As a business owner, getting your payroll taxes right is essential. Mistakes can lead to penalties and unnecessary stress for you and your employees. Keep reading to learn six practical payroll tax tips to help keep your payroll tax process smooth and compliant:
Payroll Tax Tips for Small Businesses
1. Keep Thorough, Organized Records
Accurate recordkeeping is one of the simplest ways to stay ahead of potential payroll issues. Keeping track of employee hours, wages, tax withholdings, and any employer-paid contributions helps you ensure everything adds up. If you’re ever audited, this documentation is also your first line of defense.
2. Understand Federal Withholding Requirements
There are two key components to federal payroll taxes:
- Federal income tax is withheld based on the employee’s Form W-4. You’ll calculate the amount to withhold using the IRS tax tables.
- FICA taxes (Social Security and Medicare) are split between employer and employee. For 2025, the Social Security rate is 6.2% each (12.4% total), up to a wage base of $176,100. Medicare is 1.45% for both parties, with no income cap.
As the employer, you’re responsible not only for withholding the correct amounts from employee paychecks — but also for matching them.
3. Don’t Forget About Employer Contributions
Beyond federal income and FICA taxes, your business may owe additional payroll-related taxes:
- FUTA tax (Federal Unemployment Tax Act): Paid solely by employers to fund unemployment benefits.
- State unemployment insurance (SUI): Requirements vary depending on where you operate. Your state’s labor department or the U.S. Department of Labor can provide the most accurate guidance.
4. Follow All Filing and Deposit Deadlines
Timely deposits and accurate filings are another big part of payroll compliance:
- Deposit schedules are based on the total amount of federal tax withheld. Depending on your total, you’ll deposit either monthly or semi-weekly.
- IRS Form 941 must be filed quarterly, and Form 940 (for FUTA) is due annually.
It’s also important to know that under the Trust Fund Recovery Penalty, individuals responsible for failing to deposit payroll taxes can be held personally liable — even if they’re not the business owner. That includes officers, managers, or anyone with control over company funds.
5. Stay Up-To-Date on Regulation Changes
Tax regulations change regularly. Whether it’s updates from the IRS or new state-specific rules, staying up-to-date allows you to make adjustments before those changes take effect. A proactive mindset goes a long way in avoiding last-minute scrambles or unexpected penalties.
6. Work with a Trusted Professional
Payroll can get complicated quickly — especially if your business operates in multiple states or has a mix of full-time, part-time, and contract employees. We’re here to help with:
- Choosing and setting up payroll systems
- Calculating tax withholdings
- Filing on time (and in the right places)
- Staying compliant as your business grows
We take care of the details so you can focus on running your business with confidence.
We’re here to help with your payroll questions and concerns. Let’s talk about how we can support your business and keep your payroll process stress-free and compliant.
