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Payroll Taxes for Corporations
Payroll, or employment taxes, include the following:
- Federal income tax withholding;
- Social Security and Medicare taxes; and
- Federal unemployment (FUTA) tax.
Federal Income Tax Withholding
Your corporation must withhold federal income taxes from its employees' wages. The employee's Form W-4 is used to determine how much federal income tax to withhold from each wages payment. IRS Publication 15 (Circular E, Employer's Tax Guide) is also helpful in making this determination.
Social Security and Medicare Withholding
Social Security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Social Security tax pays for the benefits under the old-age, survivors, and disability insurance portion of FICA. Medicare tax pays for benefits under the hospital insurance portion. A portion of this tax is deducted from employees' wages, and your corporation pays a matching amount.
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