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Depositing and Reporting Federal Employment Taxes

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This post was updated in March 2020

Considering how relevant they are in our day-to-day lives, employment taxes can be complicated to understand. As the employer, it’s your job to deposit and report employment taxes and prepare and file Form W-2. This is used to report wages, tips, and other compensation paid to your employees. Let's go over the major taxes you will likely have to withhold:

Federal Income Tax

The first major tax withholding you will have to enforce is the Federal Income Tax. Use Form W-4 and either the Wage Bracket Method or Percentage Method withholding tables in order to figure out how much tax you’ll need to withhold. Once that is done, you will have to deposit the withholdings. The method of doing this will vary depending on your business and the amount withheld.

Social Security and Medicare Tax

These taxes are also important to withhold from your employees’ wages, only this time you will have to pay a matching amount yourself. Bummer, I know. To figure out how much tax that is, use the employee’s Form W-4 and the methods described here and here. You’ll also have to follow the requirements for depositing these withheld wages, as discussed below.

Federal Unemployment (FUTA) Tax

FUTA taxes are reported by employers separately from the taxes listed so far. Employees do not pay this tax or have it withheld from their wages; instead, you pay FUTA directly from your own funds. 

Depositing Employment Taxes

There are two deposit schedules you may be required to follow: monthly and semi-weekly. You must determine which schedule you have to file before the beginning of each calendar year. This can be done by reviewing Publication 15 for Forms 941, 944, and 945, or Publication 51 for Form 943 (here and here, respectively.) Failing to make a timely deposit can subject you to a failure-to-deposit penalty of up to 15 percent, so make sure you’re fully aware of your deadlines. 

You are required to make deposits for FUTA Tax (using Form 940) for the quarter within which the tax due exceeds $500. The deposit must then be made by the end of the month following the end of the quarter. 

All federal tax deposits must be made using electronic funds transfer (EFTPS).

Reporting Employment Taxes

For Federal Income Tax, Social Security, and Medicare Tax, employers must file Form 941 each quarter, and for agricultural employers, Form 943 must be filed annually. This includes withholdings on sick pay and supplemental unemployment benefits. FUTA taxes, which again only the employer pays, are reported by filing Form 940

See the IRS Employment Tax Due Dates page for filing and depositing due dates.

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