Which of the Following Is NOT an Employer Payroll Tax? A Clear Breakdown
If you've ever stared at a multiple-choice question about payroll taxes and felt that familiar brain fog, you're not alone. But payroll taxes are one of those topics that sound straightforward until you actually try to pin down what counts and what doesn't. The question "which of the following is not an employer payroll tax" shows up in HR exams, accounting quizzes, and even some job interviews — and it trips people up because the answer isn't always obvious Simple, but easy to overlook. Surprisingly effective..
Here's the thing: most people assume anything related to employee compensation and taxes is a "payroll tax." But there's a key distinction that matters — one that could cost you if you get it wrong on an exam or, worse, if you mishandle it in real payroll processing.
Let's clear this up That's the part that actually makes a difference..
What Are Employer Payroll Taxes, Exactly?
Employer payroll taxes are the taxes that businesses are required to pay based on the wages they pay their employees. These are taxes the employer pays out of their own pocket — not money withheld from an employee's paycheck.
The key word there is employer pays. That's the distinction that answers our main question.
When you run payroll, two things happen:
- You withhold certain amounts from employee paychecks (like federal income tax, Social Security, and Medicare employee portions)
- You pay certain taxes yourself as the employer
Only the second category counts as employer payroll taxes. That's why the money you withhold from employees? That's their responsibility — you're just the middleman collecting it for the IRS.
The Main Employer Payroll Taxes
Here's what actually falls into the employer payroll tax category:
- employer's share of FICA — This covers Social Security (6.2%) and Medicare (1.45%) taxes on employee wages. The employer matches what employees pay from their own checks.
- FUTA (Federal Unemployment Tax Act) — A federal tax that funds unemployment benefits. Employers pay this entirely — no employee withholding involved.
- State unemployment tax (SUTA) — Most states require employers to pay into state unemployment insurance programs. Rates vary by state and by employer experience rating.
- State-specific payroll taxes — Some states add their own, like state disability insurance (California has SDI) or workers' compensation surcharges.
These are the taxes that come out of your business account. Not your employee's.
So Which One Is NOT an Employer Payroll Tax?
Now, the answer depends on what options are in your multiple-choice list, but here's the pattern to understand:
Federal income tax withholding is the most common answer to this question — because it's not a tax the employer pays. It's money you withhold from employee wages and pass along to the IRS. The employer doesn't bear the cost; you're just collecting it Simple as that..
Other common "trick answers" that aren't employer payroll taxes:
- Employee's share of Social Security and Medicare (those come out of employee paychecks)
- State income tax withholding (again, collected from employees)
- Workers' compensation premiums (these are insurance costs, not taxes per se)
- Any personal or business taxes not directly tied to employee wages
The question is really testing whether you understand the difference between withholding (taking money from employees to give to the government) and paying (footing the bill yourself).
Why This Distinction Actually Matters
You might be thinking: "It's just a technical accounting distinction. Who cares?"
Here's who cares: the IRS. The Department of Labor. Your state's unemployment office.
Getting this wrong on an exam might cost you a few points. Getting it wrong in your actual payroll? Day to day, that can trigger penalties, audits, or missed deadlines. Employers who confuse withholding obligations with their own tax obligations sometimes fail to make timely deposits, or they try to pocket the employee withholdings (which is illegal, obviously, but it happens when people don't understand the difference).
Beyond the legal angle, there's the practical reality of running a business. When you're budgeting for labor costs, you can't just look at wages. Even so, you need to factor in the employer-side taxes too — because that's money leaving your bank account every pay period. Treating everything as "payroll tax" without understanding which ones are yours to pay leads to bad financial planning.
A Quick Example
Say you hire someone at $60,000/year salary. Simple, right? Except:
- You owe about $4,590 in employer's FICA taxes (7.65% of wages)
- You owe FUTA (6% on the first $7,000, so $420)
- You owe state unemployment (let's say another $600 or so depending on your state)
That's roughly $5,600 in employer payroll taxes on a $60,000 salary. Practically speaking, that's nearly 10% on top of wages. If you didn't budget for that because you thought "payroll taxes" were just something withheld from employees, you're in for a rude awakening.
Common Mistakes People Make
Assuming all payroll-related taxes are employer taxes. This is the big one. The word "payroll" makes people think anything connected to employee compensation falls into this bucket. It doesn't. The critical question is always: who pays this — the employer or the employee?
Confusing FICA employer and employee shares. Yes, Social Security and Medicare are payroll taxes. But when someone asks about "employer" payroll taxes specifically, they're talking about the employer's matching portion — not what comes out of the employee's check.
Forgetting state-level variations. Some states have no state income tax (like Texas or Florida). Others have reliable state unemployment systems, disability insurance, and even local payroll taxes. If you're taking a test, read the question carefully — sometimes the "not an employer payroll tax" answer is something that exists in one state but not another.
Treating workers' comp as a payroll tax. Workers' compensation is insurance — employers pay premiums based on risk factors, not as a percentage of wages like traditional payroll taxes. It's related to employment, but it's a different category.
How to Handle Employer Payroll Taxes in Practice
If you're processing payroll (or studying for something that will require you to), here's what actually works:
Know your rates. FICA employer match is always 7.65% (6.2% Social Security + 1.45% Medicare) on wages up to the Social Security wage base. FUTA is 6% on the first $7,000. State unemployment rates vary — check your state's current rates.
Set up automatic deposits. The IRS requires regular deposits of both withheld taxes and employer taxes. Missing deadlines triggers penalties fast. Most payroll software handles this, but if you're doing it manually, mark your calendar That's the part that actually makes a difference..
Separate the buckets mentally. When you see a tax line item, ask: is this money coming from the employee (withholding) or from the business (employer tax)? That one question will answer most of the confusion around questions like "which of the following is not an employer payroll tax."
Keep good records. Every payment, every deposit, every W-2 and 941 form. Payroll tax records need to be clean and accessible. If you ever get audited, you'll want everything organized Which is the point..
FAQ
Is federal income tax withholding an employer payroll tax?
No. In real terms, federal income tax withholding is money you collect from employees and pass to the IRS. In practice, the employer doesn't pay this — they just support the payment. That's why it's not considered an employer payroll tax.
What's the difference between FICA and FUTA?
FICA funds Social Security and Medicare — both the employee and employer share these costs. FUTA funds federal unemployment insurance — employers pay this entirely, with no employee contribution. Both are employer payroll taxes, but they serve different purposes And it works..
Do all employers pay FUTA?
Almost all employers pay FUTA if they have employees. In practice, the threshold is $1,500 in wages in any calendar quarter, or at least one employee for some part of a day in 20 different weeks during the year. Most businesses with employees cross that threshold quickly.
Are state unemployment taxes the same as FUTA?
No — they're separate but related. That said, most states require employers to pay both. FUTA is federal, and state unemployment tax (SUTA) is state-level. The state rate depends on your industry and your "experience rating" (basically, how many former employees have claimed unemployment).
What happens if I don't pay employer payroll taxes?
The IRS can hit you with penalties, interest, and in extreme cases, criminal liability. Payroll tax violations are taken very seriously because these funds support Social Security, Medicare, and unemployment programs that millions of people depend on. If you're struggling to make payments, contact the IRS early — they have payment plans Easy to understand, harder to ignore..
The Bottom Line
The answer to "which of the following is not an employer payroll tax" almost always comes down to one simple test: is this a tax the employer pays from their own funds, or is it money withheld from an employee's paycheck?
Federal income tax withholding? Not an employer payroll tax — it's employee money passing through your hands Small thing, real impact. Simple as that..
Employee's share of Social Security and Medicare? Not an employer payroll tax — it's withheld from wages.
But the employer's share of FICA, FUTA, and state unemployment taxes? Those are yours. So every pay period. No way around it.
Once you lock that distinction in your mind, these questions become almost impossible to get wrong — whether you're taking an exam or running payroll for real Worth keeping that in mind..
