What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Ohio

Small businesses operating in Ohio must manage several payroll tax obligations at both the federal and state levels. Understanding these taxes is essential for compliance and smooth payroll operations.

Federal Payroll Taxes

• Social Security Tax: Employers must withhold 6.2% of wages from employees and contribute an additional 6.2% as the employer share.
• Medicare Tax: Employers withhold 1.45% of wages and match this amount.
• Federal Unemployment Tax Act (FUTA): Employers pay FUTA tax on the first $7,000 of each employee’s wages, typically at 6.0%, with possible credits reducing the effective rate.
• Federal Income Tax Withholding: Employers withhold federal income tax based on employee W-4 forms and IRS withholding tables.

Ohio State Payroll Taxes

• Ohio State Income Tax Withholding: Employers must withhold state income tax from employee wages according to Ohio’s withholding tables and remit these amounts to the Ohio Department of Taxation.
• Ohio Unemployment Insurance (UI) Tax: Employers pay UI tax based on taxable wage limits and their assigned rate, which varies depending on the employer’s experience rating and industry classification.
• School District Income Tax: In certain Ohio school districts, employers are required to withhold additional income tax from employees residing or working within those districts.

Operational Considerations

• Registration: Register with the Ohio Department of Taxation and the Ohio Department of Job and Family Services to report and pay state payroll taxes.
• Reporting: File payroll tax returns regularly, typically monthly or quarterly, depending on payroll size and tax type.
• Recordkeeping: Maintain accurate records of wages, tax withholdings, and payments for at least four years to comply with audit requirements.
• Payroll Automation: Use payroll software or services that support Ohio-specific tax calculations and filings to reduce errors and save time.
• Employee Classification: Properly classify workers as employees or independent contractors to ensure correct tax treatment and avoid penalties.

As of 2026, stay updated with Ohio Department of Taxation and federal IRS guidelines to ensure compliance with any changes in payroll tax rates or reporting requirements.