Payroll Calculator: How to Calculate Employee Taxes and Withholding

As an employer, you're responsible for calculating, withholding, and remitting several taxes on each paycheck:

• Federal income tax withholding — based on the employee's W-4
• FICA — Social Security + Medicare (15.3% total, split between employee and employer)
• FUTA — federal unemployment (employer-only)
• SUTA — state unemployment (employer-only, rate varies)
• State & local income tax — if your jurisdiction has them

Getting any of these wrong means penalties, interest, and unhappy employees. The structure is consistent; the complexity is in the thresholds and state variation.

FICA is the largest payroll tax. For 2026:

Two things trip up employers: (1) stopping Social Security withholding once an employee passes $176,100 in year-to-date wages, and (2) starting the 0.9% Additional Medicare withholding when an employee crosses $200,000 — that one is employee-only, no employer match.

Let's break down a $60,000/year salaried employee (single, no dependents, semi-monthly = 24 pay periods, gross $2,500/paycheck):

The employee costs the employer roughly 8% more than their salary once employer-side taxes are included — before benefits.

Both unemployment taxes are employer-only — never withheld from employee wages.

• FUTA — 6.0% on the first $7,000 of each employee's wages, but a 5.4% credit for timely state unemployment payments brings the net rate to 0.6% ($42/employee/year max)
• SUTA — varies dramatically: 0.5% to over 10%, depending on state, industry, and your claims history ("experience rating"). New employers pay a standard rate for 2–3 years; wage bases range from $7,000 to $58,000+

Your SUTA rate drops as you build a low-claims history — contesting unjustified unemployment claims protects this rate.

The W-4 tells you how much federal income tax to withhold. The 2026 form is built in steps:

• Step 1 — filing status (single, married filing jointly, head of household)
• Step 2 — multiple jobs / working spouse (triggers higher withholding)
• Step 3 — dependents (each under-17 child reduces withholding)
• Step 4 — other income, extra deductions, or additional withholding

Apply the IRS wage bracket or percentage method to compute withholding. If an employee wants more withheld (common around bonus time), they add a flat dollar amount in Step 4(c).

Payroll has no margin for error — wrong withholding or a missed deposit triggers IRS penalties from 2% to 15% of the underpaid amount. Track year-to-date wages for the Social Security cap and Additional Medicare threshold, and know your deposit schedule (monthly vs. semi-weekly, based on the $50,000 lookback).

The Payroll Calculator on Adept.club computes gross pay, all employee withholdings, and the full employer-side cost (FICA match, FUTA, SUTA) so you see the true cost of employment. Free, no sign-up.