How payroll taxes are calculated and filed

When you submit payroll with 7shifts Payroll, your taxes follow a clear, automated process from calculation to final payment. This payroll tax flow journey ensures your business stays compliant while we handle the heavy lifting! This guide will walk you through how your taxes move from calculation to status tracking so you can feel confident in your payroll runs. 

Calculation → Funding → Filing → Status Tracking 

Things to know

• Employers must make updates promptly on the effective date indicated in a tax notice to maintain system accuracy.
• Employers should keep a copy of all tax notices for company records in case of future agency discrepancies.
• Failed filings do not appear inside 7shifts platform at this time.
• Tax agencies have independent processing times that are outside the control of Check Technologies and 7shifts.
• Employers are responsible for reviewing government tax portals for penalties or missing payments because delayed payments can lead to interest charges from the tax agency.
• When an unremittable tax payment or overpayment is identified, the tax agency will credit the employer account since 7shifts does not issue automated bank refunds.
• 7shifts does not cover penalties or interest for late filings or tax payments caused by missing or incorrect tax settings.
• The total payroll cost, including payroll taxes, is withdrawn from the employer bank account as soon as the payroll run enters Processing status.
• Tax funds are securely held until the official due dates to ensure timely payments to tax agencies.
• Tax forms appear in 7shifts by the quarterly due date.

Payroll submission and tax calculation

Once a payroll run is approved, 7shifts calculates all applicable employee and employer taxes. Employers can find these tax amounts in the Taxes tab or by referencing the payroll summary/journal.

• Employee Taxes (EE) are withheld from employee pay, including FICA (Social Security), Medicare, and federal or state income taxes.
• Employer Taxes (ER) are paid by your business and include ER FICA, Medicare, Federal Unemployment (FUTA), and State Unemployment (SUTA).

How tax withholding rates are determined

Tax withholding rates are determined by the selections configured in Business Settings. To ensure accuracy and avoid default rates, employers should complete these configuration steps:

1. Update tax rates immediately upon receiving a Rate Change Notice by navigating to Payroll, selecting Business Settings, and clicking Tax Set Up.
2. Confirm the Tax Frequency matches the specific government agency requirements.
3. Enable Third Party Authorization (TPA) in all relevant government agency portals.
4. Approve your Filing Authorization under Payroll > Business Settings > Filing Authorization.

Understanding tax payment statuses

Employers can track company tax payments by navigating to Payroll, selecting Taxes, and clicking Tax Payments. The 7shifts platform displays two primary statuses for payroll tax payments:

• The Funded status indicates that tax funds have been successfully withdrawn from the business bank account and are ready for payment on the official due date.
• The Pending status indicates that tax funds are secured but the actual payment to the tax agency is not yet completed because taxes remain pending until the official due date.

Reviewing tax filings

All filed tax forms are stored in Payroll > Taxes > Tax Forms. You can use this section to view and download records for various jurisdictions and periods. For more details, see View and Download Tax Filings.

Federal vs State taxes

• Federal Taxes: Imposed by the IRS to fund nationwide programs like Social Security and Medicare. Quarterly filings are typically due one month after the quarter ends.
• State Taxes: Imposed by individual state governments to fund local services like education and roads. Deadlines vary by state and tax type.

Note: After reconciliation, you may occasionally see adjustments or refunds. Learn more in our guide on Understanding State and Federal Payroll Tax Refunds.

What happens if a tax payment fails?

A payroll tax payment may fail to submit if critical information is missing, such as a Tax ID or Third Party Authorization access. In these cases, the tax payment status will remain Pending past the official due date. If a tax payment failure is suspected, employers should review account configuration errors immediately.