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Run the Payroll Fee Auditor →Blog · Payroll Management · Financial Services
Financial Services & Accounting Firms: Payroll Tax Guide (2026)
Payroll tax for a financial services firm is the federal stack every employer runs, withholding, 7.65 percent employer FICA, FUTA, deposits and Form 941, plus the financial services firm items this page cites: IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024), IRS Publication 5528. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Tax rules specific to financial services firms
If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A.
Under the FICA special timing rule, nonqualified deferred compensation is subject to Social Security and Medicare taxes when it is deferred, unless the employee must perform substantial future services to vest, in which case it is taxed when vested. Income tax withholding applies later, when the amounts are actually or constructively received.
Form 5500 series returns for employee benefit plans are due the last day of the seventh month after the plan year ends, which is July 31 for a calendar year plan, and must be filed electronically through EFAST2. The penalty for failure to file is $250 per day, not to exceed $150,000.
The stack every financial services firm runs
On one of the personal financial advisors at the May 2025 national median of $105,070, the employer share of Social Security and Medicare is $8,038 a year, FUTA is $42 after the 5.4 percent state credit on the first $7,000, and income tax withholding follows the employee's W-4. Deposits are monthly or semiweekly depending on the prior lookback period, with a next-business-day deposit whenever $100,000 accumulates. Form 941 is due the last day of the month after each quarter; W-2s and any 1099-NEC at the $2,000 threshold are due January 31.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A. [IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)]
- Under the FICA special timing rule, nonqualified deferred compensation is subject to Social Security and Medicare taxes when it is deferred, unless the employee must perform substantial future services to vest, in which case it is taxed when vested. Income tax withholding applies later, when the amounts are actually or constructively received. [IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)]
- Form 5500 series returns for employee benefit plans are due the last day of the seventh month after the plan year ends, which is July 31 for a calendar year plan, and must be filed electronically through EFAST2. The penalty for failure to file is $250 per day, not to exceed $150,000. [IRS Form 5500 corner]
Read the full guide to how to calculate payroll taxes, and the rest of the financial services firm payroll library.
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Frequently Asked Questions
Financial services firm payroll tax: IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)
If a nonqualified deferred compensation plan fails section 409A, the deferred amounts become includible in the employee's income, are reported on Form W-2 box 12 code Z, and are subject to an additional 20% income tax plus a premium interest tax, both assessed on the employee. Amounts that are substantially vested and paid no later than March 15 of the following year fall under the short-term deferral exception and are not subject to section 409A.
Financial services firm payroll tax: IRS Publication 5528, Nonqualified Deferred Compensation Audit Technique Guide (Rev. 3-2024)
Under the FICA special timing rule, nonqualified deferred compensation is subject to Social Security and Medicare taxes when it is deferred, unless the employee must perform substantial future services to vest, in which case it is taxed when vested. Income tax withholding applies later, when the amounts are actually or constructively received.
What is the employer tax cost on one of the personal financial advisors?
At the $105,070 national median (BLS OEWS, May 2025): $8,038 in employer Social Security and Medicare, $42 in FUTA after the state credit, plus state unemployment at the employer's assigned rate.
What does managed payroll cost for a financial services firm?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Deferred compensation structures, FINRA recordkeeping and performance fee payroll are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Financial Services & Accounting Firms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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