Filing payroll taxes means withholding the right amounts from employee paychecks, depositing those taxes with the IRS on schedule, and submitting quarterly or annual returns that report what you withheld and paid. The process has several moving parts, but each one follows a predictable cycle once you understand the forms, deadlines, and deposit rules involved.
What Payroll Taxes You’re Responsible For
As an employer, you handle two categories of payroll taxes: ones you share with your employees and ones you pay entirely on your own.
Social Security and Medicare taxes (collectively called FICA) are split evenly between you and each employee. For 2026, the Social Security tax rate is 6.2% from the employee and 6.2% from you, applied to wages up to $184,500. Medicare tax is 1.45% from each side with no wage cap. Employees earning over $200,000 in a calendar year also owe an additional 0.9% Medicare tax, which you withhold but don’t match.
Federal income tax is withheld entirely from the employee’s pay based on the W-4 they filled out when hired. You don’t contribute to this, but you are responsible for calculating the correct withholding and sending it to the IRS.
Federal unemployment tax (FUTA) is paid solely by employers. The standard FUTA rate is 6.0% on the first $7,000 of each employee’s annual wages, though most employers receive a credit that brings the effective rate down to 0.6%. You also owe state unemployment taxes, which vary by state and are filed separately.
Setting Up Before Your First Filing
Before you can deposit or file anything, you need an Employer Identification Number (EIN). You can apply for one online through the IRS website and receive it immediately. Every payroll tax form and every deposit you make will reference this number.
You also need to register with your state’s tax and labor agencies for state income tax withholding and unemployment insurance. Each state has its own registration process, rates, and filing calendar.
Finally, collect a completed Form W-4 from every employee. The information on that form, including filing status and any adjustments, determines how much federal income tax you withhold each pay period. Keep these on file; you don’t send them to the IRS, but you need them to run payroll correctly.
Calculating Withholding Each Pay Period
Every time you run payroll, you calculate three withholdings from each employee’s gross pay: federal income tax, Social Security tax, and Medicare tax. You then calculate your employer-side match for Social Security and Medicare.
For federal income tax, the IRS publishes withholding tables in Publication 15 (also called Circular E) that correspond to the employee’s W-4 information. Payroll software automates this lookup, but if you’re doing it manually, the publication walks through the calculation step by step. The amount withheld changes based on pay frequency (weekly, biweekly, semimonthly, or monthly) and the employee’s W-4 elections.
Social Security and Medicare withholding is more straightforward: multiply the employee’s gross wages by 6.2% for Social Security and 1.45% for Medicare, then set aside the same amounts as your employer contribution. Once an employee’s cumulative wages for the year exceed $184,500, stop withholding Social Security tax for that employee. Medicare has no cap.
Depositing Taxes With the IRS
Withholding taxes from paychecks is only half the job. You must deposit those taxes, along with your employer share, with the IRS according to a set schedule. Nearly all employers are required to make deposits electronically through the Electronic Federal Tax Payment System (EFTPS). You can enroll at eftps.gov, and enrollment takes about a week to process, so set this up well before your first payroll.
The IRS assigns you either a monthly or semiweekly deposit schedule based on how much tax you reported during a lookback period (generally the 12 months ending the previous June 30). Smaller employers typically land on the monthly schedule, where deposits are due by the 15th of the following month. Larger employers fall on the semiweekly schedule, where deposits are due within a few days of each payday. If your total accumulated tax liability hits $100,000 or more on any single day, you must deposit by the next business day regardless of your normal schedule.
FUTA deposits follow a different rule. If your FUTA liability exceeds $500 in any quarter, you must deposit it by the last day of the month following that quarter. If it’s $500 or less, carry it forward to the next quarter.
Filing Form 941 (Quarterly)
Most employers file Form 941 four times a year. This form reports total wages paid, federal income tax withheld, and both the employee and employer shares of Social Security and Medicare taxes for the quarter. It also reconciles what you owed against what you already deposited, so the IRS can confirm your deposits matched your liability.
The due dates are April 30, July 31, October 31, and January 31, covering the first through fourth quarters respectively. If you deposited all taxes on time and in full, you get an extra 10 days to file.
Each 941 requires you to list the total number of employees, total wages, total taxes withheld, and total deposits made. The math should result in a zero balance if your deposits were correct. If there’s a small discrepancy, you can adjust it on the next quarter’s return. Larger discrepancies may require a separate correction form (Form 941-X).
Form 944 for Very Small Employers
If your total annual liability for Social Security, Medicare, and federal income tax withholding is $1,000 or less, the IRS may notify you that you qualify to file Form 944 instead. This form covers the same information as Form 941 but is filed once a year rather than quarterly. You can’t simply choose to use it; the IRS must designate you as a Form 944 filer.
Filing Form 940 (Annual)
Form 940 reports your federal unemployment tax for the entire year. It’s due by January 31 of the following year. On this form, you report total wages paid to all employees, identify which wages were exempt from FUTA, and calculate your tax. You also report any FUTA deposits you already made during the year and reconcile the balance.
Because FUTA only applies to the first $7,000 of each employee’s wages, your liability decreases as employees hit that cap throughout the year. Many employers find their FUTA deposits are concentrated in the first and second quarters.
Year-End Reporting: W-2s and W-3s
At the end of each year, you must prepare a Form W-2 for every employee showing their total wages and the taxes withheld during the year. For the 2026 tax year, you must furnish W-2 copies to employees by February 1, 2027. That same date is the deadline for filing all W-2s and the accompanying transmittal form (W-3) with the Social Security Administration, whether you file on paper or electronically.
The SSA requires electronic filing if you’re submitting 10 or more W-2s. You can file electronically through the SSA’s Business Services Online portal. The W-3 is essentially a summary that totals all the individual W-2s you’re submitting.
Getting W-2s right matters because employees use them to file their personal tax returns. Errors mean filing corrected W-2c forms, which creates extra work for you and your employees.
State Payroll Tax Filings
Federal filings are only part of the picture. Most states require you to withhold state income tax from employee paychecks and remit it on a schedule similar to the federal system. You’ll also file state unemployment insurance returns, typically on a quarterly basis. Each state sets its own rates, wage bases, forms, and deadlines, so check with your state’s department of revenue and department of labor for specifics.
Some states and localities also impose additional payroll-related taxes, such as disability insurance contributions or local income taxes. These vary widely and may require separate registrations and filings.
Penalties for Late Deposits and Filings
The IRS takes payroll tax deadlines seriously. Late deposits trigger penalties that escalate based on how late they are: 2% for deposits one to five days late, 5% for six to 15 days late, 10% for more than 15 days late, and 15% if the tax remains unpaid 10 days after the IRS issues a demand notice. Interest accrues on top of these penalties.
Late filing carries separate penalties, and failing to file W-2s on time can result in per-form penalties that add up quickly with a larger workforce. The simplest way to avoid all of this is to set calendar reminders for every deposit and filing deadline, or use payroll software that handles the timing automatically.
Using Payroll Software or a Service
Many small employers handle payroll taxes through dedicated software or a payroll service provider. These tools calculate withholding each pay period, make deposits through EFTPS on your behalf, generate and file Forms 941 and 940, and produce W-2s at year end. Costs typically range from $40 to $150 per month plus a per-employee fee.
Even if you outsource the mechanics, you remain legally responsible for accurate and timely filings. If a payroll provider makes an error or misses a deposit, the IRS holds you accountable, not the provider. Review your payroll reports regularly to verify that withholdings, deposits, and filings match your records.