Filing and paying your payroll tax returns on time is important for keeping your business in good standing with the IRS, fulfilling your tax obligations, and avoiding fees and penalties. In order to achieve this, you need to know how frequently you must file, what forms to use, and what payroll taxes include.
This article covers:
- Payroll Tax Basics
- What are Payroll Taxes
- Federal Payroll Taxes
- State Payroll Taxes
- Whether You Need to File Annually or Quarterly
- What Form(s) You Need
- Due Dates
- Filing Without Payment
- E-Filing and IRS Recommendations
- How to Electronically File
Let’s jump in.
Payroll Tax Basics
What are Payroll Taxes?
Payroll taxes are the taxes you withhold from your employee’s paycheck, as well as the employer portion of those taxes, for federal and state programs. These withholdings are remitted to the U.S. and often state governments to cover specific programs.
In most cases, you will need to consider two categories—federal and state.
Federal Payroll Taxes
Federal payroll taxes are fairly straightforward. These are the taxes held from wages, tips, and salaries to cover federal government programs like Social Security and Medicare.
Federal payroll taxes include:
- Employer Portions of Social Security and Medicare Taxes (FICA)
- Federal Unemployment Tax
- Federal Income Tax
Important Note: There are income stipulations for many of these taxes. Make sure you have the latest information on income thresholds and how they impact your withholding.
State Payroll Taxes
Because states are free to independently determine their tax withholding requirements, whether you must withhold from employee paychecks and provide employer portions of state payroll tax and if so, how much, depends on the state you live in.
Some examples of state payroll taxes include:
- State Unemployment Tax
- State Income Tax
- Local Taxes (in some states and cities)
For example, California has four main state payroll taxes, Unemployment Insurance, Employment Training Tax, State Disability Insurance and Personal Income Tax. Whereas in Alaska, there is only one state payroll tax, State Unemployment Insurance Tax.
Taxes Paid by Employer on Behalf of Employees
The payroll taxes paid by employer on behalf of employees are Social Security and Medicare Taxes, line itemed on paychecks as FICA, half of which is paid by the employer, the other half being withheld from the employee and remitted to the IRS on behalf of the employee.
Important Note: These are for federal taxes. For state taxes, please check with your local government and/or a tax professional familiar with your state.
Do I File Payroll Taxes Annually or Quarterly?
Most employers will file quarterly payroll taxes, unless instructed otherwise by the IRS.
What Form Do I Need?
Most employers will file quarterly payroll taxes with Form 941. Keep in mind that this form does get revised, so you’ll want to make sure you’re using the most updated version.
In some rare cases (i.e. when the tax liability is less than $1,000), the IRS will request that you file Form 944 annually instead. You can read more on that here: IRS Form 944 vs 941: Which One Should You File
Form 941 Due Dates
Form 941 is filed quarterly, meaning you must follow employment tax and reporting due dates. This is typically:
- First Quarter – April 30
- Second Quarter – July 31
- Third Quarter – Oct 31
- Fourth Quarter – Jan 31
We always recommend checking the IRS website for details: Employment Tax Due Dates
*If your FUTA (Federal Unemployment Tax) liability is $500 or less for the quarter, then it is typically carried over to the next quarter. If it is over $500, you must tender the entire amount. If it’s $500 or less for the fourth quarter of the year, then you will file Form 940 by January 31.
Important Note: The IRS will post deadline extensions for federally declared disaster areas, allowing them more time to file and pay. You can find more information on disaster situations here: Tax Relief in Disaster Situations
For 2023, deadline extensions include:
- Vermont – November 15, 2023
- Maine, Massachusetts, and South Carolina – February 15, 2024
- Disaster impacted portions of Florida, Georgia, Hawaii and Louisiana – February 15, 2024
- Employers affected by the conflict in the State of Israel – October 7, 2024
What if I File 941 Without Payment?
Filing and paying on time are important for avoiding fines and penalties. If you file on time, but do not pay or underpay your taxes, the IRS will send a notice (CP161) about the penalty, which is typically 2-15% of the amount underpaid or not paid depending on how many days after the payment and filing deadlines have lapsed.
If you cannot pay on time, it is recommended that you still file on time, as a late filing comes with its own penalty—5% of the tax due for each month it is late and prorated for partial months, up to 25%.
If you may not be able to file or pay on time, we recommend calling a tax professional as soon as possible.
Why E-File Form 941?
The IRS advises employers to use electronic filing rather than paper filing by mail, stating in a recent update that…
“E-filing is the most secure, accurate method to file returns… the IRS acknowledges receipt of e-filed returns within 24 hours, giving employers reassurance that their return was not misplaced or lost in the mail.”
Employers who e-file will also receive missing information alerts.
How to Electronically Filing Payroll Tax Returns (Form 941)
There are two options for filing your payroll tax returns (Form 941):
- Purchase an IRS-approved software, prepare your return, apply for an online signature PIN with the IRS, scan and include Form 8453-EMP for the required signature, and submit.
- Hire a tax professional to prepare and file your return on behalf of your business.
If you need assistance preparing and filing your quarterly payroll taxes, please contact us to speak with one of our payroll tax experts.
