Payroll Taxes FICA:  also known as Social Security and Medicare.  The social security tax rate is 6.2% taxed on the first $106,800 of wages (for 2009 and 2010).  The medicare tax rate is 1.45% with no limit.  Both the employee and the employer pay FICA for a total of 15.3%.  Federal payroll taxes, which include FICA and federal withholding are reported quarterly on form 941.  Federal tax deposits are required to be paid either on the 15th of the next month or semi-weekly depending on the size of the employer's payroll.  Penalties for late payments of federal payroll taxes are extremely harsh.  FUTA:  also know as Federal Unemployment Tax.  The federal unemployment tax rate is .8% of the first $7,000 of wages.  FUTA is paid quarterly (annually for small employers) and reported annually on form 940. SUTA:  also known as State Unemployment Tax.  The state unemployment rate varies by employer.  Employers without any unemployment claims pay less than other employers who have had employees claim unemployment.  New businesses all start at the same rate.  Maryland unemployment is taxed on the first $8,500 of wages.  SUTA is paid and reported quarterly. To save money on payroll taxes, consider establishing a cafeteria plan or being taxed as an S corp.  A corporation or an LLC can elect to be taxed as an S corp.  See S corp taxation for more info. Below is a table that shows a few instances when wages are exempt from payroll taxes.  Employer contributions to retirement plans (both matching and discretionary contributions) are always exempt from payroll taxes.  Employee Contribution Federal & State Income Tax FICA FUTA & SUTA Cafeteria Plan (for any decution: retirement, child care, health, etc.) Exempt Exempt Exempt 401-K Pre Tax Exempt Taxable to employee & employer Taxable 401-K Roth Taxable Taxable to employee & employer Taxable Simple IRA Exempt Taxable to employee & employer Taxable