Employer payroll taxes are often the most confusing part of a payroll journal entry. Unlike employee withholdings (which reduce the employee's pay), employer taxes are an additional cost on top of gross wages. Here's how they work.
What are employer payroll taxes?
- Employer Social Security: 6.2% of gross wages (up to the SS wage base)
- Employer Medicare: 1.45% of all gross wages (no cap)
- FUTA (Federal Unemployment): 0.6% on the first $7,000 of each employee's wages
- SUTA (State Unemployment): Varies by state and employer experience rating
Employer payroll tax journal entry structure
Employer taxes create both an expense (the cost to the company) and liabilities (amounts owed to tax authorities):
| Account | Debit | Credit |
|---|---|---|
| Payroll Tax Expense | $1,441.25 | |
| Employer SS Payable | $775.00 | |
| Employer Medicare Payable | $181.25 | |
| FUTA Payable | $42.00 | |
| SUTA Payable | $443.00 | |
| Total | $1,441.25 | $1,441.25 |
Based on $12,500 gross payroll, 3 employees under SS wage base, SUTA rate 3.54%.
When do employer tax liabilities clear?
When you remit payment to the IRS or state agency: debit each Payable account, credit Cash/Bank. The payable accounts return to zero.
Common mistakes
- Forgetting FUTA/SUTA because they're not on employee pay stubs
- Including employer SS/Medicare in the employee FICA line (they're separate liabilities)
- Continuing to charge SS after an employee hits the wage base cap
PostBooks calculates employer tax entries automatically from your payroll provider's report. Try it free.