Guide · 2026 rules

How to do payroll: each payday, each quarter, each year

Payroll is more than writing paychecks. Each payday you figure and withhold taxes, then you deposit them, report them every quarter and send W-2s once a year. This page lists the federal steps in order, with the IRS’s own pages for each, and links each state’s part.

Updated October 24, 202622 official sources

In short

Each payday: withhold federal income tax, Social Security and Medicare from each paycheck, and add the employer’s share.
A new employer generally deposits those taxes monthly, by the 15th of the next month, and always electronically.
Form 941 is due every quarter; Forms W-2 and W-3 by February 1, 2027 for 2026 wages.
A payroll service can do the work, but the IRS holds the employer responsible for the taxes.

Before the first payday

1. Set up the accounts

You need an EIN, which the IRS issues free online. You also register in the state where the work is done, usually for income tax withholding and unemployment insurance. Employer setup by state lists the accounts each state expects, with each agency’s page. Check your state’s rate in minimum wage by state.

2. Collect the new-hire forms

Each employee fills out Form W-4 for federal withholding and Form I-9 for work eligibility, and you report the hire to the state. How to hire your first employee covers each form and its deadline.

3. Pick a pay schedule

States set their own payday rules, and they differ. California, for example, generally requires pay at least twice a month, and most Rhode Island employers must pay weekly. Federal law requires that wages it covers be paid on the regular payday for the period. Check your state’s rule before you choose weekly, every two weeks, twice a month or monthly: pay frequency requirements by state lists all of them.

Every payday

4. Figure each paycheck

Start from gross pay: hours times the rate, or the salary for the period, plus any overtime. Then take out the taxes the employee owes, and set aside the employer’s own share.

Tax	Employee pays	You pay	On
Federal income tax	From the W-4	None	Each paycheck
Social Security	6.2%	6.2%	Wages up to $184,500 for 2026
Medicare	1.45%	1.45%	All wages
Additional Medicare	0.9%	None	Wages over $200,000 in a calendar year
Federal unemployment (FUTA)	None	6.0%, or 0.6% after the full 5.4% credit	The first $7,000 of each employee’s wages

IRS Publication 15-T gives two ways to figure federal income tax: the Wage Bracket Method, which employers who run payroll by hand may use for employees with a 2020-or-later W-4, and the Percentage Method, which automated payroll systems use. Bonuses and other supplemental wages have their own rules: one option is a flat 22%, and supplemental wages above $1 million to one employee in a year are withheld at 37%.

State income tax and state unemployment tax come on top, set by each state. Employer setup by state lists them. When an employee leaves, each state sets its own deadline for the last check: final paycheck laws by state.

Depositing the taxes

5. Deposit on your schedule

Every employer follows one of two federal deposit schedules, monthly or semiweekly, set before each year starts. The schedule comes from the taxes you reported in a lookback period, not from how often you pay people: $50,000 or less makes you a monthly depositor, more than $50,000 a semiweekly one. A new employer filing Form 941 is a monthly depositor for its first calendar year.

Monthly: a month’s taxes are due by the 15th of the following month.
Semiweekly: taxes for a Wednesday, Thursday or Friday payday are due by the next Wednesday; for a Saturday through Tuesday payday, by the next Friday.
Any schedule: once you build up $100,000 or more in taxes on any day, deposit by the next business day.

All federal tax deposits must be made electronically, for example through EFTPS, IRS Direct Pay or your IRS business tax account.

Every quarter

6. File Form 941

Form 941 reports the federal income tax, Social Security and Medicare you withheld, the employer’s share, and the wages you paid. It is due by the last day of the month after each quarter: April 30, July 31, October 31 and January 31. If you deposited all the taxes on time, you get 10 more calendar days. You generally file even for a quarter with no taxes to report.

The smallest employers may instead file Form 944 once a year, but only if the IRS has notified them in writing. It is for employers whose yearly Social Security, Medicare and withheld income tax come to $1,000 or less. The IRS says $5,000 or less in yearly wages generally means $1,000 or less in those taxes. The request window falls early in each year.

Every year

7. Send W-2s and file the annual returns

Each employee gets a Form W-2 showing the year’s pay and withholding, and you send the W-2s to the Social Security Administration with Form W-3. For 2026 wages both are due February 1, 2027. You must e-file W-2s if you are required to file at least 10 information returns. Federal unemployment tax goes on its own annual return, Form 940.

8. Keep the records

The IRS says to keep employment tax records for at least 4 years. Federal wage law asks for payroll records for at least three years. How to hire your first employee lists the rest, including the I-9s.

Doing it yourself or with a payroll service

Doing payroll yourself costs time: the calculations each payday, the deposits, the quarterly and annual forms, and the state filings. A full-service payroll plan does the calculations, deposits and filings for you. Published plans start at $35 to $50 a month plus $5 to $7 a month per person; S-corp payroll costs compares them.

Want a service to run it? GustoPaid link runs payroll and files federal and state payroll forms; its published plans start at $49 a month plus $6 a person.

Hiring a service doesn’t move the responsibility. The IRS says the employer stays ultimately responsible for depositing and paying federal payroll taxes, and it may assess penalties on the employer’s account if the provider fails to pay. It suggests registering on EFTPS with your own PIN and checking the payments from time to time.

If the only employee is you

After an S election your own salary runs through payroll, with the same steps on this page. How to pay yourself covers the salary, and the payroll cost calculator shows what it costs in your state.

See what an S election would add or save for your business.Profit, state and salary. Two minutes, nothing sent anywhere.

Open the check

Sources

Sources: 22 official pages

Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An explanation of public rules, not tax advice.

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