Who Pays the Payroll Tax?

Roni Tambasco

October 24, 2022


As a former employee, you might have heard about the payroll tax and wondered, “Who pays it?” You pay your employer’s share of Social Security and Medicare as well as your portion. This is because the costs and benefits you receive from your job are higher than your paycheck. However, recently self-employed individuals are also learning to pay their payroll tax.


When you’re self-employed, you pay two types of taxes – self-employment tax and social security tax. This tax applies to your income, a percentage of what you make. It is similar to the FICA taxes that employers withhold from an employee’s paycheck. The self-employment tax is 15.3% of the net profit.

Generally, you can write off half of the self-employment tax if you don’t have a business or are self-employed. In addition, if you’re a sole proprietor, the entire amount is taxed at 15.3%, and you can claim an additional deduction. To calculate your tax liability, use a self-employment tax calculator.

If you have an income that exceeds $1,000, you must submit quarterly estimated tax payments. You can calculate your estimated tax payments using IRS Form 1040-ES. The 1040-ES includes vouchers for tax payments. You can also use IRS Direct Pay if you prefer a more user-friendly method. Either way, you should keep records of when you pay your estimated tax.

Self-employed individuals must document all business income and expenses. This is a mandatory part of their tax filing process. In addition, these individuals also need to file an annual return.


The payroll tax is a tax that businesses must withhold from their employee’s paychecks. It includes tax money and employer contributions. The tax is also used to fund Social Security. Companies may eventually have to file quarterly returns, known as Form 941, and the due date is usually the last day of the month following the end of the quarter.


If you are self-employed, you must be aware of the tax rules for independent contractors. For the most part, contractors are responsible for paying self-employment taxes. This tax is akin to FICA taxes, but the contractor produces it instead of the employer. You are required to pay the tax if you earn $400 or more a year as a contractor. You should also file a federal tax return.

The tax status of an independent contractor is determined by the level of control over the work. You must pay taxes if you misclassify someone. If you’re not careful, the IRS can pursue you for unpaid employment taxes. If you’re a contractor, you’ll also have to deal with the tax consequences of being misclassified.

The IRS has a standardized term for this type of worker, “independent contractor.” They are different than employees. Independent contractors must file a separate tax form from employees. In addition, they may qualify for benefits. Therefore, it is essential to determine the worker’s status as an independent contractor as early as the time of hire. This determination is dependent on the level of control a business owner has over the work performed by an independent contractor.