What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Virginia

Small businesses operating in Virginia must manage several payroll tax obligations to stay compliant and avoid penalties. Understanding these taxes helps streamline payroll processes and ensures accurate bookkeeping and reporting.

Federal Payroll Taxes

• Social Security Tax: Employers must withhold 6.2% of wages from employees and match this amount.
• Medicare Tax: Employers withhold 1.45% from employees and also match this contribution.
• Federal Unemployment Tax (FUTA): Employers pay this tax; it is not withheld from employees. The current rate is 6.0% on the first $7,000 of wages per employee, with potential credits reducing the effective rate.
• Federal Income Tax Withholding: Employers must withhold federal income tax based on employee W-4 forms and IRS withholding tables.

Virginia State Payroll Taxes

• Virginia Income Tax Withholding: Employers are required to withhold state income tax from employee wages. Rates vary based on employee withholding allowances and income level.
• Virginia Unemployment Insurance (SUTA): Employers pay state unemployment tax based on taxable wages and assigned rates. Employees do not pay this tax.

Operational Considerations

• Registration: Register with the Virginia Department of Taxation and the Virginia Employment Commission to report and remit payroll taxes.
• Reporting: File federal payroll tax reports such as Form 941 quarterly and Form 940 annually. Virginia requires regular state withholding and unemployment tax filings.
• Recordkeeping: Maintain accurate payroll records including tax withholdings, wage payments, and tax filings for at least four years.
• Automation: Use payroll software or services to automate tax calculations, withholding, and filing to reduce errors and save time.
• Compliance: Stay updated on changes to tax rates or filing requirements as of 2026 by consulting official Virginia and IRS resources.