Employee Tax refers to the group of payroll taxes that constitute the total amount of funds an employer should withhold from wages of recruited personnel for social security tax and income tax. Employee tax is limited to expenses that are ordinary and necessary for a hired worker to carry out a particular profession. It is also the responsibility of a company’s accounts department to create the payroll and make necessary tax calculations regarding employee social security and corporate income.
Business organizations possessing employed staff are legally liable to withhold payroll taxes from employee wages and report about the amount of payroll taxes owed and paid. Usually business organizations are not obligated to withhold employee tax from salaries paid to independent contractors. In this regard, employee tax makes difference between employed personnel and independent contractors.
Non-profit organizations usually have some unique situations when addressing payroll and employee tax – all possible situations of non-profit payroll taxation are specific for every country and defined by existing legislation.