Share
Every time you run payroll, you’re not just paying employees. You’re also calculating and remitting a set of federal taxes — some taken from the employee’s check, some paid by the business, and some split between the two. Understanding what you owe and when it’s due is foundational to running payroll without surprises.
This guide covers the four federal payroll tax obligations every employer has: Social Security, Medicare, federal income tax withholding, and the Federal Unemployment Tax (FUTA). These are separate from state and local payroll taxes, which layer on top depending on where your employees work.
Social Security Tax (OASDI)
Social Security tax funds the Old-Age, Survivors, and Disability Insurance program. The combined rate is 12.4% of covered wages. The employee pays half (6.2%) through a payroll deduction, and the employer matches that 6.2%. So you’re withholding 6.2% from the employee’s check and contributing another 6.2% as an employer expense — a total of 12.4% per covered dollar of wages.
Social Security applies up to a wage base limit, which adjusts annually for inflation. In 2025, the wage base was $176,100. Wages above that threshold in a calendar year are not subject to Social Security tax. The wage base resets every January 1, so a high-earning employee who hit the ceiling in November starts paying Social Security again on January 1 of the following year.
Medicare Tax
Medicare tax funds the hospital insurance portion of the Medicare program. The combined rate is 2.9% — 1.45% from the employee and 1.45% from the employer. Unlike Social Security, Medicare has no wage base limit. It applies to all covered wages, no matter how much the employee earns.
High earners face an Additional Medicare Tax of 0.9% on wages above $200,000 in a calendar year for single filers. This additional tax is the employee’s obligation — the employer doesn’t match it. But you do have a withholding obligation: once an employee’s wages exceed $200,000 in a calendar year, you’re required to withhold the additional 0.9% on wages above that threshold, regardless of the employee’s filing status or total household income.
Social Security and Medicare together are called FICA taxes. When you see FICA on a pay stub or tax form, it refers to the combined 7.65% employee contribution (6.2% Social Security + 1.45% Medicare) that you withhold from the employee’s paycheck.
Federal Income Tax Withholding
Federal income tax withholding isn’t a fixed rate — it’s calculated based on each employee’s W-4, their pay frequency, and the IRS withholding tables published in Publication 15-T. The amount withheld varies by employee based on their filing status, the number of allowances or adjustments claimed, and whether they’ve requested additional withholding.
Your payroll system handles the withholding calculation using the employee’s current W-4 information. What matters for compliance is that you’re using a current, signed W-4 for every employee, applying the correct withholding method, and depositing the withheld amounts on the correct schedule. You don’t determine whether the withholding amount is “right” for the employee’s tax situation — that’s between the employee and the IRS. Your obligation is to withhold and remit based on the W-4 they’ve submitted.
Federal Unemployment Tax (FUTA)
FUTA is an employer-only tax — it’s not withheld from employees. The standard FUTA rate is 6% on the first $7,000 of each employee’s wages per year. Most employers qualify for a credit of up to 5.4% if they’ve paid their state unemployment insurance on time, reducing the effective FUTA rate to 0.6%. At 0.6%, the maximum FUTA liability per employee per year is $42 ($7,000 x 0.006).
The credit reduction works in reverse if your state has an outstanding federal loan balance used to pay UI benefits. States that borrow from the federal unemployment trust fund and don’t repay the loan lose part of their FUTA credit — meaning employers in those states pay a higher effective FUTA rate until the loan is repaid. The IRS publishes the list of credit reduction states annually, usually in November.
Deposit Schedules: When Federal Payroll Taxes Are Due
Federal payroll tax deposits (covering FICA and withheld federal income tax) are made to the IRS on either a monthly or semi-weekly schedule. Your deposit schedule is determined by your total tax liability during the lookback period — the 12-month period ending June 30 of the prior year.
Monthly depositors owe less than $50,000 during the lookback period. Deposits are due by the 15th of the following month. Semi-weekly depositors owe $50,000 or more. Deposits are due on Wednesday for payroll paid on Wednesday, Thursday, or Friday; and on Friday for payroll paid on Saturday, Sunday, Monday, or Tuesday. New employers default to monthly depositors in their first year.
The $100,000 next-day rule overrides both schedules: if you accumulate $100,000 or more in tax liability on any single day during a deposit period, you must deposit by the next business day, regardless of your normal schedule. This catches some employers off guard when a particularly large payroll run — a bonus payroll, a correction run, or a payroll covering a longer-than-usual period — pushes the day’s liability above the threshold.
Form 941 and Annual Filings
Employers file Form 941 quarterly to report wages paid, taxes withheld, and deposits made during the quarter. The filing deadlines are April 30, July 31, October 31, and January 31. If all deposits were made on time and in full, the deadline extends 10 days. Form 940 is filed annually to report FUTA liability and reconcile deposits made throughout the year.
Netchex handles federal payroll tax calculations, deposit scheduling, and quarterly and annual filings as part of the payroll service — so your team isn’t managing deposit dates and lookback period determinations manually. Talk to a Netchex consultant about full-service payroll tax management for your business.
Frequently Asked Questions
FICA stands for the Federal Insurance Contributions Act and covers Social Security (6.2% employee / 6.2% employer) and Medicare (1.45% employee / 1.45% employer). These are flat-rate taxes applied to covered wages up to the Social Security wage base (for Social Security) or on all wages (for Medicare). Federal income tax withholding is different — it’s a variable amount based on each employee’s W-4 elections, filing status, and the IRS withholding tables. Employees pay income tax withholding; they don’t pay the employer’s share of FICA.
Your deposit schedule is determined by your total payroll tax liability during the lookback period — the 12 months ending June 30 of the prior calendar year. If your total tax liability during that period was less than $50,000, you’re a monthly depositor (taxes due by the 15th of the following month). If it was $50,000 or more, you’re a semi-weekly depositor (due Wednesday or Friday depending on your pay date). New employers start as monthly depositors. The IRS notifies you of your deposit schedule, and you can also determine it from your own lookback period calculation.
No. FUTA applies only to the first $7,000 of each employee’s wages per calendar year. Once an employee’s wages exceed $7,000, you stop paying FUTA on their wages for the rest of the year. The wage base resets on January 1. At the standard 0.6% effective rate (after the state credit), the maximum FUTA liability per employee per year is $42.
Late federal payroll tax deposits trigger a Failure to Deposit penalty that scales with how late the deposit is: 2% for 1-5 days late, 5% for 6-15 days late, 10% for more than 15 days late, and 15% for amounts not deposited after IRS notice. In cases of willful failure to remit withheld taxes, the IRS can also assess the Trust Fund Recovery Penalty personally against responsible individuals — meaning payroll managers and business owners can be held personally liable for the withheld employee portions. Missed deposits should be corrected as quickly as possible to minimize penalty exposure.
Want Payroll Taxes Handled for You?
See how Netchex calculates, deposits, and files federal payroll taxes on your behalf — so your team focuses on the business, not the IRS deposit schedule.
This guide reflects publicly available product information and independent reviewer data (G2, Capterra, Trustpilot, Yelp, Better Business Bureau, Reddit, Software Advice, GetApp) as of 2026. Feature availability and pricing may vary by plan. Contact each provider for current details.
Disclaimer: Any product roadmap or future plans provided herein are for informational purposes only. They do not represent a commitment to deliver any material, code, feature, or functionality. Plans may change without notification. The development, release and timing of any features or functionality described remain at the sole discretion of Netchex, its affiliates, and partners. Netchex does not give legal, tax, or accounting advice. You are responsible for ensuring your use of Netchex product meets your individual business and compliance requirements.
Related events
Census Designated Places and Payroll: The Hidden Geography Problem
State vs. Local Minimum Wage: Which Rate Actually Controls Your Employees’ Pay?
Employee Relocation and Taxes: What’s Still Deductible and What’s Fully Taxable
