What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Georgia

Small businesses operating in Georgia must manage several payroll tax obligations to stay compliant and avoid penalties. Understanding these taxes is essential for smooth payroll processing and accurate bookkeeping.

Federal Payroll Taxes

• Social Security Tax: Employers must withhold 6.2% of an employee’s wages and match this amount. This funds the federal Social Security program.
• Medicare Tax: Employers withhold 1.45% of wages and contribute an equal amount to Medicare.
• Federal Unemployment Tax Act (FUTA): Employers pay this tax to fund unemployment benefits. The rate is generally 6% on the first $7,000 of wages per employee, but credits often reduce this to 0.6%.
• Federal Income Tax Withholding: Employers must withhold federal income taxes based on employee W-4 forms and IRS withholding tables.

Georgia State Payroll Taxes

• Georgia State Income Tax Withholding: Employers are required to withhold state income tax from employee wages according to Georgia Department of Revenue guidelines. Rates vary based on employee withholding allowances.
• Georgia State Unemployment Insurance (SUI): Employers pay SUI taxes to support state unemployment benefits. Rates vary depending on the employer’s experience rating and industry classification. The taxable wage base and rates can change annually.

Operational Considerations

• Registration: Register with the IRS for an Employer Identification Number (EIN) and with the Georgia Department of Revenue and Georgia Department of Labor for state tax accounts.
• Payroll System Automation: Use payroll software or services that automatically calculate and remit federal and state payroll taxes to reduce errors and ensure timely payments.
• Recordkeeping: Maintain detailed payroll records, including tax filings and employee wage data, for at least four years to comply with federal and state requirements.
• Reporting: Submit quarterly payroll tax reports to the IRS (Form 941) and Georgia Department of Revenue, and annual filings such as W-2 forms to employees and tax agencies.
• Employee Classification: Properly classify workers as employees or independent contractors to avoid misclassification penalties related to payroll taxes.

As of 2026, payroll tax rates and wage bases may be updated, so regularly check official IRS and Georgia state websites for the latest information.