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
Federal Authority: Taxes are imposed by the U.S. federal government (IRS) to fund nationwide programs like Social Security and Medicare.
State Authority: Taxes are imposed by individual state governments to fund services like education, roads, and local law enforcement.
The total payroll cost, including taxes, is withdrawn from your bank account as soon as payroll enters the Processing status.
- Tax funds are securely held until their official due dates to ensure timely payments to agencies.
- Tax forms appear in 7shifts by the quarterly due date (e.g., Q4 forms appear by January 31).
Payroll submission and tax calculation
Once payroll is approved, 7shifts calculates all applicable employee and employer taxes. You can find these amounts in your Taxes tab or your 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
Your tax withholding rates are based on your Business Settings. To ensure accuracy and avoid default rates, please complete the following steps:
- Update rates immediately if you receive a Rate Change Notice by navigating to Payroll > Business Settings > Tax Set Up.
- Confirm your Tax Frequency matches your agency requirements.
- Enable Third Party Authorization (TPA) in all relevant government agency portals.
- Approve your Filing Authorization under Payroll > Business Settings > Filing Authorization.
Understanding tax payment statuses
You can track your tax payments by navigating to Payroll > Taxes > Tax Payments. There are two primary statuses you will see:
- Funded: Funds have been successfully withdrawn from your bank account and are ready for payment on the due date.
- Pending: Funds are secured, but the actual payment to the tax agency has not yet been completed. Taxes remain pending until their 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.
What happens if a tax payment fails?
A payment may fail to submit if information is missing, such as a Tax ID or TPA access. In these cases, the status will remain "Pending" past the due date. If you suspect a failure, refer to the related article below for resolution steps.