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Payroll Tax

Definition - What does Payroll Tax mean?

Payroll taxes are taxes that companies are legally required to pay for their paid employees. These taxes are based on the exact payroll figures that businesses pay to their employees.

Payroll taxes are given directly to the government and are an important source of revenue for it. The higher the salaries and wages are, the higher the payroll tax amounts are.

Justipedia explains Payroll Tax

Payroll taxes are just one of the reasons why money is taken out of employee paychecks. Money can also be taken out for social security and medicare. By the time the employee actually receives their paycheck, it is likely that a significant amount of money will have been taken out of it.

Employers who do not pay payroll taxes can face legal action, as it is mandatory for many of them.

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