What is Payroll Tax?
When companies pay their employees, they must withhold taxes from their workers’ paychecks. This is referred to as payroll tax. Generally speaking, there are two types of taxes that companies may withhold. First, they may withhold from an employee’s pay. This is called “pay as you earn” (PAYE) tax. Second, they may withhold from their own earnings which are directly related to having an employee work at their companies. These taxes can be fixed or vary according to what an employee earns while working for the company. Both types of taxes are also referred to as “employee taxes”. According to IRS laws, employers are accountable for withholding Social Security taxes, Medicare taxes and income taxes from their employees’ paychecks. This means that anytime an employer issues a paycheck, he/she must be in compliance with payroll tax laws as employers that fail to take taxes out of their employees’ paychecks may be subjected to audits and, in serious cases, criminal investigation. In the Uni
