Payroll Tax Filing
Payroll tax filing is the employer's job of calculating payroll taxes each pay run, depositing the money with tax agencies on a set schedule, and filing returns that report wages and taxes. At the federal level that means deposits plus Form 941 each quarter, Form 940 each year, and Forms W-2 and W-3 each January.
Filing has two parts that people often mix up. Deposits move the money: income tax withheld from employees, both halves of Social Security and Medicare, and federal unemployment tax. Returns report the totals and reconcile them against what was deposited. A company can deposit every dollar on time and still be penalized for a late return, or the reverse.
How payroll tax filing works
- 1Calculate each pay run. Withhold federal income tax, 6.2% Social Security and 1.45% Medicare from employees, and add the employer's matching 6.2% and 1.45%. For 2026, Social Security applies to the first $184,500 of wages (IRS Publication 15).
- 2Deposit on schedule. An employer that reported $50,000 or less of these taxes in its lookback period deposits monthly, by the 15th of the next month. Above $50,000, it deposits semiweekly (IRS Topic 757). Deposits of $100,000 or more accumulated on one day are due the next business day (IRS due dates).
- 3File Form 941 quarterly by April 30, July 31, October 31 and January 31 (IRS due dates).
- 4Handle federal unemployment (FUTA). The rate is 6.0% of the first $7,000 per employee, reduced to 0.6% with the full 5.4% state credit. Report it on Form 940, due January 31 (IRS Topic 759).
- 5Issue W-2s and file W-3. Employees get Forms W-2 and the SSA gets Forms W-2 and W-3 by January 31 (IRS due dates).
- 6Repeat for each state and locality. State income tax withholding, state unemployment insurance and local taxes each have their own accounts, rates and deadlines.
Most payroll software calculates, deposits and files on the employer's behalf. The employer remains responsible if the provider misses a deadline, so it is worth checking the deposit confirmations.
Example
Illustration: a three-person company pays $12,000 in gross wages each month, all below the Social Security wage base, and withholds $1,200 of federal income tax (the amount depends on each employee's W-4).
| Item | Calculation | Monthly amount |
|---|---|---|
| Federal income tax withheld | From W-4s (illustrative) | $1,200.00 |
| Social Security, employee + employer | $12,000 x 6.2% x 2 | $1,488.00 |
| Medicare, employee + employer | $12,000 x 1.45% x 2 | $348.00 |
| Total 941 deposit | $3,036.00 |
Over a year that is $36,432 of 941 taxes, under the $50,000 lookback threshold, so the company is a monthly depositor: January's $3,036 is due February 15. FUTA is 3 employees x $7,000 x 0.6% = $126 for the year. Because that stays under the $500 threshold, no quarterly FUTA deposit is needed; the liability carries forward to Form 940 (IRS Topic 759).
Related terms
- Payroll run: the process that produces the tax amounts each period.
- Payroll register: the per-run report that the tax totals come from.
- Payroll compliance: the wider set of pay rules around filing.
- Gross pay: the starting figure for every tax calculation.
- Payroll software compliance checklist: guide to what a payroll tool should handle.
Common mistakes
- Using the wrong deposit schedule. The schedule depends on the lookback period, not on how often you pay people. A growing company can cross $50,000 and become a semiweekly depositor without noticing.
- Treating deposits as filing. Paying the tax doesn't file Form 941. Both are required.
- Forgetting new state accounts. Hiring a remote employee in a new state usually means registering for that state's withholding and unemployment accounts before the first pay run.
- Not reconciling before year-end. If the four 941s don't add up to the W-3 totals, the SSA and IRS will send notices. Reconcile each quarter.
- Missing the wage base cap. Continuing to withhold Social Security above the annual wage base over-withholds from high earners.
Sources
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