Payroll tax is the tax owed on wages paid to employees, split between amounts withheld from the employee's paycheck and additional amounts the employer owes on top of it, covering Social Security, Medicare, and unemployment insurance.
The employer side, mainly the employer's matching share of Social Security and Medicare (commonly cited as roughly 7.65% of wages), is a real cost on top of an employee's stated salary, not something absorbed into it. That's exactly the extra cost that doesn't apply to a 1099 contractor, which is part of why worker classification affects the total cost of a hire, not just the paperwork.
Payroll tax also matters for the R&D tax credit specifically: a pre-revenue or early-revenue startup that doesn't yet owe income tax can apply up to $500,000 of the credit against payroll tax instead, which is often the only way an early-stage company sees real value from the credit in its first few years.
Prepared by the same team that keeps your books, with credits you may already be owed caught along the way. Built by founders, investors, CPAs and startup people.