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Everything You’ve Ever Wanted To Know About How To Pay Payroll Taxes But Were Too Afraid To Ask

How To Pay Payroll TaxesHow To Pay Payroll Taxes
min read
August 21, 2023

Only two things are certain in this world: death and taxes. Today we’re discussing the latter. 

If you work or own a business in the United States, payroll taxes are just one of the many taxes you’ll encounter in your world.

According to the Center on Budget and Policy Priorities, payroll taxes are the second-largest source of federal tax revenue for the United States. In 2019, income taxes made up 50% of the federal government’s revenue, and payroll taxes made up 36%.

But what counts as a payroll tax? How do you pay them? And who’s responsible for paying them? We’re answering those questions and more in this guide on how to pay payroll taxes. 

From Social Security To Medicare Taxes

Payroll taxes are federal and state taxes on wages that support Social Security, Medicare, unemployment, and other programs. 

Some people also consider federal, local, and state income taxes to be payroll taxes because they’re also withheld from a paycheck and paid to the government. However, while income taxes are paid at different rates depending on gross pay, the payroll tax rate is the same for everyone. 

So what are the payroll tax rates for 2020? And what do employers and employees have to pay?

Federal Payroll Taxes

State Payroll Taxes

Payroll tax rates and type vary significantly across the country. These are the types of state payroll taxes you can encounter around the United States:

California State Payroll Taxes

Employers and employees in California are responsible for paying four taxes levied by the state. They include:

Where To Pay Payroll Taxes

Paying payroll taxes would be simple if they all went to the same place. Instead, you have to pay your taxes through different institutions for each level of government that levies taxes. 

If you’re also subject to local taxes for payroll, they are generally paid through your city or town’s municipal tax office.

How To Pay Payroll Taxes

Whether you’re the CEO of a Fortune 500 company and have thousands of employees, a small business owner with several staff members, or are self-employed, you have several options when it comes to processing payroll taxes:

We’ll break down our recommendations for how to pay these important taxes, with guidance for whether you’re an employer or a self-employed independent contractor.

How To Pay As An Employer

If you’re an employer with numerous employees, you might consider hiring a team dedicated to payroll. Be sure to hire licensed tax professionals who know your state’s tax code and can help you stay on top of compliance.

If you’re a small business owner with several employees, you should outsource payroll tax filing to a payroll service, or use a payroll software like Hourly that will file your taxes for you. These affordable options can automate paying payroll taxes so that you can focus on running your business.

How To Pay Self-Employment Taxes

If you’re self-employed, you’re responsible for withholding, filing, and paying your payroll taxes. 

Unlike Form W-2 employees, whose income taxes and payroll taxes are withheld from their paychecks and filed by their employers, Form 1099 independent contractors aren’t subject to tax withholding. They are responsible for paying income taxes and payroll taxes to the government on their own.

Also, unlike W-2 employees, whose employers subsidize half of their FICA payroll taxes, sole proprietors are responsible for paying the full FICA (24.8%) and Medicare (5.8%) tax rates respectively. Sole proprietors don’t pay FUTA, since they don’t have employees. 

Sole proprietors file payroll taxes by filling out Schedule C as part of IRS Form 1040. They must also pay estimated self-employment taxes quarterly through the IRS and their state tax agency to avoid a penalty for underpayment.

When To Pay 

So when do you pay these taxes? The answer to that depends on whether you’re an employer or self-employed.

When To Pay Federal Payroll Taxes As An Employer

Tax code determines which employers pay FICA and Medicare taxes monthly, semi-weekly, or the next day

Employers who follow the monthly deposit schedule must make payments by the 15th of the next month. 

Employers who follow the semi-weekly deposit schedule and pay their employees between Wednesday and Friday must file payroll taxes by the following Wednesday. Those who pay their employees between Saturday and Tuesday have until the next Friday to file taxes with the IRS. 

FUTA tax payments are made quarterly to the IRS and are due before the end of the first month, after the end of the quarter.

When To Pay State Payroll Taxes As An Employer

States set their own payment schedules for collecting payroll taxes. Check your state’s tax agency to find tax due dates. 

For example, in California, employers have a combination of semi-weekly, monthly, and quarterly deadlines for individual payroll taxes. 

When To Pay Federal Self-Employment Taxes

Sole proprietors are required to file estimated SE (self-employment) taxes with the IRS every quarter. These payments are due on the 15th day of the month that follows the end of the quarter. They include both payroll taxes and income taxes.

Self-employment tax table with pay period and tax due date.

Source: IRS

When To Pay State Self-Employment Taxes

Many states follow a filing schedule for quarterly taxes that is similar to the IRS’s. That includes California.

Final Thoughts: How To Pay Payroll Taxes

Whether you run a small business with several employees or you’re self-employed, it’s your duty as an American to pay payroll taxes. They make up more than one-third of federal tax revenue and fund critical social programs like Social Security and Medicare.

While all working Americans have to pay payroll taxes, it can be a complicated process. Paying them manually—from calculating how much you owe to making the deposits on time—is tricky. That’s why many entrepreneurs take paying payroll taxes off of their plates by using a payroll processing software that automates the process.

Learn how Hourly can save you time and give you peace of mind by automating payroll tax compliance.

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