Payroll tax deductions are mandatory for small business owners in the U.S. and Canada.
In this chat, I'll answer these two questions:
Enjoy a cup of tea while you browse through these rates. I've put together a chart to show you the comparable payroll tax components between the U.S. and Canada.
2020 W2 Deadline - Friday, January 31, 2020
2020 T4 Deadline - Friday, February 28, 2020
Canada |
U.S. | |
Payroll Tax
|
Canada Pension Plan (CPP) |
Social Security Tax (SST)* |
Medicare
|
Provincial Health Insurance |
Hospital Insurance (HI)* |
UnEmployment Insurance
|
Employment Insurance (EI) |
Federal Unemployment Tax Act (FUTA) |
*SST and HI together are known as FICA |
A history of FICA & SECA rates from 1937 to present can be found at https://www.ssa.gov/OACT/ProgData/taxRates.html
EE = employee's portion of FICA, ER = employer's portion of FICA
2019 FICA | EE Rate | ER Rate | EE+ER Rate | Wage Base Limit | Maximum Tax |
---|---|---|---|---|---|
Social Security | 6.2% | 6.2% | 12.4%* | $132,900 | $8,239.80 EE $8,239.40 ER |
Medicare | 1.45% | 1.45% | 2.9% | $200,000 | $2,900 EE $2,900 ER |
Medicare | 2.35% | 1.45% | 3.8% | over $200,000 | no limit |
You may want to read the US Small Business Administration article by Barbara Weltman titled 5 Payroll Tax Mistakes to Avoid. It discusses best protection strategies for:
FICA (Federal Insurance Contributions Act) establishes two taxes on self-employed workers, employers, and employees.
✔ The first employee payroll tax known as the Social Security tax is for Old Age, Survivors and Disability Insurance (OASDI).
✔ The second employee payroll tax known as the Medicare tax is for Hospital Insurance (HI).
Business owners (YOU) are responsible for:
Find historical rates and commentary on these employee payroll tax deductions.
You can attend a free webinar by the SBA (U.S. Small Business Administration) on the Affordable Care Act to learn the basics and what it means for you as an employer.
2020 Rates to be released in November 2019. The contribution rate increased from 4.95% to 5.10 % due the CPP Enhancement which will be implemented on January 1, 2019.
CPP Rates | 2019 |
---|---|
Employee Contribution Rate | 5.10% |
Employer Contribution Rate | 5.1% |
Basic Exemption | $3,500 |
Maximum Pensionable Earnings | $57,400 |
Maximum Contribution | $2,748.90 |
Maximum Monthly Contribution | $229.08 |
EI Rates | 2019 |
---|---|
Employee Contribution Rate | 1.62% |
Employer Contribution Rate | 2.268% |
Maximum Insurable Earnings | $53,100 |
Maximum Contribution | $860.22 |
*small business job credit announced September 12, 2014 which is different than the hiring credit
CRA (Canada Revenue Agency) and Social Development Canada share administration responsibilities of payroll taxes on self-employed individuals, employers, and employees.
✔ Canada Pension Plan (CPP) contributions are shared by employers and
employees. Self-employed individuals pay both the employee and employer
portions.
✔ Employment Insurance (EI) premiums are shared by
employers and employees and set by The Canada Employment Insurance Finance Board (CEIFB). Self-employed individuals do not
pay EI premiums unless they have opted into the volunteer EI program.
✔ Medical premiums are administered provincially.
PaySavvy's article by James Plett titled 5 Costly Payroll Mistakes to Avoid discusses:
Business owners (YOU) are responsible for:
Find historical rates and commentary on these payroll tax deductions.
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