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Payroll tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG) and often covering advance payment of income tax and social security contributions. The second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee's pay. The charges paid by the employer usually cover the employer's funding of the social security system.

In the United States, payroll taxes are assessed by the federal government, all fifty states, the District of Columbia, and numerous cities. These taxes are imposed on employers and employees and on various compensation bases and are collected and paid to the taxing jurisdiction by the employers. Most jurisdictions imposing payroll taxes require reporting quarterly and annually in most cases, and electronic reporting is generally required for all but small employers.

Payroll taxes are those taxes required to be paid to federal and state taxing authorities as a result of paying employees (such as FICA taxes and unemployment taxes). The IRS strictly defines payroll taxes as FICA taxes (Social Security and Medicare), but the term is often used in the general sense.


Payroll processing describes the preparation of paychecks (including withholding and deductions), distribution of paychecks, and payment and porting of payroll taxes.

 

Louis F. Patten C.P.A. is a full service accounting firm.

Contact us today for reasonable rates on our payroll & sales tax preparation services.
 

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