Payroll taxes, explained simply

The direct answer: what payroll taxes are (and who pays what)

In the US, “payroll taxes” usually means two things: (1) money withheld from employees’ wages (like federal income tax and FICA) and (2) employer-paid taxes (like FUTA/SUTA).

A payroll provider’s job is to calculate the amounts from your payroll, then help you deposit them on time and file the required tax forms. Rules and deadlines depend on the tax and your state.

RunWise Pay is a FREE matching service that helps you connect with payroll service providers who can handle payroll deposits and filings. We are not a payroll provider, accountant, bookkeeper, or tax advisor, and we can’t give tax/legal advice.

Because details vary, confirm specifics with a qualified payroll provider and/or tax professional, and double-check current IRS and state rules and deadlines yourself.

Federal taxes you’ll hear about most (in plain language)

Here are the common federal items tied to payroll:

- Federal income tax withholding: This is federal tax taken out of an employee’s paycheck based on what they claim on their W-4.

- FICA (Social Security + Medicare): These are payroll taxes that fund Social Security and Medicare. They’re split between employer and employee. Payroll services calculate both sides.

- FUTA (Federal Unemployment Tax Act): This is a federal unemployment tax the employer pays (not withheld from employees). Some employers can get a credit if state unemployment taxes are paid.

Your payroll service typically calculates these each pay period (or each payroll run), then schedules deposits and prepares filings.

Note: Additional Medicare rules and certain wage thresholds can apply. That’s exactly why you should ask your provider how they handle your specific situation.

State payroll taxes: what changes by where you live

States generally add their own income tax withholding and their own unemployment tax.

Common state items include:

- State income tax withholding (if your state has it): Withheld from employees’ wages based on state rules and employee elections.

- SUTA (State Unemployment Tax): Employer-paid unemployment tax. The rate can depend on factors like your experience rating and how your state tracks claims.

State deposit schedules, filing dates, and forms vary a lot. A payroll service usually knows the rules for each state you operate in—but you still should confirm what’s included.

Before you switch providers or start payroll, ask how they handle: your state’s unemployment filings, deposit timing, and any year-end reporting (like W-2 and 1099 support).

How a payroll service handles deposits and filings (what to expect)

A payroll service usually follows this pattern each pay cycle:

1. You enter or import employee info and payroll details (hours/salary, pay dates, deductions).
2. The service calculates gross pay, withholding, and employer taxes.
3. It prepares pay runs so employees are paid (often by direct deposit) and deductions are applied correctly.
4. It helps ensure required tax deposits are scheduled and tracked.
5. It prepares filings for payroll tax forms and year-end forms.

At year-end, payroll providers commonly support W-2 and 1099 processing (what’s required depends on your staffing, contractors vs employees, and the type of payments).

Cost note (honest range, not a quote): many small businesses pay a base monthly fee plus a per-employee fee. Depending on team size, pay frequency (weekly/biweekly/semimonthly), what’s included (direct deposit, tax filing support, year-end forms, support), and your state, an approximate range might be something like $40–$150+ per month, and possibly $5–$15+ per employee per month. These are ballparks, not quotes—always confirm the full pricing in writing.

Red flags to avoid when comparing providers:

• Vague pricing or pricing that changes after you sign.
• “We’ll handle taxes” without clear details on deposits, filings, and support.
• No clear explanation of whether they include year-end W-2/1099 support.
• Pressure to sign fast, or refusal to confirm scope in writing.

Always ask: “What exactly is included in the monthly price, and what would cost extra?” and get that in writing.

Payroll tax basics for new owners: a simple checklist

If you’re new to US payroll, you don’t need to memorize tax rules—just make sure the system is set up correctly.

1. Confirm you can properly classify your people (employees vs contractors). Payroll tax responsibilities are different.
2. Make sure you collect required employee tax forms (like W-4) before running payroll.
3. Choose your pay schedule and stick to it (your deposit timing and workflow depend on this).
4. Set up accurate pay components (regular pay, overtime if applicable, reimbursements/benefits if any).
5. Confirm your provider’s process for unemployment tax (FUTA/SUTA) and how state filing works.

When you’re evaluating a payroll provider, ask practical questions:

• How do you calculate federal income tax withholding and FICA?
• How do you handle deposit schedules and proof/records?
• Do you file payroll tax forms or provide filing support, and how do you communicate status?
• What happens if there’s a mistake—how do corrections work?

RunWise Pay can help you get matched with providers, but we don’t run payroll or file taxes. Confirm any specifics with a qualified professional and check current IRS/state guidance.

One more reminder: confirm what’s included in writing before you sign anything.

Get help fast: use RunWise Pay to compare providers

If payroll taxes feel confusing, you’re not alone—many small owners, especially new immigrant business owners and non-native English speakers, just need a clear, reliable setup.

RunWise Pay is a FREE matching service (not a payroll provider). We connect you with participating payroll service providers based on your business intent, how many people you pay, your state, and your preferred language.

To get started, share only what’s necessary (contact + business intent). Don’t submit SSNs, EINs, bank account numbers, or employee records.

1. Go to Get matched and tell us your state and how many people you pay.
2. Review provider options from Services and ask what’s included.
3. Ask for written details about deposits, filings, and year-end support before choosing.

If you already have a provider and need help fixing payroll tax issues, you can still ask for matching—just describe the problem you’re trying to solve.