Payroll tax credits will decrease the amount of payroll taxes that a business owes. Payroll taxes that are imposed on employers and employees include income tax, Social Security, and Medicare taxes.
Small business payroll tax credits will reduce the amount that employers contribute to such taxes. Employers and employees normally split responsibility equally for social security taxes, which total 12.4 percent of employee earnings.
Certain payroll tax credits can reduce or even eliminate an employer’s share of these taxes. Tax credits may include nonrefundable tax credits that allow businesses to reduce their tax bills up to the amount they owe or refundable tax credits that allow businesses to receive refunds if credits exceed the amount they owe.
The IRS lists tax credits for both individuals and businesses. If a business is eligible for more than one credit, it will have to file a Form 3800, General Business Credit, on which each of the credits will be added up to calculate the total value of all tax credits.