Filing employee payroll taxes is important for any small business with employees. Here's how to do it.
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, pay the taxes to the IRS, create reports on the taxes paid, and file payroll tax reports.
Steps for filing employee payroll taxes
Step 1: Complete and submit IRS Form 941 (Employer's Quarterly Income Tax Return) or IRS Form 943 (Employer's Annual Federal Tax Return for Agriculture Employees).
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 January 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, October 31 and January 31.
Step 2: Complete and submit IRS Form 940 for Federal Unemployment Tax (FUTA).
Employers must pay the FUTA tax if they either pay $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 January 31.
The employer must calculate the FUTA tax owed each quarter and 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.
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Step 3: Register for the Electronic Federal Tax Payment System (EFTPS).
All employers must make their tax payments using EFTPS (i.e., 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, as well as a business bank account and routing numbers 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.
Step 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 visiting eftps.gov:
- Click on "Make a payment."
- Enter the EIN, PIN and password.
- 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). Make EFTPS payments no later than 8:00 p.m. EST the day before payment is due to receive credit for paying taxes due on time.
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 frequency you're required to remit taxes depends on the total payroll taxes owed. Employers with a few employees and a small payroll tax liability pay taxes monthly. Larger companies with a larger payroll tax liability pay these taxes semiweekly.
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 February 15 (or the next business day).
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 who 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 tax 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 January 31:
- Form 940, Employer's Annual Federal Unemployment (FUTA) tax return
- Form 941, Employer's Quarterly Federal Tax Return (as well as April 30, July 31 and October 31)
- Form 943, Employer's Annual Federal Tax Return for Agricultural Employees
- Form 944, Employer's Annual Federal Tax Return
- Form 945, Annual Return of Withheld Federal Income Tax
- Form W-2, Wage and Tax Statement
- Form 1099, Miscellaneous Income
Employers must file the following reports by February 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
- Electronic Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips
Payroll processing software
There are many different payroll processing software programs and applications available to businesses. Below are five popular payroll software solutions.
Paychex is a cloud-hosted, full-featured payroll service that enables large businesses to manage their payroll processing and tax obligations. It supports flexible payroll schedules, with weekly, biweekly, semimonthly and monthly options. It can manage full-time employees, part-time W-2 workers, 1099 contractors and freelancers. Paychex supports multiple payment methods (e.g., direct deposit, paper checks, prepaid debit cards) that can be branded with your company's logo. Its mobile app supports payroll management on iOS and Android devices. Employees can view their own pay stubs and year-end tax documents. Paychex also offers three pricing plans to meet the needs of different-sized businesses.
Intuit QuickBooks Payroll
Intuit QuickBooks Payroll is ideal for smaller businesses, as it provides scalable payroll services, collects and reports payroll taxes, and offers various tools and features. All plans integrate with QuickBooks software and are available for a 30-day free trial. The service offers three levels of plans and pricing for both the Online Payroll and Desktop Payroll plans.
Rippling is an online payroll software solution with a user-friendly interface. It works with more than 400 applications to payroll processing, payroll tax preparation and accounting. Payroll processing can be run within 90 seconds, and the software automatically deducts tax withholdings based on the employee's tax status. Its dashboard includes key metrics (e.g., time worked per employee, paid time off, total labor expenses). Rippling supports both direct deposit and paper checks.
OnPay is a user-friendly, online payroll software program that enables businesses to run an unlimited number of monthly payrolls each month. It supports both direct deposit and paper checks. The service includes a payroll tax and benefits deduction withholding system, payroll tax preparation, and tracking of up-to-date forms. The company recently updated its reporting features, enabling the creation of custom expense reports. OnPay has one pricing plan for all businesses and charges a fee to mail year-end tax forms. The company will cover the cost of fines that arise due to filing or payment errors.
ADP offers a scalable payroll processing platform that supports businesses with complex needs (e.g., highly regulated industries, cross-state and cross-national borders). It offers payroll platforms for businesses of different sizes and needs, as well as four pricing plans. Its most basic plan includes an employee self-service portal, support for direct deposit payments, prepaid debit cards and paper checks and HR tools. ADP supports payroll processing on desktop and mobile devices and will automate various payroll tasks. It can also integrate with other services (e.g., time and attendance software).