How Much Is Payroll Tax in NC for Employers?

Payroll taxes are a fundamental component of operating a business, funding social programs and public services. Understanding these obligations is essential for employers to ensure compliance and manage financial responsibilities. For businesses in North Carolina, this involves navigating both federal and state payroll tax requirements.

Federal Payroll Taxes

Employers are responsible for federal payroll taxes, which consist of FICA (Social Security and Medicare) and Federal Unemployment Tax Act (FUTA) taxes. FICA taxes are shared between the employer and the employee. For 2025, the Social Security tax rate is 6.2% for both, applied to wages up to $176,100.

Medicare tax is assessed at 1.45% for both employer and employee, with no wage base limit. An extra 0.9% Medicare tax applies to individual wages exceeding $200,000; employers withhold this additional amount but do not pay a matching share. FICA contributions fund retirement, disability, and healthcare benefits.

The Federal Unemployment Tax Act (FUTA) tax is paid solely by employers and funds unemployment compensation. The standard FUTA tax rate is 6.0% on the first $7,000 of wages paid annually per employee. Most employers qualify for a credit of up to 5.4% for timely state unemployment tax payments, reducing their FUTA tax rate to 0.6%.

North Carolina Payroll Taxes

Employers in North Carolina must comply with state payroll taxes, including North Carolina Unemployment Insurance (NCUI) and state income tax withholding. NCUI is an employer-paid tax that provides temporary financial assistance to eligible unemployed individuals. The North Carolina Department of Commerce, Division of Employment Security (DES), administers this program.

Employer NCUI rates are determined by an experience rating system, based on factors like payroll and benefits charged. New employers start with a specific rate, while experienced employers’ rates fluctuate. For 2025, the taxable wage base for NCUI is $32,600 per employee. Experienced employer rates for 2025 range from 0.06% to 5.76%.

Employers must withhold North Carolina state income tax from employee wages. Employers deduct and remit this employee tax to the NC Department of Revenue (NCDOR). The withholding amount is based on information provided by the employee on their Form NC-4, Employee’s Withholding Allowance Certificate. North Carolina has a flat income tax rate, which simplifies the calculation for employers.

Determining Payroll Tax Amounts

Calculating payroll tax liability involves a systematic process for federal and state taxes. This begins with determining an employee’s gross wages. After determining gross wages, applicable FICA taxes are computed. The employee’s share of Social Security (6.2%) and Medicare (1.45%) is calculated and withheld from their pay.

The employer’s matching share of Social Security (6.2%) and Medicare (1.45%) is also calculated. For FUTA, the employer applies the 0.6% rate to the first $7,000 of annual wages. The NCUI tax is calculated using the employer’s assigned rate against the North Carolina taxable wage base, up to the annual limit of $32,600 for 2025.

North Carolina income tax withholding is determined based on the employee’s gross wages and the information provided on their Form NC-4. This cumulative calculation provides the total payroll tax cost for the employer and the net pay for the employee.

Meeting Payroll Tax Deadlines

After determining payroll tax amounts, employers must adhere to deadlines for depositing taxes and filing reports with federal and state agencies. Federal payroll tax deposits are made through the Electronic Federal Tax Payment System (EFTPS). Deposit frequency depends on the employer’s total tax liability during a “lookback period.”

Employers have federal reporting obligations. Form 941, Employer’s Quarterly Federal Tax Return, is filed quarterly to report federal income tax, Social Security, and Medicare taxes withheld from employee wages, as well as the employer’s share of FICA taxes. Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is filed annually to report FUTA tax liabilities. Employers also distribute Form W-2, Wage and Tax Statement, to each employee by January 31st of the following year, summarizing annual wages and withheld taxes.

For North Carolina payroll taxes, employers remit withheld state income tax and NCUI contributions to state agencies. NC income tax withholding payments are made online through the NCDOR’s website, with varying filing frequencies based on the amount withheld. Quarterly filers must submit Form NC-5 by the last day of the month following the end of the calendar quarter. NCUI contributions and wage reports are filed quarterly using Form NCUI-101, Employer’s Quarterly Tax and Wage Report, through the NC DES portal.