What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Connecticut

Small businesses operating in Connecticut must manage several payroll tax obligations to stay compliant and ensure smooth operations. Understanding these taxes helps with accurate payroll processing and financial planning.

Key Payroll Taxes to Pay

• Federal Payroll Taxes: Employers must withhold and remit federal income tax, Social Security tax, and Medicare tax from employee wages. Employers also pay a matching amount for Social Security and Medicare.
• Connecticut State Income Tax Withholding: Employers are required to withhold Connecticut state income tax from employee wages based on current withholding tables. Proper withholding ensures employees meet their state tax obligations.
• Unemployment Insurance (UI): Connecticut employers pay state unemployment insurance taxes. Rates vary based on the employer’s experience rating and industry. Accurate payroll records and timely payments are essential.
• Paid Family and Medical Leave (PFML) Contributions: As of 2026, Connecticut requires employers and employees to contribute to the state’s PFML program. Employers must withhold employee contributions and remit combined payments to the state.
• Federal Unemployment Tax Act (FUTA): Employers pay FUTA taxes federally, which fund unemployment benefits. This is separate from Connecticut’s UI tax but coordinated for overall unemployment funding.

Operational Tips for Managing Payroll Taxes

• Automate Payroll Processing: Use payroll software that integrates federal and Connecticut tax tables to ensure correct withholding and tax payments.
• Maintain Accurate Records: Keep detailed payroll records including hours worked, wages paid, and taxes withheld to support reporting and audits.
• Stay Updated on Rates and Rules: Tax rates and contribution requirements can change annually. Regularly review updates from the Connecticut Department of Labor and IRS.
• File and Pay on Time: Meeting deadlines for tax deposits and returns avoids penalties and interest. Establish a calendar for federal and state payroll tax due dates.
• Classify Employees Correctly: Proper classification between employees and contractors affects payroll tax obligations and compliance.