Business owners, employers, and HR professionals across America know how unpleasant it can be to deposit and file payroll taxes. And newer businesses may be wondering, “What even are payroll taxes?”

Put simply, payroll taxes are incurred by an organization whenever it processes payroll to pay its employees. These funds are used for governmental programs, such as Medicare or unemployment aid. Unlike income tax, which is paid solely by the employee, unemployment taxes are either paid by the organization or by both the organization and the employee.

The following overview will walk through these different types of federal payroll taxes, when and how to pay them, how to file returns for them, and the upcoming payroll tax deadlines for 2023. Incorrect payroll tax reporting and filing are some of the most common payroll errors, so having a firm grasp on these basics can help avoid the consequences and alleviate the stress that comes with this subject.

What are Federal Payroll Taxes?

At the federal level, the main payroll taxes organizations see are for Social Security, Medicare, and Unemployment. While federal income tax is paid just by employees, organizations do have to withhold and deposit the funds to pay this tax on each employee’s behalf, as well as file returns for these deposits every quarter or year.

Social Security and Medicare Taxes

Social Security and Medicare payroll taxes were created by the Federal insurance Contributions Act (FICA), which itself was originally a provision of the 1935 Social Security Act (SSA).

• The current rate for these taxes is 15.3% of an employee’s paycheck, with half (7.65%) being paid by the employee and the other being paid by the employer when it matches the employee’s payment.
• 6.20% of each half (or 12.4% of the total 15.3%) goes to Social Security, while the remaining 1.45% of each half (or 2.9% of the total 15.3%) goes to Medicare.

Tax	Tax Rate	Paid by Employee	Paid by Employer
FICA Taxes (Total)	15.3%	7.65%	7.65%
Social Security	12.4%	6.20%	6.20%
Medicare	2.9%	1.45%	1.45%

• Social Security taxes have a wage base limit, which is the maximum wage subject to Social Security taxes for the year.
  • For 2022 the wage base limit is $147,000, so if an employee earns $160,000 in 2022, only $147,000 of that salary is eligible for social security taxes.
  • This wage base limit will increase to $160,200 for 2023.

Tax Year	Social Security Tax Wage Base Limit
2022	$147,000
2023	$160,200

• Medicare taxes don’t have a wage base limit, but they do have an Additional Medicare Tax for wages above certain amounts.
  • Employees earning over $200,000 annually that file their tax returns as an individual owe an additional 0.9% in Medicare taxes on top of the 1.45% described above.
  • Married employees who file jointly while earning over $250,000 annually or file separately while earning over $125,000 annually are also eligible for this additional tax.

 

Wage Thresholds for Additional 0.9% Medicare Tax
Filing Status	Wage Threshold
Single	$200,000+
Married Filing Jointly	$250,000+
Married Filing Separately	$125,000+

Unemployment Taxes

Unemployment payroll taxes were created by the Federal Unemployment Tax Act (FUTA) of 1939 and serve to fund the federal government’s unemployment programs.

There are three tests to determine if an organization must pay unemployment taxes, and they’re based on the types of workers said organization employs.

The General Test

Employers are subject to unemployment taxes on wages paid to non-farmworker and non-household employees if the employer paid more than $1,500 in wages during any quarter of 2021 or 2022, or if the employer had one or more employees for at least some part of a day across any 20 different weeks in 2022 or 2023.

The Household Employee Test

Employers are subject to unemployment taxes on wages paid to household workers if the employer paid $1,000 or more cash wages to household employees in any calendar quarter of 2022 or 2023. A “household employee,” is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter.

The Farmworkers Test

Employers are subject to unemployment taxes on wages paid to farmworkers if the employer paid $20,000 or more cash wages to farmworkers in any calendar quarter of 2022 or 2023, or if the employer employed 10 or more farmworkers at least some part of a day (simultaneously or not) across any 20 different weeks in 2022 or 2023.

Current Unemployment Tax Rate

The current tax rate is 6% and the current wage base limit is $7,000 annually, per employee. Therefore, employers shouldn’t pay more than $420 per employee, every year (6.0% x $7,000).

If an employer’s unemployment taxes for a calendar quarter are $500 or less, that employer can instead wait to deposit the funds with the next quarter’s unemployment taxes.

Income Taxes

Income taxes are paid solely by each employee, but employers must still collect and deposit these taxes on the employee’s behalf. This amount is determined by the employee’s filed W-4 and can be calculated on the IRS’ Tax Withholding Estimator.

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Read More: Federal Payroll Tax Facts (and FAQs)

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When are Payroll Taxes Due?

Payroll tax deposit due dates vary depending on which type of tax is being paid. Deposits for social security, Medicare, and income taxes may be made at the same time, but deposits for unemployment taxes use a different cadence.

Due Dates for Social Security, Medicare, and Income Tax Deposit

Note, if any of the following dates fall on a weekend or a federal holiday, the deposit may instead be made on the next business day.

• Deposit must be made on either a monthly or semiweekly schedule.
  • The IRS chooses which schedule an organization uses. This depends on how often the organization files its federal tax returns (quarterly or annually) and the amounts reported on said returns during a specific timeframe, also known as a lookback period.
  • The lookback period for a quarterly filing organization is the prior four calendar quarters, while for annual filing organizations it’s the second preceding year to the current one. So, in 2022 the lookback period for an annual filing organization would be the calendar year 2020.
• Monthly deposit schedules require employers to deposit their taxes on the 15th day of the month following the month in which the employees were paid. For example:
  • If an organization pays its employees on April 30 for hours worked that month, that organization must deposit the taxes from that payroll on May 15.
  • If, however, an employer pays its employees on May 1 for hours worked in April, the organization must instead deposit those taxes on June 15.
• Semiweekly deposit schedules require organizations to deposit their federal taxes depending on the day of the week on which employees were paid.
  • If an organization pays its employees on a Wednesday, Thursday, or Friday, taxes must be deposited by the following Wednesday.
  • If an organization pays its employees on a Saturday, Sunday, Monday, or Tuesday, taxes must be deposited by the following Friday.

Due Dates for Unemployment Tax Deposit

Unemployment taxes are deposited quarterly, unless the total collected tax for a quarter is $500 or less, in which case an organization may wait to deposit the funds the following quarter. As with payroll tax deposits, if any of the following deadlines fall on a weekend or holiday, the deposit may instead be made on the next business day.

Quarter	Quarter End Date	Deposit Due Date
Q1 (Jan, Feb, Mar)	March 31	April 30
Q2 (Apr, May, June)	June 30	July 31
Q3 (July, Aug, Sept)	September 30	October 31
Q4 (Oct, Nov, Dec)	December 31	January 31

How to Deposit Payroll Taxes

Organizations need to first confirm (or apply for) their Federal Employer Identification Number (FEIN). With this in hand, the IRS generally requires payroll tax deposits be made in the form of an Electronic Fund Transfer (EFT), which can be performed free of charge via the Department of the Treasury’s Electronic Federal Tax Payment System (EFTPS).

How to File Payroll Tax Returns

Similar to the deposits themselves, the schedules for filing these returns vary based on the type of tax being reported.

Should I File Form 940, Form 944, or Form 941?

• Form 940 reports federal unemployment taxes and is filed on an annual basis, despite the fact deposits for unemployment taxes are made on a quarterly basis. Organizations have until January 31 to submit this form, so the due date for reporting 2021 unemployment taxes, is January 31, 2022.

• Form 941 – This is used by organizations that wish to file their payroll and income tax returns quarterly. Form 941 due dates are as follows:

Quarter	Quarter End Date	Deposit Due Date
Q1 (Jan, Feb, Mar)	March 31	April 30
Q2 (Apr, May, June)	June 30	July 31
Q3 (July, Aug, Sept)	September 30	October 31
Q4 (Oct, Nov, Dec)	December 31	January 31

• Form 944 is used by organizations that wish to file their payroll and income tax returns annually as well. This is best suited for very small organizations whose annual payroll and income taxes are less than $1,000.

Electronic vs. Paper Filing

The IRS encourages organizations to file these forms electronically, but paper filings are allowed too.

Paper filings carry the added complication of where to send the return, which depends on which state the organization is located and whether the return includes any payments. The instructions for each form linked above contains a list of the addresses for each scenario under “Where Do You File?”

Automatic Payroll Tax Filings

The right payroll software solution with tax filing services can alleviate time and stress by automating your filing. See how one payroll admin got her weekends back by turning to Paylocity to handle the payroll taxes.

2022 Payroll Year End Due Dates

Monthly deposits for payroll and income taxes are due on November 15 and December 15, 2022, but employers can use the remaining calendar year to get their information ready for the busy tax season in January 2023. This can include organizing their employees’ personnel information, such as Social Security Numbers (SSNs), mailing addresses, etc., and compiling any charitable donations or entertainment expenditures the organization made in 2022.

Check out our Year End Payroll Checklist for more information on everything your organization needs to prepare for year end.

Moreover, employers would be smart to obtain electronic or paper copies of the returns they will need to file and confirm certain information with the government, such as the upcoming Social Security wage base limit and the organization’s FEIN and deposit schedule for payroll and income taxes.

2023 Payroll Tax Deposit and Form 941 Due Dates

The following quick reference guide will help track the dates covered above for 2023 specifically. For more information and details (e.g., semiweekly tax deposit dates) refer to the IRS’ online tax calendar.

Date	Items Due
January 17, 2023	Monthly deposit of payroll and income taxes.
January 31, 2023	Quarterly returns for Q4 payroll and income taxes from the prior year (Form 941) OR annual returns for payroll and income returns from the prior year (Form 944). Annual returns for unemployment taxes from the prior year (Form 940). Quarterly deposit of unemployment taxes.
February 15, 2023	Monthly deposit of payroll and income taxes.
March 15, 2023	Monthly deposit of payroll and income taxes.
April 17, 2023	Monthly deposit of payroll and income taxes.
May 1, 2023	Quarterly returns for Q1 payroll and income taxes (Form 941). Quarterly deposit of unemployment taxes.
May 15, 2023	Monthly deposit of payroll and income taxes.
June 15, 2023	Monthly deposit of payroll and income taxes.
July 17, 2023	Monthly deposit of payroll and income taxes.
July 31, 2023	Quarterly returns for Q2 payroll and income taxes (Form 941). Quarterly deposit of unemployment taxes.
August 15, 2023	Monthly deposit of payroll and income taxes.
September 15, 2023	Monthly deposit of payroll and income taxes.
October 16, 2023	Monthly deposit of payroll and income taxes.
October 31, 2023	Quarterly returns for Q3 payroll and income taxes (Form 941). Quarterly deposit of unemployment taxes.
November 15, 2023	Monthly deposit of payroll and income taxes.
December 15, 2023	Monthly deposit of payroll and income taxes.

Frequently Asked Questions About Paying and Filing Payroll Taxes

What Are the Penalties for Not Paying Taxes on Time?

The penalties for not depositing withheld taxes on time varies based on how late the deposit is finally made.

• 1 – 5 calendar days late = 2% of the unpaid amount
• 6 – 15 calendar days late = 5% of the unpaid amount
• Over 15 calendar days late = 10% of the unpaid amount
• Over 10 calendars days after a first notice = 15% of the unpaid amount

What Other Resources Should I Reference for Payroll Tax Information?

The best source of information for this subject is the IRS’ Publication 15, though its site also has a handy overview page of the different tax types described above. Also be sure to review Paylocity’s HR compliance alerts for up-to-date changes to policies and procedures that may affect payroll tax filings.

How Can I Make Paying and Filing Payroll Taxes Easier?

Paying and filing payroll taxes can be quite time-consuming and complicated depending on the size of an organization’s workforce, and there are consequences for mistakes. Paylocity’s all-in-one HR & Payroll software includes tax preparation services to help you file your state and federal payroll taxes accurately and on time.

Request a payroll software demo today to learn more about how our Payroll Tax Services can alleviate headaches and keep your organization compliant.