Burkland Brief:

  • Federal payroll taxes are mandatory and include Social Security, Medicare, FUTA, and income tax withholding.
  • Most states require additional payroll taxes like SUTA, paid leave, or workers’ comp.
  • Missing payroll tax deadlines can trigger steep penalties and even personal liability.
  • A payroll platform or professional partner can help you stay compliant and stress-free.

When you’re running a business, payroll taxes might not be high on your to-do list, but they should be. Payroll tax compliance is a legal obligation, and even small missteps can lead to expensive penalties, government audits, and unnecessary stress.

This guide will walk you through the basics of payroll tax responsibilities for small and mid-sized businesses and how to stay on the right side of IRS and state regulations.

📄Related Article: The Payroll Checklist Every Growing Business Needs

Start with the Basics: Employee or Contractor?

Before you get into the specifics of payroll taxes, make sure you’ve correctly classified everyone who works for your business. Are they W-2 employees or independent 1099 contractors? This distinction affects how you report wages, what taxes you owe, and your risk of audits or fines. This article focuses on payroll taxes for W-2 employees.

The Must-Pay Federal Payroll Taxes

Regardless of where your business operates, federal payroll taxes apply to all W-2 employees. Here’s what you’re responsible for:

Social Security Tax

  • 6.2% of employee wages up to the annual limit ($176,100 for 2025).
  • Employers must match this amount.

Medicare Tax

  • 1.45% on all employee wages.
  • Employers match this too.
  • For employees earning over $200,000, withhold an additional 0.9% (no employer match).

Federal Unemployment Tax (FUTA)

  • 6% on the first $7,000 of wages per employee.
  • Employers are solely responsible for this tax.
  • Most employers qualify for a 5.4% credit if they pay state unemployment taxes on time, lowering the rate to 0.6%.

Federal Income Tax Withholding

  • Based on employees’ W-4 forms.
  • You withhold and remit these taxes, but you don’t pay them out of pocket.

Federal payroll taxes must be calculated, withheld, and deposited with the IRS on a set schedule. We’ll cover that shortly.

State Payroll Taxes: Know the Rules Where You Hire

If you have employees in multiple states, you must register as an employer in each one. This step is critical for compliance and smooth payroll processing. Missing or delaying this step can result in fines, delayed payroll, and unhappy employees.

State requirements vary significantly based on location but often include:

State Unemployment Tax (SUTA)

  • Rates range by state and business type, typically between 0% and 14%. See Gusto’s state-by-state SUI tax rates.
  • Your rate may also depend on your unemployment claims history.

Disability & Paid Leave Contributions

  • States like California, New Jersey, and New York require employer and/or employee contributions to disability and paid family leave programs.
  • Rates are generally between 0.1% and 1% of wages.

Workers’ Compensation Insurance

  • Required in nearly every state.
  • This isn’t a payroll tax per se, but is often tied to payroll.
  • Premiums vary based on your industry and payroll size.

State-Specific Mandates

  • Some states also require payroll-based contributions to retirement savings, training funds, or sick leave programs.

Payroll Tax Deposit Deadlines

The IRS enforces strict timelines for payroll tax deposits, depending on how frequently you pay employees:

Semiweekly Payroll

  • If payday is Mon/Tue → deposit by Friday of the same week.
  • If payday is Wed/Thu/Fri → deposit by the following Wednesday.

Monthly Payroll

  • Deposit by the 15th of the following month.

Missing these deadlines can lead to penalties of 2% to 15%, plus interest.

Missed a Payment? Here’s What to Do

Mistakes happen—but the key is to act quickly. If you’ve fallen behind:

  1. File Any Missing Forms: Most importantly, Form 941 for each missed quarter.
  2. Set Up EFTPS: Use the Electronic Federal Tax Payment System for future deposits.
  3. Catch Up on Payments: Pay what you can, and work with the IRS to set up a payment plan if needed.

Late payroll taxes can trigger fines, legal action, and even personal liability for business owners, so don’t ignore it.

Don’t Tackle Payroll Taxes Alone

Payroll compliance is high-stakes and detail-heavy. Getting it wrong can cost you, but getting it right doesn’t have to be hard.

Here’s how to make it manageable:

  • Use a Payroll Platform: Tools like Gusto or Rippling automate calculations and filings.
  • Partner with an Expert: A dedicated payroll specialist can help you navigate state laws, deadlines, and benefit deductions.
  • Consider a PEO: A Professional Employer Organization like Justworks, TriNet and ADP can take payroll and compliance off your plate—just note that not all states support PEO registration.

Stay Focused on Growth, We’ll Handle Payroll

Payroll taxes are a critical part of running a compliant business, but you don’t have to figure it out alone. At Burkland, we help businesses like yours handle payroll with confidence, so you can focus on growing your company.

Need help with payroll compliance? Contact Burkland to learn more about our services.