Small businesses should budget an additional 20-25% on top of gross wages for payroll taxes.

This includes employer FICA match (7.65%), federal unemployment (0.6%), state unemployment (typically 2-5%), workers' compensation (1-10% depending on industry), and other state-specific taxes.

For example, a $50,000 salary actually costs $60,000-62,500 when all employer taxes are included.

The employer FICA tax rate for 2025 is 7.65% of gross wages: 6.2% for Social Security (on wages up to $176,100) and 1.45% for Medicare (no wage limit).

This matches the employee's contribution for a total of 15.3%.

High earners ($200k+ single, $250k+ married) also pay an additional 0.9% Medicare tax, though this is employee-only with no employer match.

Most small businesses are "monthly depositors" and must deposit federal payroll taxes by the 15th of the following month.

If your total tax liability exceeds $50,000 in a year, you become a "semi-weekly depositor" and must deposit taxes within 3 business days.

Businesses with $100,000+ in accumulated liability must deposit the next business day.

All federal deposits must be made electronically through EFTPS.

Small businesses must file: Form 941 (quarterly federal tax return), Form 940 (annual FUTA unemployment tax), W-2s for all employees (due January 31), and Form W-3 (transmittal to SSA).

Many states also require quarterly wage reports and unemployment tax returns.

Form 1099-NEC is required for contractors paid $600+ annually, though contractors don't affect payroll taxes.

Late payroll tax deposits incur penalties: 2% if 1-5 days late, 5% if 6-15 days late, 10% if 16+ days late, and 15% if unpaid 10 days after IRS notice.

Failure to file Form 941 on time carries a 5% monthly penalty (up to 25%).

Late W-2s cost $60-310 per form.

The IRS takes payroll tax violations seriously because these are trust fund taxes (withheld from employees), and can pursue criminal charges for intentional non-payment.

For 1-5 employees in one state, quality payroll software ($30-60/month) can handle calculations and tax filing.

With 5+ employees, multiple states, or complex benefits, a full-service payroll provider ($40-150/month + $4-8 per employee) is often worth it for guaranteed compliance, tax deposit management, and time savings.

Services also carry E&O insurance covering penalties from their errors—critical protection given payroll tax penalties average $845 per quarter for small businesses.