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What's the Difference Between Payroll Taxes and Employment Taxes?


Question: What's the Difference Between Payroll Taxes and Employment Taxes?
Tax websites and books toss around these two terms - payroll taxes and employment taxes - as if they were equal, but they are not. Yes, they are close enough in meaning to cause confusion, but they are different things.
For the purpose of the "Crash Course on Payroll and Payroll Taxes," the term "payroll taxes" is used generically to describe all taxes paid through an employer's payroll system.

What are Employment Taxes?
The IRS uses the term "employment taxes" to refer to those taxes reported on Form 941. That is, income tax withholding for employees and FICA taxes (Social Security and Medicare) withheld from employees, matched by employers, and paid by employers. But, just to confuse the issue, the IRS also lists other taxes when it is discussing "employment taxes." Look in this IRS article on "employment taxes," and you will see they also refer to self-employment taxes (Social Security/Medicare paid by business owners) and federal unemployment taxes as "employment taxes."

What are Payroll Taxes?
For this term, the IRS is more specific. By "payroll taxes" the IRS means only Social Security and Medicare taxes withheld from employee pay and matched by employers. In its terminology, federal income tax withholding, while submitted on the 941 form, is not part of payroll taxes.

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