Payroll Taxes for New Optometry Practices: What You Owe

2026-08-21

Learn the payroll taxes new optometry practices must pay, including federal, state, and local obligations, with practical steps to stay compliant.

Starting an optometry practice brings many financial responsibilities, and payroll taxes are among the most critical. If you have employees, you must withhold and pay various taxes to federal, state, and local agencies. This guide explains exactly what you owe, how to calculate it, and steps to take this week to stay compliant.

Federal Payroll Taxes

Your practice is responsible for several federal taxes. The main ones are:

Federal Income Tax Withholding: You withhold this from each employee’s paycheck based on their Form W-4. The amount varies by income and filing status.
Social Security and Medicare (FICA): You withhold 6.2% for Social Security and 1.45% for Medicare from each employee’s wages. You also pay a matching 6.2% and 1.45% as the employer. For high earners (above $200,000), an additional 0.9% Medicare tax applies to the employee only.
Federal Unemployment Tax (FUTA): You pay this tax, not the employee. The rate is 6% on the first $7,000 of each employee’s wages, but you can take a credit of up to 5.4% if you pay state unemployment taxes on time, reducing your effective rate to 0.6%.

For 2026, the Social Security wage base is projected to be $176,100 (it increases annually with inflation). Medicare has no wage base limit.

State and Local Payroll Taxes

Beyond federal, you must handle state taxes:

State Income Tax Withholding: Most states require you to withhold state income tax from employees’ wages. A few states (like Texas, Florida, and Nevada) have no state income tax, but you may still have other obligations.
State Unemployment Tax (SUTA): You pay this tax to your state’s workforce agency. Rates vary by state and your experience rating, but new employers often pay between 2% and 4% on a wage base (often $7,000 to $40,000).
Local Taxes: Some cities and counties impose payroll taxes, such as a local income tax or a head tax. Check with your local tax authority.

How to Calculate and Pay

To calculate payroll taxes accurately, follow these steps:

Collect Form W-4 from each employee to determine withholding.
Use the IRS Publication 15-T to calculate federal income tax withholding. You can also use payroll software that does this automatically.
Calculate FICA: Multiply each employee’s gross wages by 6.2% for Social Security (up to the wage base) and 1.45% for Medicare. Add your matching amounts.
Determine FUTA: Multiply each employee’s wages up to $7,000 by 0.6% (after credit).
Check your state’s withholding tables for state income tax and unemployment rates.

You must deposit federal payroll taxes using the Electronic Federal Tax Payment System (EFTPS). The deposit schedule depends on your total tax liability: monthly or semi-weekly. For new practices, it’s often monthly if your liability is under $50,000 for the lookback period.

State payments are typically made online through your state’s tax portal. Deadlines vary, but many are monthly or quarterly.

Quarterly and Annual Filings

You must file several forms:

Form 941 (Employer’s Quarterly Federal Tax Return): Due by the last day of the month after each quarter (April 30, July 31, Oct 31, Jan 31). It reports federal income tax withheld, FICA, and your share.
Form 940 (Employer’s Annual Federal Unemployment Tax Return): Due by January 31 of the following year.
State Forms: Most states require quarterly wage and tax reports, and an annual reconciliation.
Form W-2: Provide to each employee by January 31, and file with the Social Security Administration.

Common Mistakes to Avoid

New practice owners often make these errors:

Misclassifying employees as independent contractors: This can lead to back taxes and penalties. If you control the work, they are likely employees.
Missing deposit deadlines: Penalties can be 2% to 15% of the unpaid tax, depending on how late.
Using outdated withholding tables: Always use the current IRS Publication 15-T.
Ignoring state requirements: Each state has its own rules; don’t assume federal compliance is enough.

Practical Steps for This Week

Take these actions now to get on track:

Register for an EIN if you haven’t already. You need it for tax filings.
Set up payroll: Choose a payroll service or software. Options range from $40-$100 per month for basic services, plus $5-$10 per employee. Popular choices include Gusto, ADP, and QuickBooks Payroll.
Register with your state’s tax agency for withholding and unemployment insurance.
Collect W-4s from all employees and have them complete I-9 forms.
Create a payroll calendar with all deposit and filing deadlines.
Consider setting aside funds for your employer tax portion: roughly 7.65% of gross wages for FICA plus FUTA and SUTA, so budget accordingly.

FAQ

Q: Do I have to pay payroll taxes if I am the only employee? A: If you are an S-corp owner, you must pay yourself a reasonable salary and withhold payroll taxes. If you are a sole proprietor or LLC taxed as a sole prop, you don’t pay yourself a salary; instead, you pay self-employment tax on your net earnings.

Q: What happens if I miss a payroll tax deposit? A: You may face penalties and interest. The IRS penalty is generally 2% for deposits 1-5 days late, 5% for 6-15 days, and 10% for more than 15 days. Interest accrues until paid.

Q: Can I use payroll software to handle all tax filings? A: Yes, most reputable payroll services calculate withholdings, deposit taxes, and file forms like 941 and W-2s. They often offer tax penalty protection, which can save you money if they make an error.

Q: How do I know if my state has a local payroll tax? A: Check with your state’s department of revenue or your local city/county tax office. Some areas, like New York City and Philadelphia, have local taxes that must be withheld.

The Bottom Line

Payroll taxes are a significant obligation for any new optometry practice. You owe federal income tax withholding, FICA, FUTA, and state taxes. To avoid penalties, set up a reliable payroll system, know your deadlines, and keep accurate records. Start by registering with the IRS and your state, then choose a payroll service that fits your budget. With careful planning, you can manage payroll taxes without stress and focus on growing your practice.