Employer Payroll Taxes 2026: FICA, FUTA, SUTA Explained

Quick answer: Employer payroll taxes are the taxes a business pays on top of employee wages. In 2026 they include 6.2% Social Security tax on wages up to $184,500, 1.45% Medicare tax on all wages, federal unemployment tax (FUTA, usually 0.6% on the first $7,000) and state unemployment tax (SUTA), which varies by state.

When you hire your first employee, the hourly rate is not the full cost. You also pay your share of payroll taxes, withhold the employee's share, deposit everything on schedule and file quarterly and annual returns. This guide explains each employer payroll tax for 2026, the forms and deposit rules, and a worked example of the real cost of an employee. It is general information, not tax advice. The official reference is IRS Publication 15 (Circular E), Employer's Tax Guide.

What are employer payroll taxes?

Payroll taxes fall into two groups:

• Taxes you withhold from the employee: federal income tax (based on Form W-4), the employee's 6.2% Social Security and 1.45% Medicare, any Additional Medicare Tax, and state or local income tax where it applies. This money belongs to the government; you hold it in trust until you deposit it.
• Taxes you pay as the employer: the matching 6.2% Social Security and 1.45% Medicare, FUTA, and SUTA. These are a business expense on top of gross wages.

None of this applies to genuine independent contractors, who pay self-employment tax themselves. If you are unsure which category a worker falls into, read W-2 vs 1099 before you set up payroll.

Employer payroll tax rates for 2026

Tax	Employer rate	Employee rate	Wage base 2026
Social Security (OASDI)	6.2%	6.2%	First $184,500 per employee
Medicare (HI)	1.45%	1.45%	All wages, no cap
Additional Medicare Tax	None	0.9%	Wages over $200,000 (withholding threshold)
FUTA	6.0% gross, usually 0.6% after state credit	None	First $7,000 per employee
SUTA	Varies by state and experience rating	Employee share in a few states	Set by each state

The Social Security Administration raised the wage base from $176,100 in 2025 to $184,500 for 2026. Once an employee's 2026 wages pass that figure, both you and the employee stop paying the 6.2% Social Security tax for the rest of the year, but Medicare continues. If you have 2027 payroll in your budget, check the SSA announcement each October for the new wage base.

How does FUTA work?

The Federal Unemployment Tax Act tax funds the federal share of unemployment benefits. The gross rate is 6.0% on the first $7,000 of each employee's wages. Employers that pay their state unemployment tax in full and on time get a credit of up to 5.4%, bringing the net rate to 0.6%, or $42 per employee per year.

The credit is cut in credit reduction states, which have outstanding federal loans to their unemployment funds. For 2025, the Department of Labor listed California (1.2% reduction) and the U.S. Virgin Islands (4.5% reduction). The 2026 list is confirmed in November 2026, and employers report any reduction on Schedule A of Form 940 filed in early 2027. FUTA is filed annually on Form 940, due January 31, and deposited quarterly once the liability passes $500.

How does state unemployment tax (SUTA) work?

Every state runs its own unemployment insurance program. You register with the state workforce agency when you hire, and the agency assigns:

• A taxable wage base, which ranges from the federal minimum of $7,000 in a handful of states to more than $70,000 in Washington.
• A new-employer rate, often between 1% and 4%, used until you have enough history.
• An experience rate after that, which rises if former employees claim benefits.

A few states, including Alaska, New Jersey and Pennsylvania, also take a small employee contribution. Some states add other employer charges such as paid family leave or training funds. File SUTA returns quarterly with the state, and update the rate in your payroll system each January when the new rate notice arrives.

Worked example: the real cost of a $50,000 employee

A small business in a state with a $12,000 SUTA wage base and a 2.7% new-employer rate hires one employee at $50,000 a year in 2026. No credit reduction applies.

Cost item	Calculation	Annual cost
Gross wages		$50,000.00
Employer Social Security	$50,000 x 6.2%	$3,100.00
Employer Medicare	$50,000 x 1.45%	$725.00
FUTA (net)	$7,000 x 0.6%	$42.00
SUTA	$12,000 x 2.7%	$324.00
Total employer payroll taxes		$4,191.00
Wages plus payroll taxes		$54,191.00

Payroll taxes add about 8.4% to wages in this example. Workers' compensation insurance, benefits, paid time off and payroll software add more. Separately, you withhold the employee's $3,825 FICA share and federal and state income tax from their pay and deposit those amounts too. For budgeting the whole hire, see hiring your first employee.

Which payroll tax forms do employers file?

Form	What it reports	Due
Form 941	Withheld income tax, both shares of FICA	Quarterly: April 30, July 31, October 31, January 31
Form 944	Annual alternative to 941 for very small employers the IRS notifies	January 31
Form 940	FUTA	January 31
Form W-2 and W-3	Each employee's annual wages and withholding, to employees and SSA	January 31
State returns	SUTA wages and contributions, state withholding	Usually quarterly

If a due date falls on a weekend or legal holiday, it moves to the next business day. Our 2027 business tax deadlines page lists the exact dates for the coming year.

How to deposit payroll taxes step by step

1. Get an EIN and register with your state's tax and workforce agencies before the first payday.
2. Collect Form W-4 and Form I-9 from each new hire, plus the state withholding form if your state has one.
3. Determine your deposit schedule. New employers are usually monthly depositors (deposit by the 15th of the next month). If your total employment taxes in the lookback period exceeded $50,000, you are a semiweekly depositor.
4. Run each payroll and calculate withholding and employer taxes.
5. Deposit electronically through the Electronic Federal Tax Payment System (EFTPS), your IRS business tax account or a payroll provider. Our guide on how to pay the IRS online covers the options.
6. Reconcile and file Form 941 each quarter and the annual forms in January.

Many small employers hand these steps to a payroll service. If you prefer to do it in-house, our guide on how to do payroll yourself walks through a full pay run, and setting up direct deposit covers paying staff.

What other state and local payroll taxes might apply?

Federal taxes are the same everywhere, but state and local payroll obligations differ a lot. Depending on where your employees live and work, you may also need to handle:

• State income tax withholding. Most states have an income tax and require withholding; a few, such as Texas and Florida, do not tax wages.
• Local income taxes. Some cities, counties and school districts levy wage taxes, common in states such as Ohio and Pennsylvania.
• State disability insurance. A handful of states, including California and New York, run disability programs funded through payroll.
• Paid family and medical leave. A growing number of states fund paid leave through payroll contributions, sometimes split between employer and employee.
• Workers' compensation. Not a tax, but required insurance in nearly every state for employers with staff, priced by payroll and job type.

Remote employees complicate this: you generally follow the rules of the state where the employee works, which can mean registering in a new state when you hire one person there. Check the state revenue and labor department websites before the first payroll in any new state.

How are payroll taxes recorded in your books?

Keep three groups of accounts so the numbers reconcile with Form 941 and the W-2s:

1. Wages expense for gross pay.
2. Payroll tax expense for the employer share of FICA, FUTA and SUTA.
3. Payroll liabilities for withheld amounts and employer taxes owed but not yet deposited. These should return to zero after each deposit.

If liability accounts keep growing, a deposit has been missed. Catching that early is far cheaper than finding it in an IRS notice.

Common employer payroll tax mistakes

• Treating withheld taxes as working capital. Withheld income tax and the employee's FICA are trust fund taxes. Owners can be personally liable if they are not paid.
• Missing deposit deadlines. Failure-to-deposit penalties start at 2% and reach 10% after 15 days.
• Using an old wage base. Forgetting to update to $184,500 for 2026 stops Social Security too early for high earners.
• Ignoring the FUTA credit reduction when budgeting in an affected state.
• Misclassifying employees as contractors to avoid payroll tax.
• Paying SUTA late, which can reduce the FUTA credit as well as trigger state penalties.

If you do fall behind, contact the IRS early; IRS penalty abatement explains when first-time relief may apply.

Payroll taxes and your pricing

Employer payroll taxes are part of your labor cost, so build them into your hourly rates and quotes. In the example above, an employee costing $26 an hour in wages really costs about $28.20 once payroll taxes are added, before insurance and overhead. When you bill clients for staff time, make sure your invoice rate covers the loaded cost. You can prepare those invoices in our free invoice generator.

Employer payroll taxes for 2026 come down to four items: 7.65% FICA (with Social Security capped at $184,500), FUTA on the first $7,000, your state's SUTA, and on-time deposits and filings. Put the dates in your calendar, budget for the true cost of each hire, and price your work accordingly. When it is time to bill, our invoice generator is free, needs no sign-up and downloads a clean PDF built in your browser.