So your employer did not lie to you. Payroll taxes are higher the 1st few months of the year because of SUTA/FUTA. Tax is paid at 6.2% on the 1st $7,000. However, the employer pays this tax not the employee. Social Security however has a limit of $128,400. If your gross wages are higher than that, then your tax rate will decrease once it has reached that limit. Your income tax withholding only changes if you change the number of exemptions. But your employer did not lie to you. They just didn't give you a complete response.
- Social Security tax makes up one half of FICA (Federal Insurance Contributions Act). The tax rate for Social Security during 2018 was 6.2 percent of each employee’s salary, with the employer paying a matching amount. Both the employer and employee are only responsible for a limited amount of Social Security tax. This amount is paid for anything earned up to a wage base of $128,400 for the year 2018.
- In addition to the payroll taxes listed above, employers must pay an unemployment tax for each individual that works at the company. This is called State and Federal Unemployment Taxes (SUTA and FUTA). The tax rate for FUTA is 6.0 percent, and it's applied to the first $7,000 paid in wages to each employee during the year. Employers who pay their SUTA on a timely basis receive an offset credit of up to 5.4 percent. SUTA taxes vary by state.
