Federal Payroll Taxes

What federal payroll taxes cover

Federal payroll taxes cover three components you calculate and remit as an employer: Federal Insurance Contributions Act (FICA) taxes which fund Social Security and Medicare, federal income tax withholding, and Federal Unemployment Tax Act (FUTA).

For FICA, you withhold the employee's share from each paycheck and match it dollar-for-dollar from your ​business ​funds. You deposit the total electronically to the IRS.

Federal income tax withholding works differently. You withhold a tax amount from each paycheck based on the employee's W-4 elections. No employer match applies. At year end, you report the withheld amount — FICA and income tax — on each employee's Form W-2.  

FUTA is employer-only. You don't withhold anything from employee pay for FUTA. You report it on Form 940 annually.  

All federal payroll tax deposits are paid using EFTPS (the Electronic Federal Tax Payment System). You file Form 941 each quarter to report FICA and federal income tax withholding.

SurePayroll By Paychex automates federal payroll tax calculations, deposits, and filings for small businesses.  

Federal payroll tax rates

Social Security tax is 12.4% of wages (6.2% the employee pays and 6.2% you contribute). It applies to the first $184,500 of each employee's wages in 2026. The limit adjusts annually, per IRS Topic no. 751, Social Security and Medicare withholding rates.  

Medicare is 2.9% of wages (1.45% employee and 1.45% employer). No wage base limit applies. It runs on every dollar of earned wages.

The Additional Medicare Tax of 0.9% applies to individual employee wages above $200,000 in a calendar year. This is employee-only with no employer match. Withholding begins in the pay period wages cross the $200,000 threshold and continues through year-end.

Social Security and Medicare together make up FICA. The combined rate is 15.3% (7.65% from the employee's paycheck and 7.65% from you).

FUTA is an employer-only tax. The FUTA rate is 6.0% on the first $7,000 of each employee's wages per year. Employers who pay into state unemployment funds may qualify for a FUTA tax credit of up to 5.4%, which would reduce the effective rate to 0.6% or a maximum of $42 per employee annually. FUTA tax credit of up to 5.4%, reducing the effective rate to 0.6% or a maximum of $42 per employee annually.  

Federal income tax withholding varies by employee, depending largely on their filing status. The amount depends on each employee's W-4 elections, pay frequency, and wage level. No fixed rate applies.  

What you pay vs. what your employee pays

When you process payroll, you withhold employee FICA contributions from each paycheck. You also withhold federal income tax in the amount their Form W-4 specifies.

You match the employee's FICA contribution dollar for dollar. The same 6.2% Social Security rate and 1.45% Medicare rate apply on your side, drawn from your payroll budget. The employer contribution doesn't appear on the employee's paystub. It's separate from their wages.

FUTA is entirely your cost. Employees don't contribute to federal unemployment insurance, and you don't withhold anything from employee pay.

For FICA and income tax withholding, you combine employee withholding with your employer FICA contributions into a single deposit and send the total to the IRS through EFTPS. Form 941, filed each quarter, reports the FICA taxes and federal income tax withholding for that period. Form 940, filed annually, ​reports ​what you owe for FUTA.

How to deposit federal payroll taxes

You deposit your federal payroll taxes electronically using EFTPS. All federal payroll tax deposits, including FICA and federal income tax withholding,​​ are processed through EFTPS.

Your deposit schedule is based on how much you paid in payroll taxes the prior calendar year. Most small employers ​follow ​a monthly schedule: deposits are due by the 15th of the month following each payroll. Employers with higher annual payroll tax totals ​follow ​a semi-weekly schedule: deposits are due Wednesday or Friday depending on which day of the week you ​​run​​ payroll.

The IRS sets your schedule once per year based on the prior year's totals. New employers start on the monthly schedule.

You file Form 941 each quarter to report your FICA taxes and federal income tax withholding. The form covers wages paid, taxes withheld, and employer FICA contributions for that quarter. You file Form 940 annually to report and pay what you owe in FUTA.

SurePayroll calculates your deposit liability each pay period and submits deposits on your schedule.

Running payroll with federal tax calculations built in

Federal payroll tax calculations run every pay period — for every employee. You calculate FICA contributions, apply the Social Security wage base, determine federal withholding from each employee's Form W-4 elections, and track your deposit deadlines.

SurePayroll automates those calculations: it withholds employee FICA and income tax, adds your employer FICA match, deposits the combined total, and files Form 941 and Form 940 on your schedule.

You run your business. SurePayroll automates your payroll.

See what's included in full-service payroll.