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Technology & SaaS Companies: Payroll Tax Guide (2026)
Payroll tax for a technology company is the federal stack every employer runs, withholding, 7.65 percent employer FICA, FUTA, deposits and Form 941, plus the technology company items this page cites: IRS Publication 15 (2026), IRS. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Tax rules specific to technology companies
The federal income tax withholding rate on supplemental wages, which include bonuses and commissions, is 22 percent, and 37 percent to the extent an employee's supplemental wages during the calendar year exceed $1 million. The 37 percent rate applies without regard to the employee's Form W-4.
A qualified small business may elect on Form 6765, filed with a timely income tax return, to apply up to $500,000 of its research credit against payroll tax for tax years beginning after December 31, 2022, up from $250,000. The credit is claimed on Form 8974 attached to Form 941, applied first against the employer share of social security tax up to $250,000 per quarter and then against the employer share of Medicare tax.
Illinois requires an employer to withhold Illinois income tax whenever it withholds federal income tax from compensation paid in Illinois, and compensation is paid in Illinois when the employee's services are localized there. The state also advises that an employer may have to register and withhold for another state in which the employee works or resides.
The stack every technology company runs
On one of the software developers at the May 2025 national median of $135,980, the employer share of Social Security and Medicare is $10,402 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.
- The federal income tax withholding rate on supplemental wages, which include bonuses and commissions, is 22 percent, and 37 percent to the extent an employee's supplemental wages during the calendar year exceed $1 million. The 37 percent rate applies without regard to the employee's Form W-4. [IRS Publication 15 (2026)]
- A qualified small business may elect on Form 6765, filed with a timely income tax return, to apply up to $500,000 of its research credit against payroll tax for tax years beginning after December 31, 2022, up from $250,000. The credit is claimed on Form 8974 attached to Form 941, applied first against the employer share of social security tax up to $250,000 per quarter and then against the employer share of Medicare tax. [IRS, Qualified small business payroll tax credit for increasing research activities]
- Illinois requires an employer to withhold Illinois income tax whenever it withholds federal income tax from compensation paid in Illinois, and compensation is paid in Illinois when the employee's services are localized there. The state also advises that an employer may have to register and withhold for another state in which the employee works or resides. [Illinois Department of Revenue Publication 130]
Read the full guide to how to calculate payroll taxes, and the rest of the technology company payroll library.
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Frequently Asked Questions
Technology company payroll tax: IRS Publication 15 (2026)
The federal income tax withholding rate on supplemental wages, which include bonuses and commissions, is 22 percent, and 37 percent to the extent an employee's supplemental wages during the calendar year exceed $1 million. The 37 percent rate applies without regard to the employee's Form W-4.
Technology company payroll tax: IRS, Qualified small business payroll tax credit for increasing research activities
A qualified small business may elect on Form 6765, filed with a timely income tax return, to apply up to $500,000 of its research credit against payroll tax for tax years beginning after December 31, 2022, up from $250,000. The credit is claimed on Form 8974 attached to Form 941, applied first against the employer share of social security tax up to $250,000 per quarter and then against the employer share of Medicare tax.
What is the employer tax cost on one of the software developers?
At the $135,980 national median (BLS OEWS, May 2025): $10,402 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 technology company?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Equity compensation handling, remote employee multi-state tax and contractor classification 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 Technology & SaaS Companies. 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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