Employer payroll taxes in 2026: what you pay on top of wages

Employer payroll taxes are the taxes a business pays out of its own pocket because it has employees, separate from the income tax and FICA it withholds from each paycheck. In 2026 that means matching the employee’s Social Security and Medicare taxes, paying federal unemployment tax (FUTA), paying state unemployment tax (SUTA), and in a growing list of states contributing to disability or paid family leave insurance. The table below gives the rate and wage base for each, using the IRS figures in Publication 15 for 2026. Then a real paycheck, the deposit schedule, the penalties for missing it, and what changes on January 1, 2027.

2026 employer payroll tax rates and wage bases

These are the payroll tax rates for 2026 that fall on the employer. The “wage base” is the amount of each employee’s wages the tax applies to in a calendar year; above it, the tax stops for that employee until January.

The Social Security Administration set the 2026 wage base at $184,500, and the IRS confirms the 6.2% and 1.45% employer rates in Publication 15 (Circular E) for 2026. The 0.9% Additional Medicare Tax on wages above $200,000 has no employer match; you withhold it from the employee only. FUTA stays at 6.0% on the first $7,000 with a credit of up to 5.4% for paying state unemployment tax in full and on time, which is why nearly every employer’s real FUTA rate is 0.6%.

How much are payroll taxes in total? Add the three federal pieces and the employer’s federal share is 7.65% of wages plus $42 a year per employee. Add a typical SUTA rate and most small employers land between 8% and 12% of wages, with the percentage falling for higher earners because FUTA and SUTA stop early in the year.

Payroll taxes for employers vs employees

“Payroll taxes” means two different things: what comes out of the employee’s check and what the employer pays on top. This table separates them.

The employee column is the one workers see on a pay stub. Our guide to what FICA is covers that side in detail, and how to read a pay stub shows where each line lands. The employer column never appears on the stub.

Worked example: one barista, one paycheck

Dana Brooks is a barista at Northfield Coffee in Austin, Texas, hired November 2, 2026, at $18.25 an hour and paid biweekly. For the November 15–28 pay period, paid Friday, December 4, she works 80 regular hours with no overtime.

Gross pay: 80 × $18.25 = $1,460.00.

The 2.7% SUTA rate is the Texas entry rate for new employers and is used here as an illustration; the Texas Workforce Commission assigns each employer its own rate, and other states use different rates and wage bases. Texas has no state income tax and no state disability program, so there is nothing else in the employer column.

Annualized. If Dana worked this schedule for a full year, her wages would be 26 × $1,460 = $37,960. The employer’s Social Security match would be $2,353.52 and Medicare $550.42, both on the full amount because she is far below the $184,500 base. FUTA stops at $7,000 of wages, so it tops out at $42.00, and Texas SUTA stops at $9,000, so it tops out at $243.00. Total employer payroll taxes for the year: $3,188.94, which makes her real cost $41,148.94, or 8.4% above her wages. Notice how the percentage dropped from 10.95% on the first check to 8.4% for the year: the unemployment taxes are front-loaded into the first few months.

The employee side, for contrast. Dana’s own stub for the same period shows $90.52 Social Security and $21.17 Medicare withheld, the mirror image of the employer match, plus federal income tax based on her Form W-4. Between the two sides, $223.38 of Social Security and Medicare goes to the IRS from this one paycheck before income tax is counted. Overtime raises every employer tax above with it; our overtime calculator shows how a 45-hour week changes the gross.

Employer payroll tax calculator

Enter the gross pay for one paycheck and the calculator estimates the employer’s payroll taxes for that check and for a full year at the same pay, using 2026 IRS and SSA figures. Enter the employee’s year-to-date wages before this check so the Social Security, FUTA and SUTA wage bases cut off at the right point. Put in your own state unemployment rate and wage base from your state’s rate notice.

FUTA, SUTA and credit reduction states

Unemployment tax is the part of employer payroll taxes with the most moving parts, because it has a federal layer and a state layer that interact.

FUTA. The federal rate is 6.0% on the first $7,000 you pay each employee in a calendar year. You owe FUTA if you paid $1,500 or more in wages in any calendar quarter of this year or last, or had at least one employee for some part of a day in 20 or more different weeks. If you pay your state unemployment tax in full and on time, the IRS gives you a credit of up to 5.4%, leaving 0.6%, or $42 per employee. Pay the state late and you can lose part of the credit, which turns a $42 bill into one as high as $420 per person.

Credit reduction states. When a state borrows from the federal government to pay unemployment benefits and still owes the money on two consecutive January 1 dates, employers in that state lose 0.3% of the FUTA credit, and another 0.3% each year the loan stays unpaid. For 2025, California employers paid a 1.2% reduction, so their FUTA rate was 1.8%. For 2026 the Department of Labor’s potential list, published on its FUTA credit reduction page, has California at 1.5% (up to 5.3% if an additional add-on is not waived) and the U.S. Virgin Islands at 4.8%. The final determination is made after November 10, 2026, and shows up on Schedule A (Form 940) for 2026, so confirm the rate there before you file. A 1.5% reduction adds $105 per employee to the usual $42.

SUTA. Every state runs its own unemployment insurance tax with its own wage base and rate schedule. New employers get an entry rate for their first years; after that the state assigns an experience rate each year based on how many former employees drew benefits on your account. Texas is a useful example: the Texas Workforce Commission taxes the first $9,000 of each employee’s wages, new employers pay the greater of 2.7% or the average rate for their industry, and the total rate also includes small components such as the obligation assessment, set at 0.01% for 2026. Other states differ a lot. Several have wage bases above $50,000, and a few (Alaska, New Jersey and Pennsylvania) also take a small employee contribution. Your state’s rate notice, usually mailed in December, is the only source for your own rate.

Two things keep SUTA costs down: respond to every unemployment claim on time so benefits are not charged to your account by default, and keep terminations documented with a clear attendance policy and write-ups, because the state decides charges based on why the person left.

State disability and paid family leave contributions

A growing number of states fund disability insurance or paid family and medical leave through payroll contributions. In most of them the employee pays all or most of the premium through withholding, but several require an employer share, often only once you pass a headcount:

• Washington Paid Family and Medical Leave: a 1.13% premium in 2026, rising to 1.2% on January 1, 2027, with employers of 50 or more paying an employer share (29.3% of the premium in 2027) and smaller employers paying none, per the Employment Security Department.
• Colorado FAMLI, Oregon Paid Leave and Massachusetts PFML all require an employer share above a headcount (10, 25 and 25 employees respectively); Minnesota’s program began collecting in 2026; Maryland’s contributions are scheduled to start in 2027.
• New Jersey temporary disability, New York disability benefits and Hawaii temporary disability insurance put part or all of the cost on the employer, while California, Rhode Island and New York paid family leave are funded by employees.

Rates change every January, and the splits are set by each state agency, so take the percentage from your state program’s current notice rather than a table on the internet. If you have employees in more than one state, the contribution follows where the work is performed, which is one more reason to keep time and attendance records by location.

Deposits and filings: Form 941, Form 940 and the schedules

Calculating employer payroll taxes is the easy part. Getting the money to the IRS on the right day is where penalties start. Federal deposits must be made electronically, through EFTPS or another IRS electronic payment option, and the schedule depends on how much tax you reported in a lookback period.

If your total Form 941 tax for the current or prior quarter is under $2,500, the IRS lets you pay it with the return instead of depositing, but most employers with more than a couple of staff pass that line fast. Northfield Coffee, for example, is a monthly depositor, so the taxes from Dana’s December 4 paycheck, both halves of Social Security and Medicare plus her withheld income tax, are due by January 15, 2027, along with every other December payday. Her $8.76 of FUTA is tracked until the company’s running total passes $500. For the full sequence from hours to filings, read how to process payroll.

Penalties for late payroll tax deposits

The IRS failure-to-deposit penalty is a percentage of the deposit that is late or short, based on how many calendar days late it is, and the tiers do not stack:

Interest runs on top, and a deposit made by check or any method other than electronic transfer can also be treated as a 10% penalty case. Late Form 941 and Form 940 filings carry separate failure-to-file penalties, and states add their own interest and penalties on late unemployment reports. Withheld taxes are also trust fund taxes: if a business collects them and does not pay, the IRS can assess a trust fund recovery penalty equal to the unpaid amount against the owner or whoever controlled the money personally.

What changes in 2027

The Social Security Administration announced in its October 2026 cost-of-living notice that the Social Security wage base rises from $184,500 to $192,300 for wages paid in 2027. The 6.2% and 1.45% rates do not change, so the only effect is on employees earning above $184,500, whose employer match continues for an extra $7,800 of wages (up to $483.60 more per employee). The FUTA rate and $7,000 wage base are set in statute and are not scheduled to change. States announce their 2027 unemployment rates and wage bases in late 2026, and Washington’s paid leave premium moves to 1.2%. Your 2027 federal deposit schedule is based on a new lookback period, July 1, 2025 to June 30, 2026, so check whether a busy year moved you from monthly to semiweekly. We cover each change as it is announced in our guide to the 2027 payroll tax changes.

Independent contractors don’t trigger employer payroll taxes

None of these taxes apply to payments made to a properly classified independent contractor. You do not match Social Security or Medicare, you owe no FUTA or SUTA, and you withhold nothing; the contractor pays 15.3% self-employment tax on their own return. That gap, roughly 8% to 12% of pay, is exactly why the IRS and state agencies audit classification. The test is control: who sets the hours, provides the tools, and decides how the work is done. If a worker is reclassified as an employee, you owe both halves of FICA, FUTA and SUTA for the back period plus penalties and interest, and the state may bill unemployment contributions too. Our 1099 vs W-2 guide walks through the federal and state tests before you decide.

What employers should do

1. Budget 8% to 12% above wages for payroll taxes alone, more in a credit reduction state or where you pay a disability or leave share. Add benefits and paid time off separately.
2. Register before the first payday. You need an EIN, EFTPS enrollment, a state unemployment account and, outside the nine states without income tax, a state withholding account. New hires also need a complete paperwork file so the W-4 is in place before you run pay.
3. Know your deposit schedule and the exact due dates for the year. Most new employers are monthly depositors.
4. Read your state rate notice each December and update the rate in your payroll system on January 1. A wrong SUTA rate means every quarterly report is wrong.
5. Watch the wage bases. FUTA stops at $7,000 and your state SUTA at its base, so most of the year’s unemployment tax lands in the first and second quarters. If your numbers do not drop mid-year, something is off.
6. Respond to unemployment claims and keep separation records, because your experience rate is the one payroll tax you can lower.
7. Keep records at least four years. The IRS requires employment tax records for four years after the tax is due or paid, and the FLSA requires payroll records for three years.
8. Decide who owns the deposits and filings, you, your accountant or your payroll provider, and get it in writing. Ask every provider which forms they file and which stay with you. When you compare options, our roundup of the best payroll services for small business lists the questions to ask.

Frequently asked questions