What Is Payroll Tax?

Payroll taxes are taxes employers withhold from employees' wages and deposit with the IRS — plus additional taxes the employer pays. They include FICA taxes (Social Security and Medicare) and federal unemployment tax (FUTA). As an employer, you're responsible for withholding the right amount, depositing on time, and filing payroll reports. Failure to deposit payroll taxes is one of the most serious IRS violations — penalties are steep. Many small businesses use payroll software or a payroll service to stay compliant.