In this article I will elaborate about Payroll taxes which have to be paid by employers for each and every employee they hire every year.

Payroll taxes are infact taken from the employees pay for paying income taxes on behalf of the employee by the employer.

Apart from the amount withheld from the employee’s income for income tax, payroll taxes are also taken for paying employee for their social security and Medicare expenses (includes employer’s contribution too). It is the employer who collects the money from the employees pay and pays it as tax to the IRS.

Employers are responsible towards filing the payroll taxes report with the IRS. Payroll taxes also include the respective taxes of the state and the city in US where your business is based. Payroll taxes are also known as trust fund taxes.

Payroll taxes can be filed with the IRS after the business gets the Federal Employer Identification Number (Check our articles on Employer Identification Number EIN).

Social Security Tax rate for 2009 is 6.2% (on each employee’s pay). The employer has to pay an equal amount towards this tax on behalf of the employee, which makes a total of 12.4%. Both Social security and Medicare taxes are together known as FICA – Federal Insurance Contribution Act. Medicare Tax rate is 1.45% and works the same way as Social Security tax by making a total of 2.9%.

As a responsible employer your duties consist of – calculating and deducting appropriate payroll taxes from the employees pay and then paying them to the IRS without fail. For calculating and deducting the payroll taxes, you need to deduct the appropriate Federal and state taxes (based on Form W-4 submitted by the employee when he/she was hired) as well as the employee’s part of his Social security and Medicare taxes.

Apart from that you have to contribute your part of the Social security and Medicare taxes for the Payroll tax calculations. Finally you are required to file the Payroll tax report with the IRS. When a new employee joins your office, as an employer you must collect the payroll tax records from him/her.

For filing Payroll tax report with the IRS as an employer you should use Form 941. This report has to be filed every quarter.