Calculate employer payroll taxes including FICA (Social Security & Medicare), FUTA, and state unemployment tax for one or more employees.
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A Texas-based freelance graphic designer earns $140,000 net profit/year from client work. She's evaluating whether to stay as a sole proprietor, form an LLC, or elect S-Corp status to reduce self-employment taxes.
Takeaway: S-Corp saves $8,300/year but adds ~$1,500-$3,000 in accounting fees (payroll, extra returns). Break-even is around $80-90K net profit. Below that, the overhead eats the savings. Texas has no state income tax, so the benefit is purely federal SE savings.
LLC annual fees range from $0 (Ohio) to $800 minimum (California, even for zero-revenue LLCs). Delaware C-Corp is standard for VC-backed companies but adds registered agent costs (~$300/yr) for out-of-state entities. The "best" structure is state-specific.
S-Corps cannot have more than 100 shareholders, cannot have non-US shareholders, and cannot have corporate shareholders. Violating these rules (e.g., adding a foreign investor) terminates S-Corp status retroactively, potentially creating a large unexpected tax event.
The IRS requires S-Corp owner-employees to pay themselves a "reasonable salary" before taking distributions. There is no fixed formula — the IRS looks at industry benchmarks, duties, and hours worked. Setting the salary too low is a common audit trigger for S-Corps.
Business break-even models track revenue vs. direct costs. They rarely factor in the owner's time as a cost. If you're working 60 hours/week at imputed $50/hour, your "profitable" business may be paying you $12/hour after the opportunity cost calculation.
Break-Even CalculatorA service business valued on EBITDA multiples (2-4×) gets a very different number than one valued on SDE (seller's discretionary earnings) or discounted cash flow. Buyers and sellers typically use different methods to argue their preferred price. This calculator uses a single method.
Business Valuation CalculatorBased on your inputs
8.34% of salary
| Annual Salary | $50,000 |
|---|---|
| Social Security (6.2%) | $3,100 |
| Medicare (1.45%) | $725 |
| FICA Total | $3,825 |
| FUTA (0.6%) | $42 |
| SUTA (4.35%) | $304.5 |
| Total Employer Tax | $4,171.5 |
| Total Cost per Employee | $54,171.5 |
| Total Annual Payroll (1 employee) | $54,172 |
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FICA consists of Social Security (6.2% up to $160,200 for 2023) and Medicare (1.45% with no cap). Employers match employee contributions.
Federal Unemployment Tax Act (FUTA) is 6% on the first $7,000 of employee wages annually. Most states offer credits reducing it to 0.6%.
State Unemployment Tax Act (SUTA) varies by state, typically 1.5–6.5% of the first $7,000–$15,000 per employee. New employers pay higher rates.
Monthly or quarterly, depending on the amount. Large employers pay semi-weekly or weekly. Filing and deposit schedules vary by state.
An extra 0.9% Medicare tax applies to employee wages exceeding $200,000 (single) or $250,000 (married filing jointly). Only the employee pays this; the employer does not match it.
File Form 941 quarterly to report federal income tax and FICA withholding. File Form 940 annually for FUTA. Issue W-2 forms to employees and file with the SSA by January 31.
Employers pay approximately 7.65% in FICA (6.2% Social Security + 1.45% Medicare), plus 0.6% FUTA, plus state unemployment (1.5-6.5%). Total employer burden is roughly 8-14% of wages.
Yes. Payroll taxes (FICA) are a fixed percentage that both employer and employee pay. Income tax withholding varies by the employee's W-4 elections, filing status, and income level.
For 2024, Social Security tax (6.2%) applies only to the first $168,600 in wages. Earnings above this amount are not subject to Social Security tax. Medicare tax has no wage base limit.
Register for an EIN with the IRS, set up state and local tax accounts, collect W-4 forms from employees, choose a payroll schedule, and select payroll software or a provider. File Form 941 quarterly and issue W-2 forms annually.
Employer Payroll Taxes = FICA + FUTA + SUTA
FICA = SS (6.2% up to $160,200) + Medicare (1.45%)
FUTA = 0.6% on first $7,000 | SUTA = varies by state
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
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Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.