ER wage taxes, or “Employer’s share of Social Security and Medicare taxes,” are the portion of payroll taxes paid by the employer. The acronym “ER” stands for “Employer’s responsibility.”
In the United States, the Federal Insurance Contributions Act (FICA) requires employers to pay a portion of the Social Security and Medicare taxes on behalf of their employees. These taxes are based on the wages earned by the employee.
How are ER taxes calculated?
To calculate ER wage taxes, the employer will first determine the total wages earned by the employee during a pay period. Then, the employer will calculate the Social Security and Medicare taxes due on those wages using the current tax rates.
The current Social Security tax rate for employers is 6.2% of wages up to the Social Security wage base, which is the maximum amount of earnings subject to Social Security taxes. The current Medicare tax rate for employers is 1.45% of all wages, with no annual limit.
What forms and reports are required for ER wage taxes?
Employers are typically required to file several forms and reports for ER wage taxes, including:
- Form W-2: This form reports the total wages paid to an employee during the year, as well as the amount of federal, state, and other taxes withheld from their pay. Employers must provide a copy of the W-2 to each employee by January 31st and file a copy with the Social Security Administration by the end of February.
- Form 941: This form reports federal income and payroll taxes withheld from employee paychecks, as well as the employer’s share of Social Security and Medicare taxes. Employers must file Form 941 every quarter.
What is the penalty for failing to pay ER wage taxes?
Employers who fail to deposit payroll taxes may be subject to penalties of 2-15% of the unpaid taxes, depending on how long the taxes are due.
Is the federal unemployment tax a wage tax?
No. The Federal Unemployment Tax (FUTA) is a separate federal payroll tax that employers are required to pay on their employees’ wages. The tax is used to fund the Federal Unemployment Trust Fund, which provides unemployment benefits to workers who have lost their jobs. Unlike Social Security and Medicare taxes, only the employer pays FUTA tax – it is not deducted from the employee’s wages.