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Payroll Taxes 101

Most payroll taxes apply to all earnings, however there are some taxes that are capped based upon the requirements of the governing agency.

FICA – Federal Insurance Contributions Act tax

  • Consists of Social Security and Medicare taxes

  • Must be paid by employee and matched by employer

  • Capped based upon annual determination

Income Tax

  • Federal Tax withheld based upon Circular E table

  • State Income Tax withheld based upon individual state rules

  • Certain States are exempt from State Income tax (AK, FL, NV,TN, TX, SD, WY, and WA)

  • Local Income Taxes apply to programs in certain areas for the benefit of cities, counties, school districts and other local needs

FUTA – Federal Unemployment Tax Act

  • Paid by employer

  • Provides compensation for workers who have lost their job

  • This is generally a capped tax

SUI – State Unemployment Insurance

  • Usually paid by employer

  • Tax rate fluctuates on an business by business basis

  • Generally Capped

Other Taxes

Some states administer disability insurance or workers compensation insurance as a tax that must be accounted for through payroll.



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