Glossary · Payroll
Payroll liabilities
Payroll liabilities are the amounts an employer owes because it ran payroll but has not yet paid them over: income tax withheld from employees, the employee and employer shares of Social Security and Medicare or CPP and EI, unemployment taxes, and deductions such as retirement or benefit contributions. They sit on the balance sheet until remitted.
Glossary / Payroll liabilities
How it works
When you pay an employee, the net pay leaves the bank, but much of the gross pay does not. Withholdings are money you hold in trust for the government or a benefit provider. Employer taxes are an extra cost on top of wages. Both are recorded as liabilities until you deposit or remit them on the schedule your tax agency sets.
Late deposits bring penalties, and withheld amounts are treated strictly: in the US the trust fund recovery penalty can make responsible people personally liable, and in Canada directors can be liable for unremitted source deductions. Keeping a clear liability balance by agency and due date is the simplest protection.
Worked example: One US paycheck of $2,000
An employee earns $2,000. The employer withholds $180 federal income tax, $124 Social Security (6.2%) and $29 Medicare (1.45%), and pays net pay of $1,667. It also owes its own $124 Social Security and $29 Medicare, plus FUTA and state unemployment tax.
| Liability | Owed to | Amount |
|---|---|---|
| Federal income tax withheld | IRS | $180.00 |
| Social Security, employee + employer | IRS | $248.00 |
| Medicare, employee + employer | IRS | $58.00 |
| FUTA at 0.6% | IRS | $12.00 |
| Total federal deposit items | $498.00 |
In the US and in Canada
In the United States
Federal income tax, Social Security and Medicare are deposited on a monthly or semiweekly schedule set by your lookback period and reported quarterly on Form 941. FUTA is reported on Form 940.
In Canada
Income tax, CPP and EI are remitted to the CRA as source deductions on a schedule set by your average monthly withholding, reported on the PD7A remittance voucher.
In AcboBooks
Each paycheque in AcboBooks posts its withholdings and employer taxes to Payroll Liabilities. Pay Liabilities shows what is owed to each agency as of a date, with the period and due date, and paying it posts the remittance and clears the balance.
Related terms
Related on this site
Sources
- IRS Publication 15 (2026), Employer's Tax Guide
- CRA: CPP contribution rates, maximums and exemptions
- CRA: EI premium rates and maximums
Updated October 25, 2026. General information, not tax, legal or accounting advice. Rules and rates change; check with the IRS, the CRA, your state or province, or your accountant.
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