What payroll taxes do small businesses need to pay?

Payroll Taxes for Small Businesses in Wisconsin

Small businesses operating in Wisconsin must manage several payroll tax obligations to remain compliant and avoid penalties. Understanding these taxes and their operational requirements is essential for efficient payroll management.

Federal Payroll Taxes

• Social Security and Medicare Taxes (FICA): Employers must withhold Social Security and Medicare taxes from employee wages and match these amounts. The current combined rate is 7.65% from the employer and 7.65% from the employee.
• Federal Income Tax Withholding: Employers are responsible for withholding federal income tax from employees’ paychecks based on IRS withholding tables and employee W-4 forms.
• Federal Unemployment Tax Act (FUTA): Employers pay FUTA tax to fund unemployment benefits. The standard FUTA rate is 6.0% on the first $7,000 of each employee’s wages, with possible credits reducing the effective rate.

Wisconsin State Payroll Taxes

• Wisconsin Income Tax Withholding: Employers must withhold Wisconsin state income tax from employee wages according to state withholding tables and employee Form WT-4.
• State Unemployment Insurance (SUI): Wisconsin employers pay SUI taxes to fund state unemployment benefits. Rates vary based on employer experience and range approximately from 0.1% to 9.9% on the first $14,000 of each employee’s wages as of 2026.

Operational Considerations

• Registration: Register with both the IRS and Wisconsin Department of Revenue for payroll tax accounts before hiring employees.
• Payroll Schedule: Establish consistent payroll schedules to ensure timely tax withholdings and deposits.
• Tax Deposits and Reporting: Deposit withheld taxes and employer contributions according to federal and state schedules. File quarterly payroll tax reports with the IRS (Form 941) and Wisconsin Department of Revenue (Form WT-7).
• Recordkeeping: Maintain accurate payroll records including wages, tax withholdings, and tax payments for at least four years to meet compliance and audit requirements.
• Automation: Use payroll software or services that integrate federal and Wisconsin tax calculations, deposits, and filings to reduce errors and administrative burden.
• Employee Classification: Correctly classify workers as employees or independent contractors to apply appropriate payroll tax rules.