US payroll 2026: FICA, FUTA, W-4 withholding and filings

In the United States the employer withholds federal income tax based on the employee's Form W-4, the employee's 7.65% FICA share (Social Security and Medicare) and any state or local income tax. On top of gross pay the employer pays a matching 7.65%, federal unemployment tax (FUTA) and state unemployment tax (SUTA).

US payroll at a glance

Social Security, Medicare and unemployment taxes

The Federal Insurance Contributions Act (FICA) taxes are shared equally between employee and employer. FUTA is paid by the employer only.

Social Security stops once the employee's wages for the year reach $184,500, so the maximum is $11,439.00 for the employee and the same for the employer. Medicare has no cap.

Additional Medicare tax: you must withhold 0.9% from the pay period in which an employee's wages from you pass $200,000 in the calendar year, whatever their filing status, and continue until year-end. There is no employer match.

FUTA: the rate is 6.0% on the first $7,000 paid to each employee in the year. You get a credit of up to 5.4% when you file Form 940, which brings the net rate to 0.6% (at most $42 per employee a year), provided you paid your state unemployment tax in full by the Form 940 due date and your state is not a credit reduction state. The Department of Labor names those states each year; if you pay wages in one, you owe extra FUTA with your fourth-quarter deposit and report it on Schedule A of Form 940. Deposit FUTA by the last day of the month after a quarter once the undeposited amount is more than $500; smaller amounts carry forward to the next quarter.

SUTA rates and wage bases differ by state, so register with the state unemployment agency in every state where you have employees.

Federal income tax withholding: Form W-4 and Publication 15-T

Every new employee fills in the 2026 Form W-4: filing status, a box for multiple jobs (Step 2), credits for dependants (Step 3) and other adjustments such as other income, extra deductions or extra withholding (Step 4). The 2026 form reflects the new deductions of the One Big Beautiful Bill Act (P.L. 119-21) and adds a checkbox for employees who claim exemption from withholding.

You then apply IRS Publication 15-T (2026), either with the wage bracket tables or with the percentage method. Under the annual percentage method for automated payroll, you annualise the wages, add the Step 4(a) other income, subtract the Step 4(b) deductions and, if the Step 2 box is not checked, a further $8,600 ($12,900 for married filing jointly). The result is the adjusted annual wage, which goes through this table for single filers:

Divide the annual figure by the number of pay periods (12 for monthly, 26 for biweekly, 52 for weekly), subtract the Step 3 credits per period and add any extra withholding from Step 4(c). The $8,600 plus the $7,500 zero band equal the 2026 standard deduction of $16,100 for a single filer, and the bands follow the 2026 tax brackets of 10%, 12%, 22%, 24%, 32%, 35% and 37%.

Bonuses and other supplemental wages can be withheld at a flat 22%, and must be withheld at 37% on supplemental wages above $1 million in the year.

Tips and overtime: from 2025 to 2028 employees can deduct up to $25,000 of qualified tips and up to $12,500 ($25,000 if married filing jointly) of qualified overtime pay, which is the premium part of time-and-a-half. These amounts are still subject to Social Security and Medicare tax.

State and local income tax is withheld under each state's own rules and forms, and some cities and counties add their own. This guide covers the federal rules only.

Minimum wage, overtime and paid time off

Federal minimum wage: $7.25 an hour under the Fair Labor Standards Act (FLSA), unchanged since 24 July 2009. State laws can give employees more, and employers must comply with both. According to the Department of Labor's state table (updated 1 July 2026), 30 states and the District of Columbia have a higher minimum wage, including the District of Columbia at $18.40, Washington at $17.13 and California at $16.90. Some cities and counties set higher rates again.

Overtime: non-exempt employees must get at least 1.5 times their regular rate for every hour over 40 in a workweek. The workweek is a fixed period of 168 hours; you cannot average hours over two or more weeks, and federal law requires no premium for weekend or holiday work as such.

No 13th salary or statutory paid leave at federal level: the FLSA does not require payment for time not worked, such as vacations, sick leave or holidays. These come from your policies and agreements, and from state or local law where it applies.

Payroll calendar and filings

Before the first payroll:

• get an employer identification number (EIN) from the IRS
• ask each new employee for a 2026 Form W-4, complete Form I-9 to verify their eligibility to work (E-Verify is available) and report them to your state new hire registry
• register with the state tax and unemployment agencies where you have employees

Deposit schedule: your schedule for 2026 depends on the taxes you reported in the lookback period, 1 July 2024 to 30 June 2025 for Form 941 filers.

• Monthly depositor (lookback $50,000 or less): deposit the taxes on wages paid in a month by the 15th of the following month.
• Semiweekly depositor (more than $50,000): for paydays on Wednesday, Thursday or Friday, deposit by the following Wednesday; for paydays on Saturday to Tuesday, by the following Friday.
• $100,000 rule: once you accumulate $100,000 or more of taxes on any day, deposit by the next business day.
• If your liability for the quarter is under $2,500, you can usually pay it with a timely filed return instead.

All federal tax deposits are made electronically, for example through the free EFTPS system.

Returns and year-end forms:

You must file information returns electronically if you file 10 or more in the year, counting Forms W-2 and 1099 together.

Records: keep employment tax records for at least four years. Under the FLSA, keep payroll records for three years and time cards, wage rate tables and work schedules for two years. The FLSA sets out what those records must contain rather than a payslip format, so check your state's rules for pay statements.

Worked example: $5,000 a month in 2026

A single employee paid monthly, with a 2026 Form W-4 with no entries in Steps 2 to 4, earns $5,000.00 a month ($60,000 a year). Federal income tax uses the Publication 15-T annual percentage method: $60,000 − $8,600 = $51,400 adjusted annual wage, so $1,240.00 + 12% × ($51,400 − $19,900) = $5,020.00 a year, or $418.33 a month.

FUTA stops once the employee's wages for the year reach $7,000: here $12.00 in February and nothing from March, when the employer cost is $5,382.50 a month before SUTA. State income tax and SUTA depend on the state, so they are not included.

Common mistakes

1. 1Budgeting only the 7.65% match. FUTA and state unemployment tax come on top, and a credit reduction state raises FUTA.
2. 2Not stopping Social Security at $184,500, or not starting the 0.9% Additional Medicare tax at $200,000, which the employer does not match.
3. 3Using last year's W-4 logic. Apply the 2026 Publication 15-T tables and the 2026 Form W-4, including the exemption checkbox.
4. 4Paying $7.25 where the state or city minimum is higher. The employee is entitled to the higher protection.
5. 5Missing overtime for non-exempt employees on a salary. Overtime depends on the hours over 40 in a workweek, not on how the employee is paid.
6. 6Depositing on the wrong schedule. Check your lookback period every year and watch the $100,000 next-day rule.

To close each pay period cleanly, use our month-end close checklist.

How Clientlly helps

Clientlly ships a built-in payroll profile for the United States: the 2026 federal income-tax bands and standard deduction as modelled, the employee and employer Social Security and Medicare rates, the Social Security wage base and the federal minimum wage, checked against official sources on 1 October 2026. It calculates gross to net and the employer contributions, produces payslips, supports recurring payroll adjustments, and imports employees and payroll data; an administrator can adjust the rates in the payroll tax settings. The profile models one employee in a primary job, single, without dependants, at federal level, so state and local income tax, SUTA, W-4 entries and personal circumstances must be checked.

The Clientlly HR module also handles leave requests and approvals with a leave calendar and keeps HR documents in one place, and attendance and time tracking records hours and overtime so you can check them before you run payroll.