Employment Taxes vs. Payroll Taxes — Understanding the Difference

The terms employment taxes and payroll taxes are often used interchangeably, but they have distinct meanings in the context of IRS compliance.

Understanding the difference helps employers stay organized and ensure every tax obligation is met correctly and on time.

What are Payroll Taxes?

Payroll taxes are a subset of employment taxes. Specifically, they refer to FICA taxes — the Federal Insurance Contributions Act taxes that fund Social Security and Medicare.

FICA taxes are shared equally by employers and employees.

• Social Security Tax

Social Security Tax funds retirement benefits, benefits for dependents of retired workers, and disability benefits.

• Medicare Tax

Medicare Tax funds healthcare coverage for people age 65 and older and those with qualifying disabilities.

2026 FICA Tax Rates

For 2026, FICA tax rates include:

• Social Security: 6.2% each for employee and employer, on wages up to the annual wage base
• Medicare: 1.45% each for employee and employer on all wages
• Additional Medicare Tax: 0.9% on employee wages above $200,000, or $250,000 for married filing jointly

The employer must withhold the Additional Medicare Tax, but does not match this portion.

Payroll taxes are reported quarterly on Form 941, Employer’s Quarterly Federal Tax Return.

Employers use Form 941 to report:

• Income taxes withheld from employees’ paychecks
• Employee Social Security and Medicare taxes
• Employer Social Security and Medicare taxes

What are Employment Taxes?

Employment taxes are the broader category that encompasses all taxes an employer owes as a result of having employees. This includes payroll taxes, meaning FICA, plus additional obligations. 

Employment taxes include:

• Federal income tax withholding
• Federal unemployment tax
• State unemployment tax
• Payroll taxes, including Social Security and Medicare

Federal Income Tax Withholding

Employers withhold federal income tax from employee wages based on each employee’s Form W-4. This is reported on Form 941 and remitted to the IRS according to the employer’s deposit schedule.

Federal Unemployment Tax

FUTA is paid exclusively by the employer. Employees do not contribute to FUTA.

• The standard FUTA rate is 6% on the first $7,000 of each employee’s wages.
• Most employers qualify for a 5.4% credit when they pay state unemployment taxes on time, resulting in a net FUTA rate of 0.6%.

FUTA is reported annually on Form 940.

State Unemployment Tax

State unemployment taxes, commonly referred to as SUTA, vary by state in terms of rate and taxable wage base.

Most states charge SUTA only to employers. However, a few states, including Alaska, New Jersey, and Pennsylvania, require employee contributions as well.

SUTA rates are experience-rated — meaning businesses with higher employee turnover typically pay more.

Tax Deposit Schedules

Employers are assigned either a monthly or semi-weekly deposit schedule by the IRS, based on their payroll tax liability during a lookback period.

• Monthly Depositors: Monthly depositors must deposit taxes by the 15th of the following month.
  
• Semi-Weekly Depositors: Semi-weekly depositors follow this schedule:
  

• Taxes on wages paid Wednesday through Friday are due by the following Wednesday
  
• Taxes on wages paid Saturday through Tuesday are due by the following Friday

Regardless of deposit schedule, all employers must file Form 941 quarterly.

2026 Form 941 Filing Deadlines

The quarterly Form 941 filing deadlines in 2026 are:

• April 30
• July 31
• October 31
• January 31 for Q4 of the prior year

The IRS Electronic Federal Tax Payment System, or EFTPS, is the required method for depositing federal employment taxes.

How 123PayStubs Helps

123PayStubs is built for business owners and payroll managers who handle their own payroll.

The platform automatically calculates:

• Federal income tax withholding
• State income tax withholding
• FICA taxes
• FUTA
• SUTA

These calculations are incorporated accurately into every paystub. Generate professional, compliant paystubs for employees, contractors, and gig workers at 123PayStubs.com.