Business operations
Payroll Taxes for Employers: FICA, FUTA, SUTA, Deposit Schedules, and the Trust Fund Penalty
When you hire your first employee, you become responsible for withholding and remitting payroll taxes on a strict schedule. Late deposits trigger penalties starting at 2%. And if you mishandle the withheld taxes, the trust fund penalty is 100% — assessed personally.
Written by Matt Reese, CPA · 8 min read · Published April 2026·Share on LinkedIn
Key Takeaways
- Employers pay 7.65% in FICA taxes per employee (6.2% Social Security + 1.45% Medicare) — matching the same amount withheld from the employee's paycheck. Total FICA cost per employee: 15.3%.
- Payroll tax deposits must follow strict schedules: monthly (for smaller employers) or semi-weekly (for employers who deposited over $50,000 in the prior lookback period). Deposits go to the IRS, not with the return.
- FUTA (federal unemployment tax) is 0.6% on the first $7,000 of each employee's wages after the state credit. SUTA (state unemployment) varies by state and is separate.
- The trust fund penalty is the most dangerous provision in payroll tax law: if you withhold employee payroll taxes and don't remit them, the IRS can assess 100% of the withheld amount personally against anyone responsible — even if the business later goes bankrupt.
The four main employer payroll taxes
| Tax | Rate | Wage base | Who pays |
|---|---|---|---|
| Social Security (OASDI) | 6.2% employer + 6.2% employee | $176,100 (2025) | Employer and employee each pay 6.2% |
| Medicare | 1.45% employer + 1.45% employee | No cap | Employer and employee each pay 1.45% |
| Additional Medicare Tax | 0% employer + 0.9% employee | Above $200k individual/$250k joint | Employee only; employer withholds |
| FUTA (federal unemployment) | 0.6% after state credit | First $7,000 per employee | Employer only — not withheld from wages |
| SUTA (state unemployment) | Varies by state/employer history | Varies by state | Employer only (most states) |
The employer’s share of FICA is 7.65% of every dollar of wages — adding to the true cost of each employee beyond the W-2 salary. At $80,000 salary, the employer pays an additional $6,120 in FICA taxes.
The true cost of an employee
FICA alone adds over $5,700 per employee per year — before FUTA, SUTA, or workers' comp. At 5 employees, that's $28,500+ in taxes on top of their salaries. This is why employee-to-contractor misclassification is financially tempting but legally dangerous.
Run the numbers for your own hire
Payroll tax deposit schedules
Withholding taxes (income tax withheld + employee + employer FICA) must be deposited with the IRS on a schedule — separate from when the payroll return is filed. Your schedule depends on how much payroll tax you deposited in your lookback period (the 12-month period ending June 30 of the prior year):
| Depositor type | Lookback period deposits | Deposit deadline |
|---|---|---|
| New employer | No prior lookback | Monthly depositor for first year |
| Monthly depositor | $50,000 or less | By the 15th of the following month |
| Semi-weekly depositor | More than $50,000 | Wednesday payrolls → deposit by Friday; Friday payrolls → deposit by following Wednesday |
| Next-day depositor (large employers) | Single payroll accumulation over $100,000 | Next business day — applies regardless of normal schedule |
Deposits go to the IRS via EFTPS (Electronic Federal Tax Payment System). Checks and wire transfers are no longer accepted for most payroll tax deposits.
The deposit deadline is not the same as the return due date
Failure-to-deposit penalties
The IRS failure-to-deposit penalty is tiered by how late the deposit is:
| How late | Penalty rate |
|---|---|
| 1–5 days late | 2% |
| 6–15 days late | 5% |
| More than 15 days late | 10% |
| Still not deposited 10 days after IRS notice | 15% |
The trust fund penalty: the most dangerous provision
When you withhold income tax and the employee’s share of FICA from an employee’s paycheck, those funds are held in trustfor the federal government. They aren’t the business’s money — they’re taxes the employee already paid, temporarily sitting in your account.
The Trust Fund Recovery Penalty (IRC Section 6672) allows the IRS to assess 100% of the unpaid trust fund taxes personally against any person who was responsible for collecting and remitting these taxes and willfully failed to do so. This includes:
- Business owners and officers
- Accountants and bookkeepers with signatory authority
- Anyone who had the authority to pay creditors but chose to pay other creditors instead of the IRS
The trust fund penalty survives bankruptcy
FUTA and SUTA: unemployment taxes
Federal unemployment tax (FUTA) is paid by the employer only — it is never withheld from employees’ wages. The nominal rate is 6.0% on the first $7,000 of wages per employee, but businesses in states that are current on their FUTA loans receive a 5.4% credit — reducing the net federal rate to 0.6%.
FUTA deposits are due quarterly if the accumulated FUTA liability exceeds $500. Annual Form 940 (FUTA return) is due January 31.
State unemployment (SUTA) is separate — rate and wage base vary by state. California’s wage base for UI is $7,000 per employee in 2025; new employers pay 3.4% for the first two to three years before the rate adjusts based on claims experience.
Payroll compliance calendar
| Deadline | Action |
|---|---|
| Per payroll (ongoing) | Deposit withheld taxes per your schedule (EFTPS) |
| Monthly 15th (monthly depositors) | Deposit prior month's payroll taxes |
| April 30, July 31, Oct 31, Jan 31 | File Form 941 (quarterly payroll return) |
| January 31 | Distribute W-2s to employees; file W-2s/W-3 with SSA |
| January 31 | File Form 940 (annual FUTA return); deposit if FUTA > $500 |
| Q4 following quarter's form 941 due date | Reconcile W-2 totals to Form 941 totals |
Use a payroll service — the compliance burden is real
You might also read
Hiring Your First Employee: The Compliance Checklist Most Owners Skip
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Business operationsEmployee vs Independent Contractor: How the IRS Classifies Workers and the Cost of Getting It Wrong
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S-corp planningS-Corp Reasonable Compensation: What the IRS Actually Requires and How to Set Your Salary
The IRS requires S-corp owners to pay themselves a 'reasonable salary' — and has audit procedures to enforce it. What factors the IRS considers, how auditors typically approach S-corp compensation cases, and a practical method for setting a defensible number.
Frequently asked
Questions owners actually ask
- Do I also owe payroll taxes on my own S-corp W-2 salary?
- Yes — the same FICA rules apply to your own W-2 wages as an S-corp shareholder-employee. The corporation pays 7.65% as the employer share, and the remaining 7.65% is withheld from your paycheck. This is the FICA cost that gets avoided on distributions — which is why the salary/distribution split matters.
- How do I know if I'm on monthly or semi-weekly deposit schedule?
- Your deposit schedule is determined each January based on your 'lookback period' — the four quarters ending June 30 of the prior year. If your total payroll tax deposits during the lookback period were $50,000 or less, you're a monthly depositor. Over $50,000, you're semi-weekly. New employers are automatically monthly depositors for their first year.
- What if payroll causes a cash flow problem — can I delay the deposit?
- No — this is one of the most dangerous mistakes in small business finance. Payroll taxes are held in trust for the IRS; the money doesn't belong to the business. Using payroll tax deposits to cover operating expenses is how the trust fund penalty gets triggered. The IRS takes this extraordinarily seriously. If you're having cash flow problems, talk to a CPA before payroll day — not after.
- What is Form 941 and when is it due?
- Form 941 is the Employer's Quarterly Federal Tax Return. It reports total wages paid, income tax withheld, and Social Security/Medicare taxes for the quarter. It's due April 30, July 31, October 31, and January 31 (for Q1, Q2, Q3, and Q4 respectively). Form 941 is a reconciliation report — the actual tax was due earlier through deposits. Filing a 941 without having made deposits creates a failure-to-deposit penalty.
- When are W-2s and W-3s due?
- W-2s (to employees) and W-3 (transmittal to Social Security Administration) are due January 31 — the same deadline as 1099-NEC. E-filing is required if you have 10 or more W-2s. Payroll services like Gusto, ADP, or Paychex handle W-2 distribution and filing automatically.
- What is SUTA and how much do I owe?
- SUTA (State Unemployment Tax Act) is state-level unemployment insurance tax paid by the employer. The rate varies by state, by industry, and by your claim history (employers with more unemployment claims pay higher rates). New employers typically start at a 'standard' rate, which adjusts over time. California's SUTA is called UI (Unemployment Insurance) and is filed through EDD.
Take the next step
Turn tax questions into a plan. Talk with Matt or see how we work with operating business owners.
Educational content only.This article is for informational purposes and does not constitute tax, legal, or investment advice. Every owner’s facts are different; consult a qualified CPA and advisor before acting. Tax and accounting services are provided through Matt Reese, CPA; investment advisory services are provided through Measured Risk Portfolios, a registered investment adviser. Matt Reese, CPA and Measured Risk Portfolios are separate entities; clients are not required to engage both.