Payroll Taxes: What Employers Owe (2026 Rates)
Last updated: 2026-03-27
Summary:Employers owe 6.2% for Social Security (on wages up to $176,100) and 1.45% for Medicare (no cap) on every employee's wages, matching what the employee pays. Add FUTA at an effective rate of 0.6% on the first $7,000 per employee, plus your state unemployment tax (SUTA), which varies by state and employer experience rating. Federal payroll taxes must be deposited either monthly or semi-weekly depending on your total tax liability. File Form 941 quarterly and Form 940 annually. Penalties for late deposits range from 2% to 15% of the unpaid amount, and the IRS can hold business owners personally liable for unpaid trust fund taxes.
Free Calculator: Use our Payroll Cost Calculator to estimate total employer costs including FICA, FUTA, SUTA, and workers comp for any state.
What federal payroll taxes do employers owe?
Federal payroll taxes fund Social Security, Medicare, and unemployment insurance. Every employer with W-2 employees owes these taxes. The rates below are current for 2026.
| Tax | Employer Rate | Employee Rate | Wage Base | Notes |
|---|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | $176,100 (2026) | Combined 12.4%. Employer and employee each pay half. No tax on earnings above the wage base. The wage base increases annually based on the national average wage index (was $168,600 in 2024, $176,100 in 2025 and 2026). |
| Medicare (HI) | 1.45% | 1.45% | No limit | Combined 2.9%. No wage cap. Applies to all earnings. These rates have been unchanged since 1986. |
| Additional Medicare Tax | None | 0.9% | Over $200,000 | Employee-only tax (ACA, effective 2013). Employer must withhold once wages exceed $200K but does not match. Threshold is $200K single / $250K MFJ / $125K married filing separately. Not indexed for inflation. |
| FUTA (Federal Unemployment) | 6.0% (0.6% effective) | None | $7,000 per employee | Employer-only tax. The 6% gross rate is reduced by up to 5.4% SUTA credit for timely state UI payments, making the effective rate 0.6% ($42/employee/year). The $7,000 wage base has not changed since 1983. |
Cost example:For an employee earning $60,000/year, the employer pays $3,720 in Social Security tax (6.2% x $60,000), $870 in Medicare tax (1.45% x $60,000), and $42 in FUTA (0.6% x $7,000) — totaling $4,632 in federal payroll taxes per year, or about 7.7% on top of the employee's salary.
What state payroll taxes do employers owe?
State Unemployment Tax (SUTA)
Every state charges employers a state unemployment insurance (SUI/SUTA) tax. Rates and wage bases vary significantly by state. Rates typically range from 0.5% to 8%+ of taxable wages, and wage bases range from $7,000 (same as FUTA, in states like Arizona, California, and Florida) to over $60,000 (in states like Washington and Alaska).
How experience rating works
Your SUTA rate is not fixed — it changes over time based on your experience rating. Here is how it works:
- •New employer rate:When you first register as an employer, you receive a default "new employer" rate set by your state (commonly 2.7% to 3.4%, though it varies).
- •Claims history: Each time a former employee files an unemployment claim that is charged to your account, your experience rating worsens.
- •Rate adjustment: States recalculate your rate annually (usually in the fall for the following year). Employers with fewer claims get lower rates; employers with more claims get higher rates.
- •Voluntary contributions:Some states allow employers to make a voluntary contribution to their unemployment account to reduce their rate — this can be cost-effective if it drops you to a lower rate tier.
State income tax withholding
41 states plus DC levy a state income tax that employers must withhold from employee paychecks. Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Each state has its own withholding tables, forms, deposit schedules, and filing deadlines.
Other state and local payroll taxes
Some states and localities impose additional employer payroll taxes beyond SUTA and income tax withholding:
- •State disability insurance (SDI): California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico
- •Paid family and medical leave: Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Washington, DC
- •Transit/transportation taxes: Oregon (Statewide Transit Tax), various metro areas
- •Local payroll/earnings taxes: New York City, Philadelphia, San Francisco, St. Louis, Columbus, and others
When must employers deposit payroll taxes?
The IRS assigns each employer a federal tax deposit schedule based on the total payroll tax liability during a "lookback period" (the 12 months ending June 30 of the prior year). There are two schedules:
Monthly Depositor
If you reported $50,000 or less in payroll taxes during the lookback period.
- •Deposit taxes by the 15th of the following month
- •Example: January payroll taxes are due by February 15
- •Most small businesses fall into this category
Semi-Weekly Depositor
If you reported more than $50,000 in payroll taxes during the lookback period.
- •Wed/Thu/Fri paydays: deposit by the following Wednesday
- •Sat/Sun/Mon/Tue paydays: deposit by the following Friday
- •Larger employers with higher payroll volume
$100,000 next-day deposit rule: If you accumulate $100,000 or more in undeposited payroll taxes on any day, you must deposit the entire amount by the next business day. This applies regardless of your regular deposit schedule. Triggering this rule also makes you a semi-weekly depositor for the rest of the year and the following year.
Safe harbor for small shortfalls:If your deposit is short by the greater of $100 or 2% of the required amount, the IRS will not impose a penalty as long as you deposit the shortfall by the applicable "make-up" date. For monthly depositors, the make-up date is the due date of Form 941. For semi-weekly depositors, it is the first Wednesday or Friday (whichever comes first) following the 15th of the month after the month in which the shortfall occurred.
All federal payroll tax deposits must be made electronically through EFTPS (Electronic Federal Tax Payment System). Paper checks are not accepted. You must enroll in EFTPS before you can make deposits — enrollment takes 5-7 business days, so do this well before your first deposit is due. Most payroll services handle deposits automatically through their own EFTPS enrollment.
What are the payroll tax filing deadlines?
| Form | Frequency | Deadline | Purpose |
|---|---|---|---|
| Form 941 | Quarterly | April 30, July 31, October 31, January 31 | Report federal income tax withheld, Social Security, and Medicare taxes |
| Form 944 | Annual | January 31 | Alternative to 941 for very small employers ($1,000 or less in annual tax liability). IRS must approve use. |
| Form 940 | Annual | January 31 (February 10 if all FUTA taxes deposited on time) | Report and pay federal unemployment tax (FUTA) |
| Form W-2 / W-3 | Annual | January 31 (to employees and SSA) | Report annual wages and taxes withheld to employees and Social Security Administration |
| State unemployment returns | Quarterly (most states) | Varies by state (typically end of month following quarter) | Report wages and pay SUTA taxes to state workforce agency |
If a filing deadline falls on a weekend or federal holiday, the deadline moves to the next business day. Very small employers (under $1,000 in annual payroll tax liability) may qualify to file Form 944 annually instead of Form 941 quarterly, but the IRS must approve this in advance.
What are the penalties for late payroll tax deposits and filings?
Failure-to-deposit penalties
| How Late | Penalty Rate |
|---|---|
| 1 - 5 days late | 2% |
| 6 - 15 days late | 5% |
| More than 15 days late | 10% |
| 10+ days after first IRS notice | 15% |
Failure-to-file penalties
If you file Form 941 or 940 late, the penalty is 5% of the unpaid taxes for each month (or part of a month) the return is late, up to a maximum of 25%. If the return is more than 60 days late, there is a minimum penalty of $510 (2026) or 100% of the unpaid tax, whichever is less.
Trust Fund Recovery Penalty (TFRP)
The most severe payroll tax penalty. The IRS can assess the TFRP — equal to 100% of the unpaid trust fund taxes (employee income tax withholding plus the employee's share of Social Security and Medicare) — against any "responsible person" who willfully fails to collect, account for, or pay over these taxes. Responsible persons include business owners, corporate officers, partners, and even bookkeepers or payroll managers with authority over financial decisions. This penalty pierces LLCs and corporations — personal assets are at risk.
Practical example:You owe $10,000 in payroll taxes but deposit them 20 days late. The deposit penalty is 10% ($1,000). If you also file Form 941 one month late, the filing penalty is 5% of the $10,000 ($500). Total penalties: $1,500 on a $10,000 tax liability — plus interest accruing from the original due date.
How does FUTA work and when do you deposit it?
The Federal Unemployment Tax Act (FUTA) tax funds the federal share of unemployment benefits. The nominal rate is 6.0% on the first $7,000 of each employee's annual wages ($420 per employee at the full rate). However, employers who pay their state unemployment tax (SUTA) on time receive a credit of up to 5.4%, reducing the effective FUTA rate to 0.6% ($42 per employee per year).
FUTA deposits: Calculate your FUTA liability at the end of each quarter. If the cumulative liability exceeds $500, you must deposit it by the last day of the month following the quarter. If it is $500 or less, carry it forward to the next quarter. Any remaining FUTA tax is due with your annual Form 940.
Credit reduction states:A few states that have borrowed from the federal unemployment trust fund and not repaid on time are "credit reduction states." Employers in these states receive less than the full 5.4% credit, meaning their effective FUTA rate is higher than 0.6%. The Department of Labor publishes the list of credit reduction states each November. Check the DOL credit reduction page for the current list.
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Frequently Asked Questions
What is the total payroll tax rate an employer pays?
The employer's share of federal payroll taxes is 7.65% (6.2% Social Security + 1.45% Medicare) plus FUTA (effectively 0.6% on the first $7,000 per employee) plus the state unemployment tax (SUTA), which varies from about 0.5% to 8%+ depending on state and experience rating. On a $50,000 salary, the employer's federal payroll tax cost is roughly $3,825 for Social Security and Medicare, plus $42 for FUTA, plus state unemployment taxes.
Do employers pay Social Security and Medicare on top of what they withhold from employees?
Yes. Social Security and Medicare are split equally between employer and employee. You withhold 6.2% (Social Security) and 1.45% (Medicare) from the employee's paycheck, and you pay a matching 6.2% and 1.45% from your own funds. The employer's share is an additional expense above and beyond the employee's gross wages.
How do I know if I am a monthly or semi-weekly depositor?
The IRS uses a lookback period to determine your deposit schedule. If you reported $50,000 or less in payroll taxes during the 4-quarter lookback period (July 1 through June 30 of the prior year), you are a monthly depositor. If you reported more than $50,000, you are a semi-weekly depositor. New employers are generally monthly depositors. The IRS notifies you of your status each November for the following year.
What is the $100,000 next-day deposit rule?
If you accumulate $100,000 or more in undeposited federal payroll taxes on any day during a deposit period, you must deposit the taxes by the next business day, regardless of whether you are normally a monthly or semi-weekly depositor. If this happens, you also become a semi-weekly depositor for the remainder of the calendar year and the following year.
What is SUTA and how does experience rating work?
SUTA (State Unemployment Tax Act) is the state unemployment insurance tax that every employer pays. Your SUTA rate is determined by your 'experience rating,' which reflects your history of former employees filing unemployment claims against your account. New employers receive a default rate (often 2.7% to 3.4%). Over time, if few of your former employees file claims, your rate decreases. If many do, it increases. Rates typically range from 0.5% to 8%+ depending on the state and your claims history.
What happens if I file Form 941 late?
The penalty for late filing of Form 941 is 5% of the unpaid taxes for each month (or part of a month) the return is late, up to a maximum of 25%. There is also a minimum penalty of $510 (for 2026) if you file more than 60 days late. If you also failed to deposit the taxes on time, you face both the late deposit penalty and the late filing penalty, which can add up quickly.
Are there any states with no state income tax withholding?
Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In these states, you do not need to withhold state income tax from employee paychecks. However, you still must pay SUTA (state unemployment taxes) in every state, and some of these states have other payroll-related taxes (for example, Washington's Paid Family and Medical Leave and Long-Term Care taxes).
Can the IRS hold me personally liable for unpaid payroll taxes?
Yes. Under the Trust Fund Recovery Penalty (TFRP), the IRS can hold any 'responsible person' personally liable for the employee's share of unpaid payroll taxes (income tax withholding plus the employee's share of Social Security and Medicare). This applies to business owners, officers, bookkeepers, or anyone who had authority to pay the taxes but willfully failed to do so. The TFRP applies even if the business is an LLC, corporation, or partnership.
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This is general information, not tax or legal advice. Tax rates, wage bases, and deadlines may change annually. Consult a tax professional for advice specific to your business and jurisdiction. Sources: IRS.gov, DOL.gov, SSA.gov, state workforce agency websites.