30 Jun 2026
Every employer is required to deposit employment taxes either monthly or semiweekly, depending on the level of tax liability. You are also required to file employment tax returns every quarter.
These filings must include the income taxes withheld from employee paychecks, which cover federal obligations and, when applicable, state and local obligations, plus the employee’s portion of Social Security and Medicare taxes.
Alongside those withholdings, you must contribute your own share of FICA and pay the applicable federal and state employment taxes. When these responsibilities are not handled correctly, penalties can follow quickly.
Breaking down the components of employment taxes
Employment tax obligations fall into a handful of key categories. Income tax withholding is based on each employee’s W-4, and while it comes out of the employee’s paycheck, it is your responsibility to withhold it and remit it on time.
The IRS encourages employees to update their W-4 each year or any time their personal situation changes, since it affects their tax position. FICA, which includes Social Security and Medicare, is split equally by employers and employees.
You are required to match your employees’ contribution. Social Security funding supports retirees, certain family members and individuals living with disabilities. Medicare taxes ensure that eligible individuals receive Part A coverage without additional cost once they turn 65.
If you want to estimate the potential FICA contributions owed by you and your employees, you can use a FICA calculator. FUTA taxes are an employer-only tax and support the federal unemployment compensation system.
States have their own unemployment tax requirements, and while most states place that burden solely on the employer, a few require contributions from employees as well. Many states also mandate workers compensation coverage, which provides wage replacement and medical benefits to employees who experience work-related injuries or illnesses. That coverage is funded entirely by the employer.
Local jurisdictions may have additional employment tax requirements. City- or county-level withholdings are not uncommon, and it is important to confirm whether the jurisdiction where you operate imposes them so you remain compliant.
For higher-earning employees, an additional Medicare tax of 0.9% must be withheld on any compensation that exceeds $200,000.
Managing the administrative side
The administrative process behind employment taxes includes calculating withholdings, remitting deposits according to the required schedule and filing quarterly and annual reports.
You must provide annual reporting to your employees and the Social Security Administration and submit any state-level reports required in your jurisdiction. Annual FUTA reporting is part of this process as well. Ultimately, the full responsibility for withholding, calculating and depositing employment taxes falls on you.
Understanding deductions and legal exposure
Certain employee benefits, such as contributions to retirement plans or employer-funded health care benefits, can be deducted to reduce your taxable income while still staying compliant.
When employment taxes are not reported or deducted accurately, you may face penalties and, in more severe situations, criminal consequences. Employers can be held legally liable for unpaid taxes, accumulated interest and related penalties if mistakes remain uncorrected for too long.
Recognizing the importance of information returns
Information returns give the IRS insight into the income being paid to employees and help ensure that tax returns are accurate. The IRS reviews the figures reported on information returns and matches them to your own tax filings, which means accuracy is essential.
Correcting errors the right way
When mistakes appear on previously filed employment tax returns, the IRS provides specific forms for corrections. Each correction form corresponds to the original return and aligns line by line with the entries being amended.
For instance, Form 941X is used to correct errors on Form 941, which is the quarterly federal tax return used by most employers to report federal income tax withholding and Social Security and Medicare taxes, along with the employer’s share of those taxes. Once the error is corrected, any underreported tax amount must be paid.
Clarifying self-employment tax
Self-employment tax applies to individuals who work for themselves and functions similarly to the Social Security and Medicare taxes withheld from traditional wages. Self-employed individuals must calculate their own self-employment tax and can deduct the employer-equivalent portion when determining their adjusted gross income.
Filing electronically
Employment tax returns can be filed through the Electronic Federal Tax Payment System, which also allows you to submit corrected employment tax returns electronically.
E-filing simplifies the process, keeps records organized and helps ensure timely compliance.
© 2026
Tags: IRSSmall BusinessTax