. Self-Employment Tax SE tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most employees. More In File. Federal Income Tax Employers generally must withhold federal income tax from employees' wages. Recommended for you How to do payroll How to start a small business.

Related resources tool Salary paycheck calculator. Learn more. FAQ What is Medicare tax? Powerful Accounting Read now. Get pricing specific to your business. Are you a current ADP client? Yes No. Step 1 Step 2 Step 3. Your privacy is assured.