Payroll Tax Deduction Rates
in the U.S. and Canada

by L. Kenway BComm CPB Retired

Payroll tax deductions are mandatory for small business owners in the U.S. and Canada.

In this chat, I'll answer these two questions:

1. What is the employer's and employee's Social Security tax rate for 2019?
2. What are the CPP and EI rates for 2019?

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.

What is the U.S. employer's and employee's Social Security tax rate for 2019?

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

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:

1. Withholding the employee's social security tax from an employee's pay check;
2. Calculating the employer's social security tax;
3. Remitting the mandatory payroll tax deposit.
4. Submitting your quarterly employer return IRS Form 941.
5. Submitting IRS Form 4070 which is your monthly reporting of tips.

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.

What are the CPP (Canada Pension Plan) and EI (Employment Insurance) rates for 2019?

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.

Business owners (YOU) are responsible for:

1. Opening a payroll account with CRA;
2. Obtaining information from employees through the TD1 Form;
   
3. Withholding the employee's federal CPP contributions, EI premiums and income tax withholdings from an employee's pay cheque;
4. Withholding provincial medical premiums if you are based in BC, Alberta or Ontario;
5. Calculating the employer's share of payroll taxes;
6. Remitting the mandatory source deductions via PD7A Form each reporting period (assigned when you open your account with CRA);
   
7. Paying provincially administered workers compensation premiums;
8. Issuing T4 and T4A slips annually; and
   
9. Submitting your annual information returns to CRA for T4 and T4A slips issued.

Find historical rates and commentary on these payroll tax deductions.

Bookkeeping Essentials › Payroll Tax Deductions in U.S. and Canada