1. 7shifts
  2. Product Guides
  3. 7shifts Payroll
  4. Compliance & Tax Information (United States)
  5. Payroll Tax Setup & Processes

Understanding Your Payroll Tax Flow in 7shifts

Updated

When you submit payroll with 7shifts Payroll, your taxes follow a clear, automated process from calculation to final payment. This guide will walk you through the journey of your payroll taxes:

Calculation → Funding → Filing → Status Tracking 

SKIP AHEAD TO:

Payroll Submission and Tax Calculation
How Your Tax Withholding Rates are Determined
Funding vs Pending Tax Payments
Reviewing Your Tax Files
What Happens if a Tax Payment Cannot Be Submitted?

Payroll Submission and Tax Calculation

Once payroll is approved, 7shifts calculates all applicable employee and employer taxes. These amounts appear in your Taxes tab and payroll summary/journal.

  • Employee Taxes (EE)  are withheld from employee pay. These include: FICA (Social Security), Medicare, and federal or state income taxes based on W-4 data.

  • Employer Taxes (ER) are paid by your business: includes ER FICA, Medicare, Federal Unemployment (FUTA), State Unemployment (SUTA), and other jurisdiction-specific taxes.

How Your Tax Withholding Rates are Determined

Your tax withholding rates are determined based on your Business Settings in 7shifts. If you have not completed these settings, or if certain tax accounts are in an "applied for" state, a default rate may be applied. To ensure accuracy, employers should:

  • Update rates if you receive a Rate Change Notice (Payroll > Business Settings > Tax Set Up).
  • Confirm your Tax Frequency matches your respective agency's requirements. For Federal frequency, you need to reach out to our support team.
  • Enable Third Party Authorization (TPA) in all relevant government agency portals.
  • Approve Filing Authorization (Payroll > Business Settings > Filing Authorization).

7shifts partners with Check Technologies to manage the processing of payments and handle complex tax obligations. When you submit payroll:

  • Funds Withdrawal: The total payroll cost (including employee pay, employer taxes, and employee withholdings) is withdrawn from your business bank account once payroll enters Processing.

  • Tax Custody: Check securely holds your tax funds until they’re paid to the correct agencies based on your filing frequencies and due dates.

Understanding "Funded" and "Pending" Tax Payments

After payroll is paid, you'll see your tax payments listed in Payroll > Taxes > Tax Payments. There are two key statuses:

  • Funded: This status indicates that the necessary funds for that specific tax liability have been successfully withdrawn from your bank account and are being held by our payroll processing partner. This confirms that the money is ready for payment on the due date.
  • Pending: This status means that while the funds are "Funded" and secured, the actual payment to the tax agency has not yet been initiated or completed. Taxes remain in a pending state until their official due date. 

Due dates may not appear in 7shifts, but payments are always submitted on schedule according to your filing frequency.

If a payment remains pending or you suspect a filing failed, see How to Resolve a Failed Tax Payment or Filing.

Reviewing Your Tax Filings 

All filed tax forms are stored in Payroll > Taxes > Tax Forms and can be used by employers to view and download their filed tax forms for various jurisdictions and periods. See: View and Download Tax Filings.

After taxes are processed and reconciled, you may occasionally see adjustments or refunds. To learn how these are handled, see Understanding State and Federal Payroll Tax Refunds. 

Here's an overview of Federal vs State taxes:

Authority: Federal taxes are imposed by the U.S. federal government (IRS), while state taxes are imposed by individual state governments.

Purpose & Funding: Federal taxes fund nationwide programs (e.g. Federal Income Contributions Act/ FICA, Social Security, Medicare), whereas state taxes fund state-specific services (e.g., state education, roads, local law enforcement).

Tax Types:

Federal: Includes income tax, payroll taxes (Social Security, Medicare), and federal unemployment tax (FUTA).

  • Federal quarterly taxes for are typically due 1 month after quarter end. Federal quarterly taxes for Q1 are typically due by April 30th. This means any settings need to be updated in time for filing to succeed. 

State: Can include state income tax (though not all states have it), sales tax, state unemployment insurance (SUTA), and various other state-specific or local taxes

  • State tax deadlines per Quarter vary by state and tax type. For example, many states align their quarterly tax deadlines with federal deadlines, meaning Q1 taxes are typically due by April 30th. However, specific due dates can differ. 

Once your filings are complete, you can review your quarter-end summary for any adjustments, credits, or refunds. To learn how to interpret this report, see Understanding the Reconciliation Recap Report.

What Happens if a Tax Payment Cannot Be Submitted? 

A payment may fail if information is missing (such as a Tax ID or TPA access) and will remain "Pending" in 7shifts. Check out this handy article on how to Resolve a Failed Tax Payment or Filing

Was this article helpful?
0 out of 0 found this helpful