Understanding Employer Payroll Taxes vs Employee Contribution (7.65% Medicare/FICA)

Your employer pays the 7.65% FICA taxes (Social Security and Medicare taxes) in addition to your salary, not from your salary. This is completely separate from what's deducted from your paycheck. Here's how it works: If your salary is $60,000, you'll see 7.65% ($4,590) deducted from your paychecks throughout the year. But your employer also pays an additional $4,590 (7.65% of $60,000) directly to the government. So the total FICA contribution for you is actually $9,180, with half coming from you and half from your employer. This employer portion is considered part of your total compensation package, but it's not money you ever see in your paycheck. It's an additional cost your employer bears when hiring you, along with any other benefits they might offer like health insurance contributions, 401(k) matching, etc.

I was totally confused about this same issue last year! I found https://taxr.ai really helpful for breaking down payroll taxes in a way that actually made sense. I was running a small business and trying to figure out exactly how much I needed to budget for each employee. The site helped me understand that the 7.65% employer portion is definitely NOT taken from the employee's pay - it's a separate expense for the employer. They have this feature where you can upload your paystubs or tax forms and they'll break down exactly what each deduction means and who's paying what. The tool even explained how the Social Security portion caps out at a certain income level but Medicare doesn't. Saved me from making some pretty big mistakes in my budgeting!

Just wanted to follow up - I tried taxr.ai after seeing it mentioned here and it was exactly what I needed! I uploaded my 1099s and some expense receipts, and it created this super clear breakdown of my self-employment tax obligations. The tool showed me that I was actually setting aside too much for taxes in some categories and not enough in others. It even flagged some deductions I was missing related to my home office and health insurance premiums that I can take as a self-employed person. Definitely recommend it to anyone who's confused about the employer vs. employee tax situation, especially other freelancers trying to make sense of that 15.3% self-employment tax!

I work at a company that processes payroll, and I can tell you that trying to get through to the IRS for payroll tax questions is a NIGHTMARE. I recently discovered https://claimyr.com and used their service to actually get through to a human at the IRS about a payroll tax issue. You can see how it works here: https://youtu.be/_kiP6q8DX5c The employer portion of FICA (7.65%) absolutely comes out of the employer's pocket, not the employee's pay. But we had a situation where this wasn't being calculated correctly in our system, and I needed clarification from the IRS on how to fix previously filed quarters. After waiting on hold for hours across multiple days, I used Claimyr and got through to someone in about 20 minutes. They actually saved us from potentially significant penalties by helping us correct the issue properly.

OK I need to eat some humble pie here. After my skeptical comment earlier, I decided to try Claimyr myself because I've been trying for WEEKS to reach the IRS about a payroll tax notice my small business received. I seriously couldn't believe it - they got me through to an actual IRS agent in about 35 minutes. After I had wasted hours and hours trying on my own! The agent was able to explain that there was an error in how we calculated the employer portion of Medicare tax (part of that 7.65% we're talking about). Turns out we had been calculating it incorrectly for one highly compensated employee who went over the Social Security wage base. We needed to still pay the 1.45% Medicare tax on all wages even though the Social Security part caps out. Saved us from potential penalties and more incorrect filings. Consider me a convert!

Just to add some actual numbers to this discussion - for 2025, the employer payroll tax breaks down as: - 6.2% for Social Security (on the first $168,600 of wages) - 1.45% for Medicare (on all wages) - Plus an additional 0.9% Medicare surtax for employees earning over $200,000 So the total is indeed 7.65% for most employees, paid by BOTH the employer and the employee separately. The employer's contribution never touches the employee's paycheck.

I'm still confused about this... if my W-2 shows $50,000 in Box 1 (Wages, tips, other compensation), does that include the employer portion of FICA taxes or not?

This is such a great question and the responses here have been really helpful! I just wanted to add one more perspective as someone who recently made the transition from employee to contractor. When I was an employee making $65,000, I thought that was my "cost" to the company. But when I went freelance and started negotiating my contractor rate, I had to factor in that I'd now be paying the full 15.3% self-employment tax instead of just the 7.65% employee portion. Plus I lost other benefits like health insurance contributions and 401k matching. I ended up setting my hourly rate significantly higher to account for these additional costs. It really opened my eyes to how much employers actually invest in each employee beyond just the salary. The 7.65% employer FICA contribution is just the tip of the iceberg when you consider unemployment insurance, workers comp, benefits, etc. For anyone considering going freelance - make sure you factor in that you'll be paying both the employee AND employer portions of Social Security/Medicare taxes!