What taxes does an employer have to handle for employees?
Employers in the U.S. must handle multiple categories of payroll-related taxes: federal income tax withholding, FICA (Social Security and Medicare), federal unemployment (FUTA), state income tax withholding, state unemployment (SUTA), state disability insurance in some states, and various local taxes. Employers withhold employee portions, pay employer portions, remit to agencies on schedule, and report annually on W-2 and 1099 forms.
The word "tax" in payroll covers a stack of obligations that compound across federal, state, and local jurisdictions. A single-state employer with W-2 employees handles roughly 6-8 distinct tax types per pay period; a multi-state employer with contractors and remote workers can hit 30+ tax types across jurisdictions. The compliance burden is what drives most employers to outsource payroll to a service provider, but the legal responsibility for accuracy stays with the employer.
Federal Employer Tax Obligations
Federal income tax withholding (based on employee W-4). FICA (Social Security 6.2% and Medicare 1.45%, with 0.9% additional Medicare on wages over $200,000). FUTA (federal unemployment, 6.0% on first $7,000, usually reduced to 0.6%). Year-end W-2 and 1099 reporting.
State and Local Employer Taxes
State income tax withholding (where applicable; nine states have no state income tax). State unemployment insurance (SUTA, varies by state and employer experience). State disability insurance (CA, NJ, NY, RI, HI). Local income taxes in some jurisdictions (NYC, Philadelphia, Cleveland, others).
2026 Tax Rate Snapshot
FICA Social Security wage base $184,500 (up from $176,100). Medicare unchanged. FUTA unchanged. State rates vary; check your state DOL site annually. See payroll tax rates for full detail.
Running Employer Tax Compliance That Doesn't Generate Penalties
Outsource to a competent payroll service for most employers under enterprise scale. Audit annually against IRS notices and W-2 reconciliation. Stay current on state nexus when employees move. IRS reference: Publication 15.
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