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.
2023 W2 Deadline - Friday, January 31, 2024
2023 T4 Deadline - Friday, February 29, 2024
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
2024 FICA | EE Rate | ER Rate | EE+ER Rate | Wage Base Limit | Maximum Tax |
---|---|---|---|---|---|
Social Security | 6.2% | 6.2% | 12.4%* | $168,600 | $10,453.20 EE $10,453.20 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:
2024 Rates to be released in November 2023. The contribution rate increased to 5.95 % due CPP Enhancement which began implementation on January 1, 2019.
CPP Rates | 2024 |
---|---|
Employee Contribution Rate | 5.95% |
Employer Contribution Rate | 5.95% |
Basic Exemption | $3,500 |
Maximum Pensionable Earnings | $68,500 |
Maximum Contribution | $3,867.50 |
Maximum Monthly Contribution | $322.29 |
EI Rates | 2024 |
---|---|
Employee Contribution Rate | 1.66% |
Employer Contribution Rate | 2.32% |
Maximum Insurable Earnings | $63,200 |
Maximum Contribution | $1,049.12 |
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:
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