Q&A: Employee Payroll Taxes

Q I am a new member to the board of directors for my condo association. We are currently working on the upcoming year’s budget. Could you please provide me some insight into the following question: is it customary the condo association pay their employees payroll taxes? We currently employ four individuals, the total taxes amounts to approximately $17,500. I work, so therefore I pay my own taxes. Two of these employees make in excess of $35,000.

—New Board Member

A “The payment of Social Security and Medicare taxes are typically lumped into one category known as ‘payroll taxes.’ Payroll taxes are sometimes referred to as the Federal Insurance Contributions Act (FICA) taxes because Social Security payroll taxes are collected under the authority of FICA,” says Daniel Altman of the law firm of Belkin Burden Wenig & Goldman, LLP in Manhattan.

“As a matter of law, employers are required to withhold from an employee’s salary, state and federal income taxes as well as Social Security and Medicare taxes. Employers are also required to pay to the IRS matching amounts of Social Security and Medicare taxes for their employees. Thus, in the question posed by the board member, the condominium association is not only required to withhold income taxes and payroll taxes from its employees’ paychecks, but it is also required to pay matching amounts of payroll taxes for its employees.

“In general and without knowing any of the specifics of the condo association’s payroll taxes, the 2007 FICA tax rate is 7.25 percent for employees. This 7.25 percent tax rate is broken down into a Social Security tax component and a Medicare tax component. The current Social Security tax rate is 6.2 percent, with a maximum taxable amount of $97,500 of an employee’s salary. Therefore, if an employee’s wages are equal to or greater than $97,500 in 2007, the employer will contribute $6,045 ($97,500 x 6.2 percent) to Social Security in 2007 and his/her employee will contribute the same amount. The current Medicare tax rate is 1.45 percent. Unlike the Social Security tax, there is no maximum taxable amount for Medicare. Both the employer and the employee must continue paying 1.45 percent for the Medicare tax regardless of the employee’s annual income.”

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2 Comments

  • I appreciate seeing this. In order to get members to take these laws seriously, I'd like to know what the typical penalties for an association would be.
  • The penalties are rather severe. Failure to file the forms is 5% per month for each form. Failure to pay the tax is 0.5%. The two combined cannot be greater than a total of 25%. The penalty would apply to both the amount the Association was to pay as well as on the amount they were supposed to have whithheld. There is interest on top of that. Not mentioned is that there is also a FUTA tax of 6% of the first $7,000.00.