How to withhold and deposit payroll taxes

What you need first

• An employer identification number (EIN) from the IRS. It is free.
• A completed Form W-4 from each employee. It tells you how much income tax to withhold. If an employee doesn’t give you one, withhold as single with no adjustments.
• A way to make electronic deposits. The IRS accepts them through your business tax account, Direct Pay for businesses and EFTPS.

1. Figure the federal income tax to withhold

Use the IRS percentage method in Publication 15-T. A single employee is paid $2,000 every two weeks. Annual wages are $2,000 × 26 = $52,000. Subtract the $8,600 standard amount ($12,900 if married filing jointly) unless the employee checked the Step 2 box: $43,400. Find that amount in the 2026 table for single filers: $1,240 plus 12% of the amount over $19,900, or $1,240 + $2,820 = $4,060 a year. Divide by 26: $156.15 a paycheck. Subtract any Step 3 credits first, and add any extra withholding the employee asked for in Step 4(c).

2. Withhold Social Security and Medicare

Social Security is 6.2% of wages up to $184,500 for the year: $2,000 × 6.2% = $124.00. Medicare is 1.45% of all wages: $29.00. Once an employee’s wages pass $200,000 you also withhold an extra 0.9% on the amount over it.

Total withheld from the employee: $156.15 + $124.00 + $29.00 = $309.15, before any state tax.

3. Add your own share

You match the employee’s Social Security and Medicare: $124.00 + $29.00 = $153.00. You also pay federal unemployment tax (FUTA) of 0.6% on the first $7,000 of each employee’s wages in a typical state, $12.00 on this check. This paycheck costs you $2,000 + $153.00 + $12.00 = $2,165.00.

4. Deposit with the IRS

What you deposit is everything withheld plus your match: $309.15 + $153.00 = $462.15. Most small employers are monthly depositors: deposit the taxes from payments made in a month by the 15th of the next month. Larger employers (more than $50,000 of employment taxes in the lookback period) deposit semiweekly: payments made Wednesday through Friday are due the next Wednesday, and payments made Saturday through Tuesday are due the following Friday. FUTA is deposited by the end of the month after a quarter in which it exceeds $500.

5. File the forms

• Form 941 every quarter, by the last day of the month after the quarter ends: April 30, July 31, October 31 and January 31. A date on a weekend moves to the next business day.
• Form W-2 to each employee and to the Social Security Administration by January 31.
• Form 940 once a year for federal unemployment tax, by January 31.

6. Don’t forget your state

Most states with an income tax have their own withholding tables, forms and deposit dates, and every state has an unemployment tax. Your state revenue department and labor department have the rules and your rates.

Never spend the withheld tax

Withheld tax belongs to the employee and the IRS. Move it to a separate account on pay day. Unpaid payroll tax can become the owner’s personal liability.

In a spreadsheet

The Payroll Withholding Calculator does the table lookup for you.

Published by Groundwork Business Advisory. Updated October 23, 2026.