Payroll tax versus income tax
Two different federal taxes come out of a paycheck. Income tax depends on your filing status, deductions and credits, and the amount withheld is only an estimate that you settle when you file. Payroll tax is a flat percentage of wages that funds Social Security and Medicare. It ignores the standard deduction, itemized deductions and credits, so it is due from the first dollar of pay, and it is not refunded when you file unless too much was taken. A worker whose income tax works out to zero still pays payroll tax on every paycheck.
The employee's share of the two programs is known as FICA, after the Federal Insurance Contributions Act. The employer pays a matching share, plus an unemployment tax that is never taken from the employee at all.
The employee's share
| Tax | Employee | Employer | On which wages (2026) |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | Up to $184,500 |
| Medicare | 1.45% | 1.45% | All wages |
| Additional Medicare Tax | 0.9% | — | Wages above $200,000 from one employer |
Social Security stops at the wage base. Once your wages for the year pass $184,500, the 6.2% is no longer withheld, which is why a high earner's December paychecks are larger than their January ones. Medicare has no cap. The Additional Medicare Tax is withheld on wages above $200,000 paid by one employer, whatever your filing status, and the employer does not match it. Because the real threshold on your return depends on filing status, a married couple can owe a little more, or get a little back, when they file.
Two jobs, one wage base: each employer withholds Social Security as though it were your only job, so with two jobs the combined withholding can pass the cap. The excess is credited back on your return; it is not lost.
What the employer pays on top
The employer matches the 6.2% and the 1.45%, so the full Social Security and Medicare cost of a wage is 15.3% up to the wage base, half visible on the pay stub and half not. Then come the unemployment taxes, which the employee never sees.
- Federal unemployment tax (FUTA). 6.0% of the first $7,000 of each employee's wages for the year. An employer that pays its state unemployment tax in full and on time gets a credit of up to 5.4%, so the usual net rate is 0.6%, or $42 per employee for the year. It is reported on Form 940, due January 31, or February 10 if every FUTA deposit was made on time.
- State unemployment tax. Set by each state, on its own wage base, at a rate that depends on the employer's history of layoffs. A handful of states also take a small unemployment or disability contribution from the employee.
An employer owes FUTA once it pays $1,500 or more in wages in a calendar quarter, or has an employee for some part of a day in 20 or more weeks of the year. Self-employed people pay neither FUTA nor the employer match in this form: they pay both halves of Social Security and Medicare themselves as self-employment tax.
How the money reaches the IRS
An employer does not send payroll tax once a year. The income tax withheld, both halves of Social Security and Medicare and the Additional Medicare Tax are deposited electronically on one of two schedules, chosen by how much the business reported in a twelve-month lookback period:
- Monthly, if the lookback total was $50,000 or less: each month's taxes are due by the 15th of the following month.
- Semiweekly, above $50,000: for wages paid Wednesday through Friday, the deposit is due the following Wednesday; for wages paid Saturday through Tuesday, the following Friday.
Two overrides apply to both. If $100,000 or more accumulates on any day, it is due the next business day. And if the whole quarter's liability is under $2,500, it can be paid with the quarterly return instead of deposited.
The quarterly return: Form 941
Every quarter the employer files Form 941, reporting the wages paid, the taxes withheld and the deposits made. The due dates are the last day of the month after each quarter:
| Quarter | Form 941 due |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
When one of those dates falls on a weekend or a federal holiday, it moves to the next business day. Late deposits are penalized on a scale that rises with the delay, separately from the penalty for a late Form 941.
Working out your own payroll tax
For one employee the arithmetic is short. On a $70,000 salary in 2026: Social Security is 6.2% of $70,000, or $4,340, and Medicare is 1.45%, or $1,015, so $5,355 comes out of the year's pay. The employer pays the same $5,355 again, plus its unemployment taxes. The FICA & payroll tax calculator does both shares for any wage and filing status, including the wage base and the Additional Medicare Tax, and the paycheck calculator shows payroll tax next to income tax and your state's tax, per paycheck. For how the income-tax side of withholding is set, see paycheck withholding explained.
Key takeaways
- Payroll tax is Social Security and Medicare, a flat share of wages from the first dollar; income tax is separate and depends on deductions and credits.
- 2026: Social Security 6.2% each for employee and employer up to $184,500; Medicare 1.45% each on all wages; 0.9% more withheld above $200,000, not matched.
- Employers also pay FUTA, 6.0% of the first $7,000 per employee and usually 0.6% after the state credit, plus state unemployment tax.
- Deposits are monthly (lookback $50,000 or less) or semiweekly, with a next-business-day rule at $100,000.
- Form 941 is due April 30, July 31, October 31 and January 31.
Sources
- IRS Publication 15 (2026), Employer's Tax Guide: Social Security and Medicare rates, the $184,500 wage base, Additional Medicare Tax withholding, deposit schedules, Form 941 due dates: 2026 edition
- IRS Topic 759: Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return: 6.0% on the first $7,000, the 5.4% credit, filing and deposit rules: last reviewed 24-Sep-2026