What is payroll tax?

Payroll tax is a tax paid on the wages and salaries of employees to fund government programs.

These taxes are used to fund various social insurance programs that provide benefits to workers, retirees, and the unemployed. Payroll taxes are typically withheld directly from employees’ paychecks by their employers and then remitted to the government.

There are two main categories of payroll taxes:

• Employee payroll taxes are paid directly from an employee’s paycheck
• Employer payroll taxes are paid by businesses in addition to their employees’ payroll taxes — they contribute to the same social insurance programs as employees and may also include unemployment insurance taxes

The specific payroll tax rates and which taxes apply can vary depending on factors such as location, income level, and employer size.

Frequently asked questions

Who pays payroll taxes?

Both employers and employees pay payroll taxes to fund different government programs.

Where does the money from payroll taxes go?

Payroll taxes are a major source of revenue for the government, used to fund social insurance programs like:

• Social security, to provide retirement and disability benefits to eligible workers
• Medical care, to provide health insurance coverage 
• Unemployment insurance, to offers temporary financial assistance to unemployed workers

How do I find out how much payroll tax I am paying?

Your employer should provide a pay stub detailing your gross pay, deductions, and net pay.
You can also access your earnings history and tax information online through your employer’s payroll portal.