Payroll compliance isn’t a once-per-year task you can easily check off. Remaining compliant is a big job. You must make sure your business is compliant with all payroll laws year-round. You can make payroll compliance easier and less stressful by doing tasks throughout the year. In fact, there are some tasks, like filing taxes, that you must do multiple times throughout the year.
Do you know how to keep payroll compliant? To keep track of what you need to do, use a payroll compliance checklist.
What payroll compliance covers (at a glance)
- Withholding, depositing, and filing payroll taxes (federal income tax, Social Security, Medicare, FUTA, and state/local taxes).
- Paying employees correctly and on time (minimum wage, overtime, final pay, and pay stubs where required).
- Accurate recordkeeping and reporting (W-2s for employees, 1099-NECs for contractors, quarterly/annual filings).
- Staying current with federal, state, and local rules (rates, posters, and classification).
How to use this checklist
Use the timeline below for recurring tasks. Due dates that fall on weekends or federal holidays typically move to the next business day. If you use full-service payroll, many deposits and filings can be automated.
The payroll compliance checklist
Use this payroll compliance checklist to complete your payroll compliance tasks. It breaks down what you need to do every payday, month, quarter, and year.
Deposit schedule quick guide (monthly vs. semiweekly)
Determine your federal tax deposit frequency using the IRS “lookback period.” If your total tax liability during the lookback period was $50,000 or less, you’re generally a monthly depositor; more than $50,000 typically makes you a semiweekly depositor.
The $100,000 next-day rule applies if you accumulate $100,000 or more in liabilities on any day. Use EFTPS to make deposits.
Every payday
- List all earnings, taxes, and other payroll deductions.
- Record all manual and voided checks.
- Make any payroll adjustments.
- Verify overtime calculations for nonexempt employees (e.g., 1.5x the regular rate for hours over 40 in a workweek under the FLSA; check state rules).
- Provide pay stubs with required details where mandated by state or local law.
- Confirm worker classification (employee vs. contractor; exempt vs. nonexempt) has not changed.
Every month
- Reconcile your payroll register.
- Make sure all voided checks are recorded properly.
- For any manual checks, make sure you recorded gross and net amounts, plus deductions.
- Deposit your federal income, Social Security, and Medicare taxes. For monthly depositors, the deposits are due by the 15th day of the following month. Some employers will be semiweekly depositors instead, meaning they will deposit more frequently.
- If you hit $100,000 in accrued federal tax liability on any day, deposit the next banking day (IRS “next-day rule”).
- Verify state and local income tax withholding deposits based on your state/local schedule.
January
- Send Form W-2 to your employees by January 31.
- Send Forms W-2 and W-3 to the Social Security Administration (and applicable state/local agencies) by January 31.
- Send Forms W-2 and W-3 to federal, state, and local governments by January 31.
- File your Quarter 4 Form 941 or annual Form 944 by January 31 to report your federal income, Social Security, and Medicare tax liabilities.
- File Form 940 by January 30 (February 10 if you deposited all FUTA tax on time) to report your FUTA tax liabilities.
- Deposit your Quarter 4 FUTA tax liabilities by January 31.
- If you paid contractors, send Form 1099-NEC to recipients and file with the IRS by January 31 (check state requirements).
February
- Send corrected Forms W-2 to employees and governments if necessary.
- Form 941 filers: If you made full and on-time deposits during the fourth quarter for federal income, Social Security, and Medicare taxes, you have until February 10 to file your Quarter 4 Form 941.
- Form 944 filers: If you made full and on-time deposits during the year for federal income, Social Security, and Medicare taxes, you have until February 10 to file Form 944.
- Form 940: Form 941 filers: If you made full and on-time quarterly deposits for FUTA tax, you have until February 10 to file Form 940.
March
- Respond to any government notices saying your Form W-2 totals don’t match Form 941 or Form 944.
- File corrected 1099-NECs if needed.
April
- File your Quarter 1 Form 941 by April 30.
- Deposit your Quarter 1 FUTA tax liabilities by April 30.
May
- Form 941 filers: If you made full and on-time deposits during the first quarter for federal income, Social Security, and Medicare taxes, you have until May 10 to file your Quarter 1 Form 941.
July
- Do a mid-year review of your payroll to make sure everything is recorded properly.
- File your Quarter 2 Form 941 by July 31.
- Deposit your Quarter 2 FUTA tax liabilities by July 31.
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August
- Form 941 filers: If you made full and on-time deposits during the second quarter for federal income, Social Security, and Medicare taxes, you have until August 10 to file your Quarter 2 Form 941.
September
- Begin thinking about holiday pay. How much will you give? When will you give it?
- Make sure you know all your year-end payroll deadlines and duties.
October
- File your Quarter 3 Form 941 by October 31.
- Deposit your Quarter 3 FUTA tax liabilities by October 31.
November
- Form 941 filers: If you made full and on-time deposits during the third quarter for federal income, Social Security, and Medicare taxes, you have until November 10 to file your Quarter 3 Form 941.
December
- Schedule all bonuses.
- Wrap up payroll for the year with a year-end payroll checklist.
- Verify employee names, addresses, and Social Security numbers for accurate year-end forms.
Every quarter
- Reconcile your payroll register. Make sure all taxes are accounted for and recorded correctly. Make adjustments as needed.
- File any required state unemployment (SUTA) wage reports and pay contributions (most states require quarterly filings).
- Reconcile Form 941 totals to your payroll records and state returns to catch mismatches early.
Every year
- Confirm employees’ identifying information, such as legal names, Social Security numbers, and addresses of residence.
- Update minimum wage posters and other labor law posters.
- Check and update your tax rates.
- Determine your deposit schedule for federal income, Social Security, and Medicare taxes.
- Have employees review their Form W-4 information.
- Review exempt vs. nonexempt classifications and job duties; update overtime policies per federal/state rules.
- Update state/local income tax and unemployment insurance rates; set up any new jurisdictions where you have employees.
- Recordkeeping: Keep payroll and wage records at least 3 years (FLSA) and payroll tax records at least 4 years (IRS).
- If applicable, complete ACA reporting (Forms 1095-C/1094-C) for Applicable Large Employers per IRS deadlines.
Why choose Patriot’s payroll software?
Automate federal, state, and local tax deposits and filings with full-service payroll.
- Unlimited payroll runs with all pay frequencies.
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- Built for small businesses that want to reduce compliance risk and save time.
Payroll compliance FAQs
Payroll compliance is adhering to all laws and regulations governing employee pay, tax withholding and deposits, reporting, and recordkeeping at the federal, state, and local levels.
Use the IRS lookback period. If your total tax liability for the lookback period is $50,000 or less, you’re generally monthly; more than $50,000 is typically semiweekly. The $100,000 next-day rule can override your schedule.
FUTA generally applies to the first $7,000 of each employee’s wages (check for changes). Deposit by the last day of the month after each quarter in which your cumulative FUTA tax exceeds $500 (e.g., Q1 due April 30). If $500 or less, carry forward until the balance exceeds $500 or deposit by January 31.
Keep wage and hour records at least 3 years (FLSA) and payroll tax records at least 4 years (IRS). Some states require longer retention.
Most federal payroll tax deadlines move to the next business day. Check your state/local rules, which may differ.
Yes. You may need to register, withhold, deposit, and file in multiple states based on where employees work and live. Confirm nexus, SUTA, and local tax obligations.
Misclassification (contractor vs. employee; exempt vs. nonexempt), missed or late deposits, incorrect overtime, untimely final paychecks, and incomplete records are common payroll compliance risks.
Make payroll compliance easier by using payroll software with a tax filing service. When you use our full-service software, our payroll services take care of depositing and filing employment taxes. And, we’ll create easy-to-read payroll reports for you to use. Try the software for free.
This article has been updated from its original publication date of December 4, 2017.
This is not intended as legal advice; for more information, please click here.
