The employer and employee split payroll taxes

Payroll taxes are split between you and your employer. You pay half through deductions from your paycheck. Your employer pays the other half directly to the IRS. This split applies to Social Security and Medicare taxes. Income tax withholding works differently — you pay all of it, and your employer straightforward holds it from your check and sends it in.

The split is set by federal law and does not change based on your salary, industry, or state. A cashier and a surgeon pay the same percentage. A small business and a corporation pay the same percentage. The only variation is that some states add their own payroll taxes on top of the federal amounts.

Your employer is required by law to withhold your half and remit both halves to the IRS. If your employer fails to do this, you are still liable for your portion — the IRS will pursue you for the money even if your employer never paid their share. This is why it matters to verify that withholding is actually happening.

Key Takeaways

  • You pay 6.2% for Social Security and 1.45% for Medicare; your employer pays the same percentages on your behalf.
  • Your employer withholds your share from your paycheck and sends both shares to the IRS — you do not write a separate check.
  • Self-employed people pay both the employee and employer share, which totals 15.3% for Social Security and Medicare combined.
  • Income tax withholding is separate: you pay all of it based on the W-4 form you filled out, and your employer forwards it to the IRS.
  • If your employer does not withhold or remit payroll taxes, the IRS can still hold you responsible for your employee portion.

Employee taxes withheld from your paycheck

Your employer deducts payroll taxes from every paycheck before you receive it. The amount depends on your gross pay — the total before any deductions. For 2024, the employee rate for Social Security is 6.2% up to a wage cap of $168,600, and the employee rate for Medicare is 1.45% with no cap. These rates are set by federal law and do not change year to year unless Congress acts.

You will see these deductions listed on your pay stub as "FICA" or "OASDI" (Social Security) and "Medicare". Your employer is required to show you exactly what was withheld. If you do not receive a pay stub or cannot see the breakdown, ask your payroll department or HR for a copy. Many employers now provide digital pay stubs through a portal or email.

The withholding happens automatically — you do not have to do anything. Your employer calculates it, deducts it, and sends it to the IRS on a schedule (usually quarterly for small businesses, more frequently for larger ones). You will see the total amount withheld for the year on your W-2 form in January.

Employer taxes paid on your behalf

Your employer pays an equal share of Social Security and Medicare taxes directly to the IRS. For 2024, this is 6.2% for Social Security (up to the same $168,600 wage cap) and 1.45% for Medicare. This money comes from the employer's business account, not from your paycheck. You do not see it deducted, but it is a real cost to your employer.

Employers must remit both the employee and employer portions to the IRS. The timing varies: small employers may pay quarterly, while larger employers may pay weekly or even more frequently. The IRS tracks these payments and matches them to your Social Security number so the credits count toward your future benefits.

If you change jobs, each employer pays their share based on the wages they paid you. There is no single "employer contribution account" — it is tracked by your Social Security number across all jobs. This is why it matters that your name and Social Security number are correct on your W-2 form.

Income tax withholding is separate from payroll taxes

Federal income tax withholding is not a payroll tax in the technical sense, but it is withheld from your paycheck by your employer. The amount depends on what you entered on your W-4 form when you were hired. You control this by claiming allowances or entering a dollar amount you want withheld each pay period.

Unlike Social Security and Medicare, income tax withholding has no set rate. It is based on tax brackets that change each year, your filing status, and the number of dependents you claim. Your employer uses IRS tables to calculate the amount. If you claim too many allowances, too little will be withheld and you may owe money at tax time. If you claim too few, too much will be withheld and you will receive a refund.

You can change your W-4 at any time by submitting a new form to your payroll department. Many people adjust it if their life changes — marriage, divorce, a second job, or a major change in income. The new withholding takes effect on your next paycheck.

Self-employed people pay both shares

If you are self-employed, you pay both the employee and employer share of Social Security and Medicare taxes. This is called self-employment tax. The combined rate is 15.3% — 12.4% for Social Security (on income up to $168,600 for 2024) and 2.9% for Medicare (no cap).

You calculate self-employment tax on Schedule SE, which is part of your tax return. You pay it when you file your return, usually by April 15, or you can make quarterly estimated tax payments throughout the year. The IRS requires quarterly payments if you expect to owe $1,000 or more in taxes for the year.

Self-employed people can deduct half of their self-employment tax when calculating adjusted gross income. This reduces your taxable income slightly, but you still pay the full 15.3% amount. You also pay federal income tax on top of self-employment tax, calculated based on your net profit and filing status.

State and local payroll taxes vary by location

Some states and cities add their own payroll taxes on top of federal taxes. These vary widely. Some states have no income tax at all. Others withhold state income tax similar to federal withholding. A few states have additional payroll taxes for specific programs like disability insurance or paid family leave.

Your employer is responsible for knowing the rules in your state and any city where you work. If you work in multiple states, your employer may need to withhold for more than one. If you move during the year, your withholding may change. Ask your payroll department what state and local taxes are being withheld from your check.

State and local taxes are shown separately on your pay stub. You will report them on your state tax return, not your federal return. The amounts withheld appear on your state W-2 or equivalent document, which you receive by the same important date as your federal W-2.

What happens if your employer does not withhold or pay

If your employer withholds payroll taxes from your check but does not send them to the IRS, you are still responsible for your employee portion. The IRS can pursue you for back taxes, penalties, and interest even though you never received the money. This is one reason to verify that withholding is actually happening — ask for a pay stub and check that the deductions are there.

If you suspect your employer is not paying withheld taxes, you can report it to the IRS using Form 13909 (online at IRS.gov) or by calling the IRS at 1-800-829-1040. You can also contact your state tax authority if state taxes are involved. Reporting does not may provide when ready action, but it creates a record and may trigger an investigation.

If your employer fails to withhold at all — which is rare but does happen — you may owe the full amount (both employee and employer share) when you file your return. You can claim a bad debt deduction for the employee portion you paid out of pocket, but this requires documentation and is complex. Consulting a tax professional is wise if this happens to you.

Frequently Asked Questions

Why does my employer pay payroll taxes if I am the one earning the money?

The employer share is a cost of employment set by federal law. It is treated as a business expense, similar to rent or equipment. From the employer's perspective, your total cost to the company includes both your salary and the payroll taxes they pay. This is why total compensation is higher than your take-home pay.

Can I opt out of paying payroll taxes?

No. Payroll taxes are mandatory for all employees and employers. The only exception is certain religious groups that have received IRS approval to be exempt, which is extremely rare and requires a formal process. For everyone else, withholding is required by law.

Do payroll taxes go toward my Social Security and Medicare benefits?

Yes. Your Social Security and Medicare taxes fund those programs. The amount you paid over your lifetime determines your future benefit amount. Income tax withholding, by contrast, goes to general federal revenue and does not directly fund a specific program.

What is the wage cap for Social Security taxes?

For 2024, you and your employer each pay Social Security tax on wages up to $168,600. Income above that amount is not subject to Social Security tax. Medicare tax has no cap — you pay 1.45% on all wages, no matter how high. The Social Security wage cap changes each year based on average wage growth.

If I have two jobs, do I pay payroll taxes twice?

Yes. Each employer withholds and pays payroll taxes based on the wages they pay you. If your combined income exceeds the Social Security wage cap, you may overpay Social Security tax. You can claim a credit for the overpayment when you file your tax return, but you will need to file to get it back.