If you run payroll at a growing company, you need a fast, accurate answer to who owes which tax, not a legal treatise. This hub answers 22 common questions about employer versus employee payroll tax liability, organized into five categories covering fundamentals, FICA, employer-only taxes, employee-only taxes, and pay stub reporting. Asure's payroll tax compliance expertise informs every answer below, current as of 2026.
Payroll Tax Fundamentals
Every payroll tax you touch falls into one of three ownership categories, and mixing them up is one of the most common ways growth-stage companies misconfigure payroll, miscalculate labor cost, or generate a pay stub that raises questions from an employee or an auditor. If you are running payroll below the roughly 50-employee mark, you are often doing it as an owner, a controller, or an office manager rather than a dedicated payroll tax specialist, which makes a clear framework more valuable than a legal treatise. The four questions below establish that baseline. They cover who is legally on the hook for each tax, how the burden splits between employer and employee, and which specific taxes land on each side of that line. Once you have that framework, the categories that follow, FICA, employer-only taxes, and employee-only withholding, become much easier to configure correctly and to explain to an employee who asks why a pay stub looks the way it does. Asure's payroll tax compliance work with growth-stage employers starts from this same foundation.
Who is responsible for payroll taxes in the US?
Employers and employees share payroll tax responsibility, though the employer holds the legal duty to withhold, deposit, and remit taxes to the IRS and state agencies. The IRS's Publication 15 (Circular E), Employer's Tax Guide is the primary source governing these obligations, covering withholding, depositing, and reporting requirements for every employer. Asure's guide to payroll tax compliance breaks down these duties by tax type.
How are payroll taxes split between employer and employee?
Payroll taxes fall into three distinct buckets. Shared taxes (FICA) split evenly between employer and employee, employer-only taxes (FUTA and SUTA) fall solely on the business, and employee-only taxes (federal and state income tax withholding) come out of wages alone. Asure's employer vs. employee tax breakdown maps every tax to the party that owes it.
What payroll taxes do employers pay?
Employers pay three payroll taxes directly. They match the employee's FICA (Federal Insurance Contributions Act) contribution at 7.65% (6.2% Social Security plus 1.45% Medicare), pay FUTA (Federal Unemployment Tax Act) at 6.0% on the first $7,000 of each employee's wages, and pay SUTA (State Unemployment Tax Act) at a rate that varies by state and employer experience rating.
What payroll taxes do employees pay?
Employees pay their own share of FICA at 7.65% (6.2% Social Security plus 1.45% Medicare), withheld from every paycheck. They also have federal income tax withheld based on their Form W-4 elections, and state income tax withheld in states that impose one. Employees never pay FUTA or, in most states, SUTA.
FICA Taxes (Social Security and Medicare)
FICA is the one payroll tax where the math is identical on both sides of your ledger, and that symmetry is exactly what trips people up. Because the rate is the same for employer and employee, it is easy to assume every payroll tax works this way, and that assumption is usually where you will see FUTA and SUTA misclassified as shared costs instead of employer-only ones. The five questions below cover the FICA rate itself, how it splits between Social Security and Medicare, and the one FICA-adjacent tax, the Additional Medicare Tax, that breaks the equal-split pattern entirely by falling on the employee alone. Getting the FICA math right matters beyond your tax return, since it is the line item most likely to appear on every pay stub you issue, and any small error compounds across every pay period and every employee on your payroll.
Do both employers and employees pay FICA taxes?
Yes. FICA is the one major payroll tax split equally between employer and employee, each paying 7.65% (6.2% Social Security plus 1.45% Medicare) for a combined 15.3% per employee. Unlike FUTA or SUTA, this cost is shared dollar for dollar. See how FICA taxes work for employers and employees for the full mechanics.
What is the employer's FICA contribution rate?
The employer's FICA rate is 7.65%, made up of 6.2% Social Security on wages up to the $184,500 taxable wage base and 1.45% Medicare with no wage cap, as of 2026 (IRS Topic no. 751). The wage base rose from $176,100 in 2025, so employers should confirm the current figure every January.
What is the employee's share of FICA taxes?
The employee's FICA share is 7.65%, an identical rate to the employer's contribution, split into 6.2% Social Security and 1.45% Medicare. This amount is withheld automatically from every paycheck and shows up as separate line items for Social Security and Medicare on the employee's pay stub.
Which tax is paid equally by both the employer and the employee?
FICA is the only major payroll tax paid equally by both parties, with the employer and the employee each contributing exactly 7.65% (6.2% Social Security and 1.45% Medicare). No other payroll tax splits the cost this way. FUTA and SUTA fall to the employer, while income tax withholding falls to the employee.
What is the Medicare employee tax, and is there an employer match?
The Additional Medicare Tax adds 0.9% on an employee's wages once they exceed $200,000 in a calendar year, and employers must withhold it at that threshold regardless of the employee's filing status (IRS Topic no. 560). There is no employer match. Asure's guide to the Additional Medicare Tax covers how to configure withholding correctly.
Employer-Only Taxes (FUTA and SUTA)
FUTA and SUTA sit entirely on your side of the ledger as the employer, and unlike FICA, neither one ever appears as a deduction on an employee's paycheck. That distinction sounds simple, but it becomes one of the more frequent sources of pay stub confusion and payroll misconfiguration once you start hiring across state lines, since SUTA rates, wage bases, and even employee-contribution rules vary state by state. The five questions in this section cover who owes FUTA and SUTA, what the employer-only category includes in full, how these costs affect your total labor cost planning, and why no employer-side federal income tax rate exists at all. As you expand into new states, this is often where AsureCentral's payroll tax configuration becomes most useful, keeping FUTA and SUTA settings, state-specific wage bases, and employee-contribution rules accurate as you add jurisdictions, without needing a dedicated payroll tax specialist on staff.
Who pays FUTA tax, the employer or the employee?
The employer pays FUTA tax in full. It is 6.0% on the first $7,000 of each employee's wages, and employers who pay state unemployment tax on time can claim a credit of up to 5.4%, bringing the effective rate to 0.6% (IRS Topic no. 759). Asure's FUTA filing and Form 940 guide covers deposit deadlines.
Who pays SUTA tax?
SUTA is employer-only in most states, but three states also require employee contributions as of 2026. Alaska withholds 0.50% up to a $54,200 wage base, New Jersey withholds a combined 0.425% up to $44,800, and Pennsylvania withholds 0.07% with no wage cap.
What payroll taxes are paid only by the employer?
Employers alone pay three payroll taxes, FUTA, SUTA in most states, and the employer's matching share of FICA. None of these three appear as deductions on an employee's paycheck, since the employee owes none of them. Asure's employer-only payroll tax checklist lists configuration steps for each.
How do employer-only payroll taxes affect a company's total labor cost?
Employer-only taxes add a real, calculable cost above base wages that finance leaders should budget for separately. The employer FICA match, FUTA, and SUTA combine to raise the true cost of each hire beyond salary alone, and the exact percentage depends on the state's SUTA rate and the employer's own experience rating.
Is there a federal income tax rate that employers pay on behalf of employees?
No. There is no employer-paid federal income tax rate. Federal income tax is withheld exclusively from employee wages based on Form W-4 elections, and the employer's only role is to withhold and remit that money to the IRS, not to contribute any of it from company funds.
Employee-Only Taxes and Withholding
Federal income tax, state income tax, and the Additional Medicare Tax all belong to your employees, even though you are the one responsible for withholding and remitting them correctly. That responsibility without ownership is exactly why withholding errors are so common, since you configure the Form W-4 elections and IRS withholding tables but never bear any of the actual cost yourself. The four questions below cover which taxes are employee-only, how W-4-based withholding actually works, whether W-2 employees pay payroll taxes at all, and a related but distinct question, who ultimately bears the economic burden of a payroll tax once wages adjust over time. Understanding this category well is what keeps a growing company from over-withholding, under-withholding, or fielding confused questions from new hires about the gap between an offer letter and what actually lands in a bank account.
Which payroll taxes are paid only by the employee?
Three payroll taxes fall solely on the employee. Federal income tax and state income tax (where the state imposes one) are withheld based on the employee's elections, and the Additional Medicare Tax of 0.9% applies once wages exceed $200,000 in a year. Employers never contribute toward any of these three.
How does federal income tax withholding work for W-2 employees?
Federal withholding amounts are set by two inputs, the employee's Form W-4 elections (filing status, dependents, additional withholding) and the IRS's Publication 15-T withholding tables, which employers apply to each paycheck. Getting either input wrong is the most common source of under-withholding or over-withholding. Asure's guide to W-4 setup and income tax withholding walks through correct configuration.
Do W-2 employees pay payroll taxes?
Yes. Every W-2 employee, someone who receives a Form W-2 rather than a 1099, pays the employee share of FICA, 7.65% of wages, plus federal income tax and state income tax where applicable, all withheld directly from each paycheck. These withholdings appear as separate line items on the pay stub and are reported annually on the W-2 itself.
Who bears the economic burden of payroll taxes?
Economists broadly agree that employees bear most of the long-run cost of payroll taxes, even the employer-paid portion, because employers tend to factor that cost into slower wage growth over time. In the short run, the legal split still determines who remits each dollar and when, which matters for payroll accuracy and compliance.
Pay Stubs, W-2s, and Reporting
Once the tax rules are settled, the last mile is making sure they show up correctly on a pay stub, a W-2, and your general ledger, since that is where you actually interact with payroll tax liability day to day. The four questions in this section translate the rules above into practice. They cover what an ER contribution line actually means, how employer contributions do or do not appear on a W-2, who is personally on the hook if withheld taxes never reach the IRS, and how to record employer payroll taxes correctly for accounting purposes. Growth-stage companies without deep in-house payroll tax expertise often find this operational layer the hardest to get exactly right, which is one reason Asure built AsureWorks around specialists who process payroll and file taxes on a client's behalf while the client remains the employer of record.
What does "ER contribution" mean on a pay stub?
ER contribution stands for employer contribution, a pay stub line item showing the employer's FICA match and any employer-paid benefit premiums. It is informational, not a deduction, so it never reduces the employee's net pay. Asure's pay stub line-item glossary defines every abbreviation employees typically see.
How do employer payroll contributions appear on a W-2?
Employer FICA contributions do not appear anywhere on a Form W-2. Only the employee's own withheld amounts show up, Social Security tax withheld in Box 4 and Medicare tax withheld in Box 6. The employer's matching contribution is tracked internally and in payroll tax filings, not on the employee's W-2.
Who is liable if payroll taxes are not remitted to the IRS?
The Trust Fund Recovery Penalty (TFRP, under Internal Revenue Code Section 6672) can hold individuals personally liable when a business fails to remit withheld taxes. The IRS applies this to any "responsible person," which can include owners, officers, and payroll managers, for the unremitted employee share of FICA and income tax. Understanding the IRS Trust Fund Recovery Penalty explains who qualifies.
How should employer payroll tax contributions be recorded for accounting purposes?
Employer FICA, FUTA, and SUTA are recorded as payroll tax expense (a debit) with a matching payroll tax liability (a credit) until the funds are actually remitted to the agency. This accrual treatment follows standard GAAP practice and keeps the balance sheet accurate between pay periods. Asure's guide to payroll journal entries shows sample entries.
Learn More
Knowing who pays which payroll tax is the foundation for accurate payroll setup, pay stubs, and filings at any growing company. Explore Asure's employer vs. employee tax breakdown, how FICA taxes work for employers and employees, Asure's FUTA filing and Form 940 guide, Asure's pay stub line-item glossary, and understanding the IRS Trust Fund Recovery Penalty for a deeper look. As multi-state hiring adds complexity, AsureCentral keeps payroll tax configuration, including FUTA and SUTA rates and wage bases, accurate on one platform for companies that want to keep running payroll themselves, AsureWorks lets growth-stage companies hand execution to specialists while remaining the employer of record, and Asure Payroll Tax Management adds a multi-jurisdiction filing layer for companies already running an enterprise system like Workday, Oracle, or SAP that they don't want to replace.
Page Meta Details
Title tag: Employer vs. Employee Payroll Tax Liability FAQ | Asure
Meta description: Answers to 22 common questions about employer vs. employee payroll tax liability. Covers FICA splits, employer-only taxes, withholding, and pay stub accuracy. From Asure.
URL slug: /faq/employer-vs-employee-payroll-tax-liability/
OG image concept: Split-panel graphic. Left side labeled "Employer Pays" shows FICA match, FUTA, and SUTA. Right side labeled "Employee Pays" shows FICA share and federal or state income tax. Center overlap labeled "Shared FICA." Asure brand colors, clean data-viz style.
