February is when many small business owners are still catching their breath after year-end reporting while also gearing up for a new tax year. One area that often causes stress and costly mistakes is payroll taxes.

Whether you have a growing team or you’re paying yourself through your business, handling payroll taxes correctly is essential for staying compliant and avoiding IRS penalties. Here’s a clear breakdown of what you need to know and how to stay on track.

Know Which Payroll Taxes You’re Responsible For

As an employer, you’re responsible for several types of payroll taxes, including:

• Federal Income Tax
  Withheld from employee paychecks based on their W-4 form and sent to the IRS.

• State and Local Income Taxes
  These vary by state and locality, so it’s important to confirm the correct withholding requirements for where your business operates.

• Social Security and Medicare (FICA Taxes)
  You withhold 6.2 percent for Social Security and 1.45 percent for Medicare from employee wages, and you must match these amounts as the employer.

• Federal Unemployment Tax (FUTA)
  Paid entirely by the employer. While the base rate is 6 percent, many businesses qualify for credits that significantly reduce this amount.

• State Unemployment Tax (SUTA) and MN Paid Family Leave
  These are state level unemployment and paid leave with rates that vary depending on your location and business history.

Unsure which payroll taxes apply to your business? AccuCountants can help you understand your obligations and how they affect your overall tax situation.

Withhold the Correct Amount From Each Paycheck

Employers must withhold federal, state, Social Security, and Medicare taxes correctly for every payroll run. The IRS provides guidance in Publication 15 (Circular E), which outlines current withholding rules and tables.

While many businesses use payroll software or third-party providers, it is still your responsibility to ensure the information is accurate.

AccuCountants can review payroll tax setups and filings to help identify potential issues before they lead to penalties.

Account for the Employer’s Share

Payroll taxes are not just about withholding. Employers are also responsible for paying their portion of Social Security and Medicare taxes.

Failing to plan for the employer share can create cash flow challenges and unexpected tax bills.

File the Required Payroll Tax Forms

Payroll taxes come with ongoing filing requirements, including:

Form 941 (Quarterly)
Reports wages paid, taxes withheld, and employer FICA contributions.

Form 940 (Annual)
Reports FUTA taxes and is due by January 31 each year.

State Payroll Forms
Requirements vary by state and must be filed on time to avoid penalties.

February is an ideal time to review prior filings and confirm everything was submitted accurately.

If you are unsure whether your payroll tax forms were filed correctly, AccuCountants can help you review past filings as part of your tax compliance planning.

Pay Payroll Taxes on Time

Payroll tax payments must be made on a monthly or semi-weekly schedule, depending on your business. Late payments can result in penalties that add up quickly.

Payments are typically made through the Electronic Federal Tax Payment System (EFTPS).

Keep Thorough Payroll Records

Maintaining proper payroll records supports accurate tax filings and protects your business in the event of an audit. Keep records for at least four years, including:

• Wages, hours, and deductions
• Payroll tax deposits
• Filed payroll tax forms
• State unemployment filings

Final Thoughts

Payroll taxes are a critical part of running a business, even when payroll processing is handled elsewhere. Taking time in February to review compliance and address gaps can help prevent issues later in the year.

Have questions about payroll taxes or business tax compliance? Schedule a consultation with AccuCountants to review your tax obligations and plan ahead with confidence.