What Are Payroll Tax Returns and Who Needs to File Them?

Whether you're considering hiring employees or have already extended job offers, it's essential to understand your payroll obligations, which include payroll taxes, tax payments, and other tax filing forms that may be applicable. One of the most critical tasks is collecting and paying taxes on behalf of employees to ensure timely filing for the tax year, thereby maintaining compliance with the IRS. 

You must have all of the correct tax forms filed in accordance with each due date every tax year. This applies whether you're in a more conventional employer-employee arrangement, or something less common, such as having household employees, or if you're a seasonal employer (think farm or summer resort employees). 

In the United States, business owners report their employees’ wages and taxes owed by filing IRS Form 941, Employer's Quarterly Federal Tax Return. This guide will help you understand what a payroll tax return is and whether you are required to file one. Chances are, if you've hired employees, your business is obligated to submit this form. 

Read on to learn more about your payroll tax obligations, process errors that can lead to IRS penalties and stress, and how 1-800Accountant, America's leading virtual accounting firm, can simplify these tasks with our affordable, tax-deductible payroll solution for your business.  

Key Takeaways

• Form 941 analysis that underscores its importance. 

• Coverage of the assistance available if you have questions about your employee’s payroll tax returns. 

• Examination of other payroll tax returns and how you can prepare for the IRS this tax year.

• Preview responsibilities related to income tax withholding, taxable wages, tax deposits, total taxes, tax payments, and tax liability.

What Are Payroll Tax Returns?

Payroll taxes are the federal, state, and local taxes associated with an IRS Form W-2, Wage and Tax Statement, employee’s taxable compensation. They fund the federal Social Security and Medicare programs, unemployment insurance, and help your business stay compliant. As an employer, you're responsible for remitting payroll materials to the proper taxing authority.

Here’s a look at the different types of payroll taxes you may encounter as a small business owner with employees. 

Types of Payroll Taxes You Must Withhold

Before we discuss the payroll taxes that must typically be withheld, it's essential to note that Social Security taxes and Medicare taxes are levied by the Federal Insurance Contribution Act (FICA) of 1935. Hence, you may hear payroll taxes, also referred to as FICA taxes.

Federal Income Tax

Employees owe income tax based on their wages or salaries at the federal level, which is the federal income tax, and, if necessary, at the state and local levels. This income tax is withheld from the employee’s paycheck by the employer and paid to the respective taxing authority.

Payroll withholdings are guided by each employee's complete IRS W-4, Employee's Withholding Certificate. While it isn't mandatory, your employees may want to revisit their selections annually. 

Social Security Tax

Employees pay Social Security taxes on 6.2% of their taxable income up to $174,000 in 2025. This dollar amount increases each year to account for inflation. The Social Security tax is officially called Old Age, Survivors, and Disability Insurance (OASDI). Social Security taxes are withheld from the employee’s paycheck and paid to the U.S. Treasury.

When an employer remits Social Security taxes withheld from an employee’s paycheck to the U.S. Treasury, the employer also makes a matching payment equal to the employee’s portion of Social Security taxes. For example, if an employee owes $1,500 in Social Security taxes, the employer must make a matching payment of $1,500 for a total of $3,000.

Medicare Taxes

An employee pays Medicare taxes on 1.45% of their entire taxable income. Medicare taxes are withheld from the employee’s paycheck and paid to the U.S. Treasury. Similar to Social Security taxes, employers make a matching payment equal to the employee’s portion of Medicare taxes.

Unlike Social Security, employees pay an additional Medicare tax on 0.9% of their taxable income above an applicable threshold. An employer must withhold this Additional Medicare Tax from wages or salaries paid to an employee in excess of $200,000 during a calendar year without regard to that employee’s filing status or wages paid by another employer.

Federal Unemployment Taxes (FUTA)

The FUTA tax rate is 6.0% and applies to the first $7,000 of wages paid to each employee during the year. This tax rate is typically reduced to 0.6% with a state credit.

State Unemployment Taxes (SUTA)

The SUTA tax is administered similarly to the FUTA tax but with differing tax rates and wage levels. For example, New York's SUTA taxable wage base is $12,800 in 2025, while California's is $7,000. 

Read this article from the U.S. Small Business Administration to learn more about the different types of payroll taxes your business might have to pay.

Payroll Tax Return Filing Requirements

Here’s an overview of the payroll tax returns that must be filed to report the different types of payroll taxes your employees are subject to: 

• IRS Form 941, Employer's Quarterly Federal Tax Return. A quarterly tax return that reports all federal withholdings, including the employer’s share of Social Security and Medicare taxes. The due date is by the last day of the month following the end of the quarter.

• IRS Form 944, Employer's Annual Federal Tax Return. File Form 944 annually instead of Form 941 each quarter if your business has an annual payroll tax liability of $1,000 or less. The due date is the last day of January, following the end of the tax year.

• IRS Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. The due date is the last day of January, following the end of the tax year.

• IRS Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Similar to Form 941, except Form 943 reports all federal withholdings for agricultural employees. The due date is the last day of January, following the end of the tax year.

• IRS Form 945, Annual Return of Withheld Federal Income Tax. Use this form to report income taxes withheld from non-payroll payments, such as pensions, gambling winnings, or other mandatory backup withholdings. The due date is the last day of January, following the end of the tax year.

• State payroll returns. State-level returns will vary. For example, California requires employers to file reports for four state payroll taxes. In contrast, New York employers must file returns for New York State, New York City, and Yonkers, depending on the employee's residence and the location of their work. Because Texas lacks state or local income tax, the central state-level payroll tax is for unemployment.

Key Filing Deadlines for 2025–2026

You must not only prepare accurate payroll documentation, but it is also imperative to file by each deadline to ensure ongoing compliance for your operations. Review the following tax deadlines, and note that if any fall on a weekend or holiday, the deadline is extended to the next business day.  

IRS Form 941 

• Q1: April 30

• Q2: July 31

• Q3: October 31

• Q4: January 31

FUTA (IRS Form 940)

• January 31

W-2 and IRS Form 1099-NEC, Nonemployee Compensation (for contractors and freelancers)

• January 31

Quarterly tax deposit deadlines

• Monthly and semi-weekly rules

How to File Payroll Tax Returns

Paper filing of tax returns is still available for qualified businesses. However, e-filing requirements implemented in January 2024 significantly limited the number of eligible businesses. The updated rules require a business or organization to e-file all tax and information returns if the total number of filed returns equals 10 or more.

Professional services, such as those offered by 1-800Accountant, are one of the most effective methods for filing your returns. An experienced tax preparer ensures all information included on a return is accurate and that the return is e-filed by the appropriate deadline.

Penalties for Late Payroll Tax Filing

You always want to prepare error-free payroll materials and submit them by their respective deadlines. Failing to meet your payroll obligations can disrupt your operations and result in costly penalties, including:

• Failure to file: 5% per month (up to 25%).

• Failure to deposit: 2–15% of the total amount, depending on the lateness.

• Trust Fund Recovery Penalty for willful nonpayment. (Up to 100% of unpaid trust fund taxes).

Amended Payroll Tax Returns & Refunds

You may need to file an amended payroll tax return. A common reason to file an amended return is that a new tax break is introduced that wasn't initially available, and the IRS permits you to file an amended payroll tax return to claim this tax break. It’s also possible that you simply overpaid payroll taxes because of an error or oversight.

Follow these steps if you believe that you’re entitled to a tax refund:

1. Calculate the refund amount. It’s your responsibility to calculate the refund amount.

2. Complete IRS Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund. This is the revised form of Form 941 that must be filed if you’re seeking a refund.

3. Attach calculations. Include your calculation and any paperwork that documents your refund claim when filing a Form 941-X.

4. File Form 941-X. Now, it’s time to file the amended Form 941 and your corresponding paperwork.

5. Wait for confirmation. Don’t assume the IRS has processed your amended Form 941 until you either receive your refund or get a letter from the IRS saying your refund request was denied. Processing times can be 16 weeks or longer. 

Payroll Taxes for Small Business Owners – FAQs

Do self-employed people file payroll tax returns?

Self-employed individuals typically do not file payroll tax returns. Instead, they pay the 15.3% self-employment tax to fulfill their Social Security and Medicare tax obligations. Self-employed individuals can usually deduct half of what they've paid in self-employment taxes. 

How often are payroll taxes deposited?

Your business's total tax liability determines the payroll tax deposit schedule you abide by. The most common deposit schedules occur monthly, semi-weekly, or next-day.  

Can I do payroll manually without software?

Manual processes are prone to human error and are generally considered a risky option. Do-it-yourself payroll software automates some of this process, but it can be time-consuming. In contrast, full-service options, such as 1-800Accountant's tax-deductible payroll solution, save the most time and ensure error-free submissions.

What happens if I misclassify workers?

Misclassifying workers, such as labeling a W-2 employee as a contractor, can result in potential back taxes and penalties, disrupting your operations and upsetting your team. Avoid misclassification errors and other unpleasantries when you use a professional payroll service. 

Get help for your payroll taxes

Payroll tax compliance is a complex but critical aspect of running your business. However, the time spent each pay period can distract from other aspects of your business, and mistakes and missed deadlines can be costly. That's why many small business owners trust the payroll experts at 1-800Accountant to address these ongoing responsibilities. 

By working with our professional payroll tax specialists, you gain peace of mind and extra time each pay period, whether you have one employee or several. Our experienced tax preparers address your IRS forms, tax payments, Medicare taxes, tax credits, and other tax forms that are vital to meeting payroll compliance obligations.

Don't delay– schedule your free, 30-minute consultation today. Let 1-800Accountant’s payroll experts handle the entire process on your behalf so that you can freely focus on your next business milestone.