What Federal Employment Tax Forms Do Employers File?
Understand the employer's role in managing federal employment taxes, from collecting employee information to reporting and depositing funds with the IRS.
Employers are responsible for several federal tax obligations, which involve calculating, collecting, and remitting funds to the government. The main employment taxes are federal income tax withheld from employee paychecks, and Social Security and Medicare taxes (FICA). For FICA taxes, employers withhold the employee’s share and contribute an employer share. A separate federal unemployment tax (FUTA) is paid solely by the employer. This system requires a structured process of tracking wages, withholding taxes, and then reporting and depositing these funds with the Internal Revenue Service (IRS).
The Employee Withholding Form
To calculate the correct federal income tax to withhold, employers must collect information from each employee using Form W-4, the Employee’s Withholding Certificate. This form is part of the new hire paperwork and provides instructions on the employee’s tax situation. The employer uses the W-4 to determine how much to withhold from each paycheck for federal income taxes.
The employee provides their name, address, Social Security number, and a filing status, such as “Single or Married filing separately,” “Married filing jointly,” or “Head of household.” This selection impacts the withholding calculation, as it corresponds to different tax brackets. The form was redesigned in 2020 to eliminate the use of personal allowances.
Instead of allowances, the modern Form W-4 asks employees to account for dependents, including children who qualify for the Child Tax Credit, which reduces the amount of tax withheld. There are also sections for the employee to report other income not from their job or to specify additional deductions they plan to take. An employee can also request that an extra, specific dollar amount be withheld from each paycheck.
The employee is responsible for completing and signing the Form W-4. The employer collects the form, implements the instructions in their payroll system, and retains it for their records. This form is not filed with the IRS but must be available for inspection if requested.
Quarterly and Annual Employer Tax Returns
Employers report withheld federal income taxes and both shares of FICA taxes quarterly on Form 941, the Employer’s QUARTERLY Federal Tax Return. This form summarizes total employee compensation, income tax withheld, and FICA tax liability for the quarter. The filing deadlines are April 30, July 31, October 31, and January 31.
On Form 941, the employer reports the number of employees, total wages subject to FICA, and total income tax withheld. For 2025, the Social Security tax is 6.2% for both the employee and employer on wages up to $176,100. The Medicare tax is 1.45% for both parties with no wage limit. The form reconciles the tax liability with deposits made during the quarter.
Employers report their annual Federal Unemployment Tax Act (FUTA) liability on Form 940. This tax is paid only by the employer on the first $7,000 of wages paid to each employee. The standard FUTA tax rate is 6.0%, but employers can claim a credit of up to 5.4% for timely state unemployment tax payments, lowering the effective rate to 0.6%. This credit can be reduced if the employer is in a “credit reduction state,” which has an outstanding federal loan for unemployment benefits.
While Form 940 is filed annually, FUTA tax must be deposited quarterly if the liability for the quarter exceeds $500. The deposit is due by the last day of the month following the end of the quarter. If the liability is $500 or less, it can be carried over to the next quarter. The annual Form 940 is due by January 31, but the filing deadline is extended to February 10 if all deposits were made on time.
Some small businesses with an annual employment tax liability of $1,000 or less may be permitted by the IRS to file Form 944 annually instead of the quarterly Form 941. This allows them to report and pay their income and FICA taxes once a year. The IRS determines eligibility and must provide written notification to the employer.
Annual Wage and Tax Statements
At the end of the year, employers must provide each employee with Form W-2, the Wage and Tax Statement, which summarizes their total earnings and taxes withheld. Employees use this document to prepare their personal income tax returns. Employers must furnish Form W-2 to every employee by January 31 of the following year.
Form W-2 reports specific financial figures in various boxes. Box 1 shows total taxable wages for federal income tax purposes, and Box 2 reports the federal income tax withheld. Other boxes detail Social Security wages (Box 3), Social Security tax withheld (Box 4), Medicare wages (Box 5), and Medicare tax withheld (Box 6).
In addition to providing copies to employees, employers must file copies of all Forms W-2 with the Social Security Administration (SSA). This filing is accompanied by Form W-3, the Transmittal of Wage and Tax Statements. Form W-3 is a cover sheet that reports the combined totals from all individual W-2s and is not provided to employees. The deadline for filing both forms with the SSA is January 31. If an employer files W-2s electronically, a separate Form W-3 is not needed.
The Federal Tax Deposit System
Employers must remit employment tax funds to the federal government using the Electronic Federal Tax Payment System (EFTPS). This free online service from the U.S. Department of the Treasury is required for nearly all businesses to deposit federal taxes, including those for Forms 941 and 940. EFTPS allows for secure electronic transfers from the employer’s bank account.
To use the system, an employer must enroll on the EFTPS website with their Employer Identification Number (EIN) and bank account information. After enrollment, the employer can log in to make payments. This involves selecting the tax form, entering the payment amount, and scheduling the transfer date. Payments must be scheduled by 8 p.m. Eastern Time at least one calendar day before the tax due date to be considered timely.
The frequency of deposits is determined by an employer’s deposit schedule, which is either monthly or semi-weekly. The IRS assigns this schedule based on the employer’s tax liability reported on Form 941 during a “lookback period.” If the total tax liability during this period was $50,000 or less, the employer is a monthly depositor and must deposit taxes for a given month by the 15th of the following month. If the liability was over $50,000, the employer is a semi-weekly depositor with more frequent deadlines. New employers usually start as monthly depositors.