How to Do Payroll Yourself: Steps, Forms and Deadlines

Quick answer: To do payroll yourself in the US, get an EIN and state tax accounts, collect Form W-4 and Form I-9 from each employee, calculate gross pay, withhold federal and state income tax plus 7.65% FICA, pay the employer's share, deposit taxes through EFTPS on schedule, and file Forms 941, 940, W-2 and W-3 on time.

Running payroll for a small team does not require a payroll company. It requires accurate setup, a calendar and careful arithmetic. This guide shows how to do payroll yourself step by step, with the forms you need, the federal deadlines, a worked paycheck example using 2026 figures, and the common mistakes that trigger IRS penalties.

This is general information for US employers, not tax or legal advice. State and local rules vary; confirm requirements with your state agencies, the IRS or a payroll professional.

What does doing payroll involve?

Payroll is the process of paying employees and handling the taxes and records that go with it. Each pay period you calculate gross wages, subtract taxes and deductions to get net pay, pay employees, and set aside the withheld taxes plus your employer taxes. Then, on separate schedules, you deposit those taxes and file returns with the IRS and your state.

Payroll is only for employees. Independent contractors are paid against their invoices and receive a Form 1099-NEC if required. If you are unsure which category a worker falls into, read our guide to W-2 vs 1099 workers and see how to pay contractors.

Step 1: Set up before your first payroll

• Employer Identification Number (EIN). Apply free on IRS.gov. You need it for every payroll form. Our EIN vs SSN guide explains why.
• State registrations. Register with your state revenue department for income tax withholding and with your state workforce agency for unemployment insurance (SUI).
• EFTPS enrollment. Enroll in the Electronic Federal Tax Payment System so you can deposit federal payroll taxes.
• Workers' compensation insurance, required for employers in nearly every state.
• Employee paperwork: Form W-4 for federal withholding, a state withholding form if your state uses one, and Form I-9 to verify work eligibility.
• New hire reporting to your state within the deadline (federal law sets 20 days, and some states require it sooner).
• A pay schedule that complies with state pay frequency laws, and a payment method such as direct deposit or checks.

Step 2: How to calculate a paycheck

1. Calculate gross pay. Hourly: hours times rate, with overtime at 1.5 times the regular rate for non-exempt employees over 40 hours in a workweek under the FLSA. Salaried: annual salary divided by pay periods.
2. Subtract pre-tax deductions, such as traditional 401(k) contributions and Section 125 health premiums. Note that 401(k) deferrals reduce income tax wages but not Social Security and Medicare wages.
3. Withhold federal income tax using the employee's W-4 and the tables in IRS Publication 15-T.
4. Withhold FICA: 6.2% Social Security on wages up to the 2026 wage base of $184,500, and 1.45% Medicare on all wages, plus an additional 0.9% Medicare on wages over $200,000 in the year.
5. Withhold state and local income tax where they apply.
6. Subtract post-tax deductions, such as Roth 401(k) contributions or court-ordered garnishments.
7. Pay net pay and give the employee a pay stub showing each item.

Employer payroll taxes you pay on top

Tax	2026 rate	Wage base
Social Security (employer share)	6.2%	First $184,500 per employee
Medicare (employer share)	1.45%	All wages (no employer share of the additional 0.9%)
FUTA	6.0%, typically 0.6% after the state credit of up to 5.4%	First $7,000 per employee
State unemployment (SUTA)	Set by your state; new employers get a starting rate	Varies by state

For a deeper breakdown, including credit reduction states for FUTA, see our guide to employer payroll taxes.

Worked example: one biweekly paycheck

Sam is a full-time employee in a state with income tax, paid $52,000 a year biweekly (26 pay periods). He contributes 5% to a traditional 401(k). Federal and state income tax figures below are illustrative; use Publication 15-T and your state tables for real amounts.

Employee side	Calculation	Amount
Gross pay	$52,000 / 26	$2,000.00
401(k) pre-tax	5% of $2,000	-$100.00
Federal income tax	From Pub 15-T (illustrative)	-$140.00
Social Security	$2,000 x 6.2%	-$124.00
Medicare	$2,000 x 1.45%	-$29.00
State income tax	State tables (illustrative)	-$60.00
Net pay		$1,547.00

Employer side	Calculation	Amount
Social Security match	$2,000 x 6.2%	$124.00
Medicare match	$2,000 x 1.45%	$29.00
FUTA	$2,000 x 0.6% (until $7,000 year to date)	$12.00
SUTA	$2,000 x 2.7% (illustrative new employer rate)	$54.00
Total employer cost for the period	$2,000 + taxes	$2,219.00

For this paycheck, the federal deposit is $140 (income tax) + $248 (Social Security, both shares) + $58 (Medicare, both shares) = $446. FUTA is deposited separately, quarterly once the liability exceeds $500.

Step 3: Deposit payroll taxes on time

Federal income tax withheld and both shares of Social Security and Medicare are deposited together through EFTPS. Your deposit schedule depends on your total tax liability in a lookback period, as explained in IRS Publication 15.

Schedule	Who	Deadline
Monthly	Most new employers, and those with $50,000 or less in the lookback period	By the 15th of the following month
Semiweekly	Employers with more than $50,000 in the lookback period	Wednesday or Friday after payday, depending on the payday
Next-day	Anyone who accumulates $100,000 or more on any day	Next business day
Quarterly with the return	Liability under $2,500 for the quarter	With Form 941

Step 4: File payroll tax returns

Form	What it reports	Due
Form 941	Quarterly federal income tax withheld, Social Security and Medicare	April 30, July 31, October 31, January 31
Form 944	Annual version for very small employers the IRS notifies	January 31
Form 940	Annual FUTA	January 31
Form W-2 (to employees and SSA) and W-3	Annual wages and withholding per employee	January 31
State withholding and SUI returns	State income tax and unemployment wages	Varies, often quarterly

If a due date falls on a weekend or legal holiday, it moves to the next business day. Forms W-2 for 2026 also include new reporting related to the 2025 tax law's deductions for qualified tips and overtime, so check the current IRS instructions before you prepare year-end forms. Our business tax deadlines calendar lists the January 2027 dates.

Do it yourself vs payroll software vs a payroll service

Approach	Best for	What you still do
Manual (spreadsheet and IRS tables)	One or two employees in one state, simple pay	Everything: calculations, deposits, filings, year-end forms
Payroll software	Small teams that want automation at low cost	Enter hours, review, approve; the software calculates and often files and deposits
Full-service payroll or PEO	Growing teams, multiple states, benefits	Approve payroll; provider handles filings, and a PEO also co-employs for benefits
Accountant or bookkeeper	Owners who want a person to check the work	Send hours and changes on time

Whichever route you choose, you remain responsible for the taxes being paid. If a provider fails to deposit them, the IRS can still collect from you, so choose reputable providers and check your EFTPS account periodically to confirm deposits were made.

Year-end payroll tasks

December and January are the busiest payroll months. Plan for these tasks:

1. Confirm employee details. Check names, addresses and Social Security numbers match their Social Security cards, because W-2 mismatches cause rejected filings.
2. Record fringe benefits. Taxable benefits such as personal use of a company vehicle or certain gift cards must be included in wages.
3. Reconcile the year. The totals of your four Forms 941 should match the totals on your Forms W-2 and W-3. Fix any difference before filing.
4. Prepare W-2s and W-3. Give copies to employees and file with the Social Security Administration by January 31. Electronic filing through SSA's Business Services Online is free.
5. File Form 940 and the fourth-quarter Form 941 by January 31, plus your state annual reconciliations.
6. Issue 1099-NEC forms to eligible contractors you paid during the year, separately from payroll.
7. Update for the new year. Load the new Publication 15-T tables, the new Social Security wage base and your new state unemployment rate notice, and ask employees to review their W-4s.

Payroll checklist for each pay period

• Collect timesheets and approve hours.
• Calculate gross pay, deductions and net pay.
• Pay employees on the scheduled payday.
• Record the payroll in your books: wages expense, employer tax expense and tax liabilities. Our journal entries guide shows the entries.
• Move the tax money into a separate account immediately.
• Diary the federal and state deposit dates.
• File each quarter's Form 941 and state returns.

How to record payroll in your books

Each payroll creates several accounting entries. Gross wages are an expense. Amounts you withheld from employees (income tax, their share of FICA, benefit deductions) are liabilities until you pay them over. Your employer taxes are a separate expense and a liability until deposited. When you make the EFTPS deposit, the liability goes to zero.

Account	Debit	Credit
Wages expense	$2,000.00
Payroll tax expense (employer FICA, FUTA, SUTA)	$219.00
Federal income tax payable		$140.00
FICA payable (both shares)		$306.00
State income tax payable		$60.00
401(k) payable		$100.00
FUTA and SUTA payable		$66.00
Cash (net pay)		$1,547.00

This entry uses Sam's paycheck from the worked example. Debits equal credits at $2,219.00. Keeping liabilities in separate accounts makes it easy to see what you owe before each deposit date, and our bookkeeping basics guide shows how to set up the accounts.

Common mistakes when doing payroll yourself

• Late deposits. Failure-to-deposit penalties start at 2% and rise with the delay. Never use withheld taxes to cover other bills; the trust fund recovery penalty can make owners personally liable.
• Misclassifying workers. Treating an employee as a contractor can lead to back taxes and penalties.
• Using an old W-4. Ask employees to update their W-4 when their situation changes, and use the current tables each year.
• Forgetting overtime. Non-exempt employees must get overtime, even if salaried.
• Missing state registrations, especially for remote employees in another state.
• Weak records. Keep payroll records for at least four years.

Doing payroll yourself is easier when cash comes in predictably, so send every invoice on time with the invoice generator. Before you hire, read our guide to hiring your first employee for the full setup checklist. To keep revenue flowing, send invoices as soon as work is done with our free invoice generator, which needs no sign-up and downloads a PDF built in your browser.