H&R Block Details 15% FICA Split, Employer-Paid FUTA for Small Businesses
H&R Block small business director John Towel breaks down federal payroll taxes into three major buckets: FICA for Medicare and Social Security at a 15% rate split equally between employers and employees, fully employer-paid FUTA for unemployment insurance, and employee-withheld income tax. He warns miscalculations incur penalties and compounding interest.
1. Federal Payroll Tax Buckets
H&R Block identifies three primary federal payroll tax categories: FICA, FUTA and employee income tax withholding. FICA funds Medicare and Social Security, FUTA supports unemployment insurance, and income tax is withheld from employee paychecks.
2. Percentage Allocations and Responsibilities
The total FICA rate is 15%, with employers and employees each responsible for 7.5%. FUTA is paid entirely by employers at a specified rate on wages. Employee income tax withholding is remitted directly by employees but processed by employers.
3. Compliance Complexity and Penalty Risks
Payroll tax calculations involve multiple rates, deadlines and deposit schedules that can vary by payroll period. Failure to calculate or remit taxes accurately leads to penalties and interest that accrue over time, making precision and timely filings critical.