How to File Employee Payroll Taxes

What are employee payroll taxes?

As an employer, you must report your business’s taxable income and pay federal taxes related to your employees. These taxes include federal income tax withholding, Social Security tax, Medicare tax and unemployment taxes. Each federal tax has its own payment deadlines and forms to send to the IRS. Employers must withhold and collect payroll taxes; they must also pay the taxes to the IRS, create reports on the taxes paid and file payroll tax reports.

“Let’s face it: No one starts a business dreaming of payroll taxes,” said Kraig Kleeman, founder and CEO of The New Workforce. “But here we are. It’s one of those things every business owner has to deal with. And, while it may not be exciting, it’s certainly important.”

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Steps for filing employee payroll taxes

Managing employee payroll taxes is a critical responsibility for employers. Staying compliant with federal regulations involves completing specific forms. Not only that, it also involves making timely payments and adhering to a strict reporting schedule. “I’ve worked with enough small business owners to know: Payroll taxes can be like a giant puzzle,” said Kleeman. “But the good news? After you have understood the different steps, it is not as complicated as it seems. So, let’s break it down step by step and make it manageable.”

Kleeman explained that in order to start filing employee payroll taxes, you first need to understand what to track. “Payroll taxes include federal income tax, Social Security, Medicare and sometimes additional taxes such as unemployment (FUTA),” Kleeman said. “As an employer, you are responsible for withholding taxes from your employees’ wages and submitting them to the IRS. It sounds simple, but the process can be complicated if you don’t have a plan in place.

Below is a step-by-step guide to help you navigate the process.

1. Complete and submit IRS Form 941 (Employer’s Quarterly Income Tax Return) or IRS Form 943 (Employer’s Annual Federal Tax Return for Agricultural Employees).

“This is where the paperwork comes in,” Kleeman told business.com. “For most businesses, you’ll need to file IRS Form 941 quarterly. This form reports the wages, withholding taxes, and Social Security and Medicare contributions that you and your employees share.”

Fill in Form 941 once per quarter to report employees’ wages and tips. Calculate the federal income tax, Social Security tax and Medicare taxes to withhold and submit to the IRS. Use this form to account for other types of payments (e.g., COBRA health insurance continuation assistance). Form 943 is due by Jan. 31 of the year after you paid wages to your workers.

Submit the form before the last day of the month after the end of each quarter: April 30, July 31, Oct. 31 and Jan. 31.

2. Complete and submit IRS Form 940 for Federal Unemployment Tax (FUTA).

Employers must pay FUTA under two circumstances: if they paid $1,500 or more in employee wages during any calendar quarter of the previous year. Or, if they have at least one employee who worked 20 or more weeks. Use Form 940 to submit the tax owed for the year by Jan. 31.

The employer must calculate the FUTA amount owed each quarter. They then must submit payment when the cumulative annual amount reaches $500. If the employer owes less than $500 after one quarter, they can carry it forward to the next quarter until they reach the $500 threshold.

3. Register for the Electronic Federal Tax Payment System (EFTPS).

“Any employer who is required to submit federal payroll taxes — including income taxes, Social Security and Medicare taxes — must register for the Electronic Federal Tax Payment System (EFTPS),” said Max Shak, CEO and founder at Zapiy. “This system allows businesses to make electronic payments to the IRS and ensures compliance with deadlines. Registration is free and should be done as soon as you have employees. And, it’s essential for businesses that are required to deposit taxes rather than pay them quarterly.”

All employers must make their tax payments using EFTPS — mailing checks is not allowed. If the IRS has not automatically enrolled the employer in EFTPS, the employer can visit eftps.gov to create a new account. (Select Enroll, then click the box marked Business.)

Registration for EFTPS requires an employer identification number. It also requires a business bank account and routing number from which to make payments. Employers must enroll at least two weeks before the payment deadline, as it takes two weeks to receive a PIN to access EFTPS.

4. Submit tax payments.

Use EFTPS to pay employee income tax, Social Security tax, Medicare taxes and unemployment taxes as calculated on Forms 940, 941 and 943. When you visit eftps.gov, follow these steps:

1. Click “Make a payment”
2. Enter the EIN, PIN and password
3. Make the payment

The payment will be debited from the employer’s bank account and submitted to the IRS. Upon making the payment, the employer receives a tracking number. (Retain this information for your records.) To receive credit for paying taxes on time, make EFTPS payments no later than 8 p.m. ET the day before payment is due. “It’s essential to meet these deadlines, as late payments can result in penalties and interest. My advice? Schedule reminders or automate payments if you can,” said Kleeman.

When should employee payroll taxes be paid to the IRS?

Employers must collect and pay payroll taxes to the IRS either semiweekly or monthly; the required frequency depends on the total payroll taxes owed. Employers with a few employees and a small payroll tax liability pay taxes monthly. Larger companies with larger payroll tax liabilities pay these taxes semiweekly. “For example: If your business owes more than $50,000 in payroll taxes in the previous year, you’ll likely be on a semiweekly deposit schedule, meaning you need to submit deposits within three days of payroll,” explained Shak.

When to make payroll tax deposits

Employers must make monthly deposits by the 15th day of the month after the month employees were paid. For example, for employees who were paid in January, the employer must make a deposit before Feb. 15 (or the next business day).

“It can be a hassle to make regular deposits, but they are not negotiable,” Kleeman said. “Think of them as a way to stay ahead of the curve. Waiting too long or skipping payments can lead to more serious problems later. A small business owner I worked with missed a payroll tax deposit by a few days and it turned into a nightmare of penalties and additional paperwork. This is a mistake you should definitely avoid.”

Employers must use the following schedule when making semiweekly deposits:

• For payrolls paid from Saturday to Tuesday, tax payments must be made by the following Friday.
• For payrolls paid from Wednesday to Friday, tax payments must be made by the following Wednesday.

Employers that have a payroll tax obligation of at least $100,000 must make a payroll tax deposit by the next day. The employer must also continue making next-day deposits for the remainder of the year and the following year.

Employers must submit Form 941 payroll tax reports at the end of the month following the end of each quarter. If payroll tax deposits are paid in full and on time, Form 941 can be submitted by the 10th of the following month. If the employer’s tax liability is greater than $500, they must submit federal unemployment tax deposits by the end of the month after each quarter.

Employers must submit their FUTA report and tax deposit for the previous year by the end of January. If tax deposits are current and paid in full, the deadline for payment is the 10th of the next month.

Reporting due dates

Employers must file the following reports by Jan. 31:

• Form 940, Employer’s Annual Federal Unemployment Tax Return
• Form 941, Employer’s Quarterly Federal Tax Return (as well as April 30, July 31 and Oct. 31)
• Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
• Form 944, Employer’s Annual Federal Tax Return (or, if all taxes were paid when due, this can be filed before Feb. 10)
• Form 945, Annual Return of Withheld Federal Income Tax
• Form W-2, Wage and Tax Statement

Employers must file the following reports by Feb. 28:

• Copy A of paper Form 1099, with Form 1096, Annual Summary and Transmittal of U.S. Information Returns
• Paper Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips

Employers must file the following reports by March 31:

• Form 1099, Miscellaneous Income (if filing electronically; Feb. 28 if filing on paper)
• Electronic Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips

“The IRS imposes penalties if businesses fail to make these deposits on time, which is why following the tax schedule is critical,” Shak said. “The same applies to electronic payments — delays can also lead to additional fines.”

Mastering payroll tax compliance

Filing and paying employee payroll taxes is a critical part of running a business and staying compliant with federal regulations. By understanding the forms, protocols and payment processes involved, employers can avoid costly penalties and ensure smooth operations. “It may not be fun, but it is manageable,” said Kleeman. “By staying organized, meeting deadlines and using tools like EFTPS, you can take the stress out of the process.”

Regularly reviewing payroll obligations, keeping accurate records and adhering to IRS schedules will help you meet your responsibilities with confidence. With the right tools and knowledge, managing payroll taxes can become a seamless part of your business routine.

Amanda Clark and Jennifer Dublino contributed to this article.