Payroll Taxes
in USA.

SALARY PAYMENT IN United States Dollar (USD, $)

CONTRACT LANGUAGES English

PAYROLL TAX Varies per state

PAYROLL CYCLE Bi-weekly or weekly

TIME TO HIRE 12 hours

Get Started

Horizons-owned entity with local country experts in Seoul.

We offer fair, scalable, and transparent pricing on South Korea PEO service. Contact us for a cost breakdown

End service in South Korea with no additional penalties or fees.

Including vision, dental, death & disability, travel, and more.

Hire and pay talents
with Horizons in
180+ countries

Get started

United States

What is the Average Employer Tax Rate in USA?

As employers in the US most commonly have an incorporated structure, most are required to pay corporate income tax. In the United States, corporate income taxes are levied at both the federal and state level.

Federal corporate income tax is currently fixed at 21%. While there has been discussion of increasing that rate to 28%, this is yet to occur.

Forty-four states and the District of Columbia collect corporate income tax with rates ranging from 2.5% to 11.5%.

Ohio, Nevada, South Dakota, Texas, Washington, and Wyoming do not levy corporate income tax, with corporations in these states only paying the federal tax rate of 21%.

What Is the Average Employee Tax Rate in USA?

According to the OECD, the average tax rate for a single employee in the United States is 28.4%. Note this tax burden includes individual income tax and the federal and state levels, as well as compulsory social contributions.

In order to ensure that tax withheld is accurate, employees need to submit a W4 form to their employer, and employers need to submit a W2 tax form to the IRS. This ensures that the IRS has all the information it requires. Note, generally, companies do not withhold income tax from independent contractors, who instead submit their own 1099 documentation.

Federal personal income tax in the United States follows a progressive system, with income tax rates levied via seven marginal tax brackets.

USA – Individual Income Tax

Taxable Income (USD)	Tax rate 2023
$0 – $10,275	10%
$10,276 – $41,775	12%
$41,776 – $89,075	22%
$89,076 – $170,050	24%
$170,051 – $215,950	32%
$215,951 – $539,900	35%
$539,901+	37%

State income tax rates vary. Forty-one states and the District of Columbia levy personal income taxes, whilst two states (New Hampshire & Tennessee) only tax income resulting from dividends and interest. The remaining seven states do not tax any personal income.

Employer Contributions in USA

In the USA, employers are required to contribute to a number of payroll taxes under the Federal Insurance Contributions Act (FICA) and Federal Unemployment Taxation Act (FUTA). FICA includes Social Security payments and Medicare coverage.

Employer social security contributions total 6.20% on the first $160,200 of wages paid. Employer Medicare contributions are 1.45% with no earnings limit.

FUTA funds the federal unemployment program. Employer contributions total 6% of the first $7,000 of an employee’s wages. A credit reduction (for eligible employers) can bring the FUTA contribution down to 0.6%.

Total employer payroll contributions are a minimum of 8.25%.

As well as the federal payroll taxes, many states and some municipalities impose additional payroll taxes to cover programs such as short-term disability or paid family medical leave.

It is the law of the employee’s state of residence that governs employment agreements. State payroll taxes are therefore paid to the employee’s state of residence.

Employee Contributions in USA

Employees match the contributions of their employer under the FICA. This includes 6.20% for social security and 1.45% for Medicare contributions. There is an additional Medicare Tax of 0.9% for employees who receive wages over $200,000.

Employees do not have to pay the FUTA.

Hiring in USA, Made Easy

Your business can easily hire employees in USA without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.

FAQs

What is the tax bureau of USA called?

The Internal Revenue Service (IRS).

Is there an employer payroll tax contribution in USA?

Yes. Employers pay federal payroll taxes under the FICA & FUTA. Together, these federal payroll taxes amount to a minimum employer contribution of 8.25%.

How does the payroll tax system of USA work?

Federal payroll taxes are paid online using the Electronic Federal Tax Payment System – a free system provided by the U.S. Department of Treasury.

Success stories from businesses we’ve helped enter and grow in new markets.

Client Testimonials

"As a seed-stage, London-based startup, we were initially hesitant to expand internationally due to the administrative workload involved. Horizons took the headache out of the process, allowing us to hire a team of software engineers in Germany."

Gabor SzedlakCo-founder & COO at MindLabs (UK)

"I truly appreciated the thoroughness and the professionalism of Horizons personnel while we hired internationally with them. They were knowledgable on all subject matters pertaining to international employment."

Gary PaskyVP Software Development, PICS ITech (USA)

"On deciding to begin commercial activities in Asia Pacific, we needed a provider to handle the employment and remuneration of our workforce. With Horizons the result was fast, efficient, and fit-for-purpose. We recommend Horizons as an EOR provider.”

Chris MorrellManaging Director, Schaeffler Group (Germany)

"The collaboration with the Horizons team is excellent. Both our local employee as well as our HQ in Germany are more than pleased with the support provided and the simplicity of the service. We can highly recommend the Horizons solution to anyone."

Christoph EngelbertCo-Founder & CTO, Clevabit (Germany)

"We needed an EOR that could provide expert support for payroll in APAC. We are pleased with Horizons’ expertise and the fact that they are flexible, responsive, and easily accessible from Belgium. They were able to provide services within the short timeline we required."

Katia FlamandHuman Resources, Devian Chemicals (Belgium)