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Frequently Asked Questions
What payroll taxes does an employer pay? ▾
Employer payroll taxes include: Social Security (6.2% on wages up to $160,200), Medicare (1.45% on all wages), FUTA (0.6% on first $7,000 of each employee's wages — federal unemployment), and SUTA (state unemployment insurance, rates vary by state and industry from 0.1% to 8%+). Together these typically add 8-12% on top of wages. Benefits like health insurance and 401k matching are additional employer costs beyond taxes.
How do I budget for payroll costs? ▾
Budget 125-135% of gross salary for the total employer cost including all taxes and basic benefits. A $50,000 salary typically costs $62,000-$68,000 fully loaded. For hourly workers, multiply their hourly rate × 1.25-1.35 for your true cost per hour. This is why contractors often charge 1.5-2x what employees are paid — they're covering their own self-employment taxes, benefits, and overhead.
When must I start paying payroll taxes? ▾
You must withhold and remit payroll taxes starting with your first payroll. There is no grace period. Employers must deposit federal payroll taxes (Social Security, Medicare, and withheld income tax) either monthly or semi-weekly depending on your total tax liability in prior years. Failure to deposit on time results in penalties of 2-15% of the unpaid amount. The IRS takes payroll tax deposits very seriously — they're called 'trust fund' taxes because employees trust you to remit their withheld taxes.