What Is The Difference Between Payroll & Income Taxes?

Payroll income tax or payroll and income taxes are the same thing, but they are paid differently. Payroll tax is a weekly, or bi-monthly tax that is paid to cover mostly Federal Insurance Contributions Act (FICA) contributions for social security and Medicare. Income taxes accounts for the difference between taxes due or a refund owed on total taxes withheld throughout the year. Income taxes are reconciled on an annual basis, and are due April 15th.

Payroll Taxes

FICA consists of 6.2 percent that covers an employee’s Social Security contribution and 1.45 percent to cover Medicare. An employer matches this amount which means that the total FICA contribution made in behalf of an employee is 15.3 percent. This amount is withheld and reported after every payroll period for every employee.

Income Taxes

Income taxes make up for any amounts that were under reported by an employee throughout the year, based on the number of deductions or filing status that was chosen. These are paid on an annual basis beginning after January 31st, for income earned in the preceding year. An employee that had too much withheld throughout the year will receive a refund and those that under reported will have to pay income taxes.