Paying Employer Taxes on Social Security and Medicare

In the United States, both employers and employees must contribute to the Social Security and Medicare systems. Employers share the Social Security and Medicare tax obligation equally with their employees.

The employer and the employee each must pay 6.2 percent of an employee’s compensation for Social Security up to a salary of $90,000 (in 2005). The percentage paid toward Medicare is 1.45 percent for both the employer and employee. There is no salary cap related to the amount that must be paid toward Medicare.

Each quarter, you must file federal Form 941, Employer’s Federal Tax Return (shown in these figures), which details the number of employees who received wages, tips, or other compensation for the quarter.

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See the IRS Web site for complete form.

The following key information must be included on Form 941:

  • Number of employees who received wages, tips, or other compensation in the pay period

  • Total of wages, tips, and other compensation paid to employees

  • Total tax withheld from wages, tips, and other compensation

  • Taxable Social Security and Medicare wages

  • Total paid out to employees in sick pay

  • Adjustments for tips and group-term life insurance

  • Amount of income tax withholding

  • Advance earned income credit payments made to employees

  • Amount of tax liability per month

Most new employers start out making monthly deposits for taxes due using Form 8109 (which you can see in this figure), a payment coupon that your company can get from a bank approved to collect that money or from the Federal Reserve branch near you.

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You can make deposits online by using the IRS’s Electronic Federal Tax Payment System (EFTPS).

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