Top

Payroll Tax

What is a ‘Payroll Tax’
A payroll tax is a tax that an employer withholds from an employee’s salary and pays on behalf of his employees. The payroll tax is based on the wage or salary of the employee.

In most countries, including the United States, federal authorities and some state governments collect some form of payroll tax. The three primary line items deducted from paychecks in the United States are Social Security, Medicare, and income taxes.

BREAKING DOWN ‘Payroll Tax’
Governments use revenues from payroll taxes to fund programs such as Social Security, health care, unemployment compensation, and workers compensation. Sometimes local governments collect a small payroll tax to maintain and improve local infrastructure and programs, including first responders, road maintenance, and parks and recreation.

Read More on Investopedia