You’re responsible for two categories of payroll taxes. The first is taxes you actually pay as the employer. The second is taxes you withhold from employee paychecks and remit on their behalf. Both are your responsibility, but only one comes out of your pocket.

The employer-paid taxes include your half of Social Security and Medicare. Social Security is 6.2% of wages up to the annual wage base, and Medicare is 1.45% with no cap. Your employees pay the same amounts from their checks, so these taxes total 15.3% combined. You also pay Federal Unemployment Tax at 6% on the first $7,000 of each employee’s wages, though most employers get a credit that reduces this to 0.6%.

California adds its own employer taxes. State Unemployment Insurance starts at 3.4% for new employers on the first $7,000 per employee, though your rate changes based on your claims history. Employment Training Tax is a small 0.1% on that same $7,000.

The taxes you withhold from employees include federal income tax based on their W-4, state income tax for California, and State Disability Insurance at around 1.1% of wages. These amounts never touch your bank account as your money. You’re holding them in trust for the government. The IRS and California EDD take this seriously. Missing payroll tax deposits can lead to personal liability even if your business is an LLC or corporation.

When you add up the employer portion, expect to pay roughly 8% to 10% on top of wages depending on your unemployment rate. That’s money most business owners forget to budget when calculating the true cost of employees.

The timing of deposits matters. Federal taxes are due semi-weekly or monthly depending on your payroll size. California taxes are due with your quarterly DE 9 filings. Missing deadlines triggers penalties that compound quickly.

If payroll taxes feel complicated, that’s because they are. Most small business accountants in the San Gabriel Valley see payroll mistakes as one of the most common issues for growing companies. Getting it wrong means penalties, interest, and potential trust fund recovery penalties that pierce liability protection.

Full-service payroll handles the calculations, deposits, and filings so you don’t have to track rates, deadlines, and form requirements yourself. Whether you handle it internally or outsource, understanding what you owe helps you budget accurately and avoid surprises.