Q10RQ - Horngren'S Financial And Managerial Accounting

Question

What payroll taxes is the employer responsible for paying?

Step-by-Step Solution

Answer

An employer is responsible for paying FICA, SUTA, and FUTA payroll taxes.

Step1: Employer payroll taxes

Employer payroll taxes are the taxes that are paid by the employer and are not withheld from the employees’ gross earnings. 

An employer is liable to pay at least three payroll taxes – 

Step 2: Payroll taxes to be paid by the employer

An employer is liable to pay at least the following three taxes –

 

a) Employer FICA Tax: It is the tax that is paid from the employer’s side regarding OASDI and Medicare.

 

b) State Unemployment and Compensation Tax (SUTA):This is the tax that is imposed to compensate workers that are laid off from their work. These are paid by the employer and not deducted from the employee’s gross earnings.

 

c) Federal Unemployment Compensation Tax (FUTA): This tax is similar to SUTA but this is levied by the federal government, unlike SUTA which is levied by the state government.