What payroll deductions are employers required to withhold?

Payroll Tax Deductions Employers Must Withhold in Texas

In Texas, employers are responsible for withholding specific payroll taxes from employee wages to comply with federal and state requirements. Understanding these deductions is essential for accurate payroll processing and compliance.

Mandatory Payroll Deductions

• Federal Income Tax Withholding: Employers must withhold federal income tax based on the employee’s Form W-4 and IRS withholding tables.
• Social Security Tax: Employers withhold 6.2% of wages up to the annual wage limit for Social Security tax from employees.
• Medicare Tax: Employers withhold 1.45% of all wages for Medicare tax. Additional Medicare tax withholding of 0.9% applies to wages above the IRS threshold.
• State Income Tax: Texas does not impose a state income tax, so no state income tax withholding is required.

Employer Payroll Tax Responsibilities

• Employer Matching: Employers must match the Social Security and Medicare taxes withheld from employee wages.
• Federal Unemployment Tax (FUTA): Employers pay FUTA taxes but do not withhold this from employee wages.
• Recordkeeping and Reporting: Maintain accurate payroll records including withheld amounts, and file required federal payroll tax reports such as Form 941 quarterly.

Additional Considerations

Employers should also consider other voluntary or required deductions such as retirement plan contributions, health insurance premiums, and wage garnishments. These deductions must be handled according to employee authorization and applicable regulations.

As of 2026, staying current with IRS updates and Texas workforce regulations ensures smooth payroll operations and compliance.