How does FreshBooks Payroll pay my taxes?

FreshBooks Payroll powered by Gusto uses automated processes to calculate payroll taxes and submit payments and filings to tax agencies on time. This is based on information you enter in your account:

All employee payroll runs, including any added historical payroll runs will be included in tax calculations and filings
FreshBooks Payroll will attempt to pay and file taxes once the first payroll run has been completed successfully
Taxes from previous payroll runs must be paid outside of FreshBooks, unless you selected for FreshBooks Payroll to pay them during your historical payroll data setup
If your Payroll Journal report does not reflect all of your employees’ wage payments for this year, reach out to our Support team

To confirm successful receipt of tax payments, reach out to your tax agencies directly.

Access Tax Documents
Federal Tax Information
State and Municipal Tax Information
Tax Resources

Access Tax Documents

FreshBooks Payroll pays taxes as close to the deadline as possible to allow time for changes and updates. Tax documents including payroll setup documents can be accessed in the following areas:

Payroll Setup Documents - If you need to sign any business documents, review them in your Payroll Settings
Payroll Tax Documents - All available tax-related documents for your business, including direct deposit authorizations, Form 941, Form 8655, Form W-2 for employees, and Form 1099 for contractors can be accessed through View Tax Documents

Federal Tax Information

FreshBooks Payroll powered by Gusto uses Gusto’s tax payment system to file and pay your federal taxes on time. Payments for Federal Income Tax, Social Security, and Medicare are made according to the IRS’ semi-weekly deposit schedule, and FUTA tax is typically paid yearly after the year is over. Quarterly (Form 941) or Yearly (Form 944) tax filings will be submitted according to the selection made during payroll setup - reach out to our Support team to change your filing frequency.

Federal Income Tax is calculated using the IRS’ Publication 15-T, based on the information provided in each employee’s Federal tax settings. If an employee’s Federal Income Tax calculations needs to be corrected, use these steps:

Collect a completed and signed Form W-4 (Employee’s Withholding Certificate) for each employee that requires updating
Then in FreshBooks, go to Team Members
Then select the employee
In the employee’s profile, under the Payroll section, select Federal Tax
Enter the line item amounts from the completed W-4 Form in the corresponding fields
Then select Save. The new withholding information will be used for all future payroll runs, any payroll runs already submitted will not be affected.

For more Federal Tax details, review the following:

State and Municipal Tax Information

FreshBooks Payroll powered by Gusto uses Gusto’s tax payment system to file and pay your state, and municipal payroll taxes on time. This requires the following:

Your business is registered with the tax agency
The required tax account information is entered in FreshBooks
You’ve authorized Gusto to pay and file taxes on your behalf with each tax agency

For detailed state tax registration and authorization information, review Gusto’s State Registration and Resources for your specific state(s).

Add New Tax Details

If you’re entering new tax details for the first time in FreshBooks Payroll, use the below steps:

Select the Payroll section on the left
Then select the More Actions button in the top right corner
Select Payroll Settings
Then select State Tax Details
Select one of the states listed, which are populated by any work location or employee home addresses entered
Select the Edit link next to any field to update the information
Then select Back and select Finish when you’re done updating your State Tax details.

After the state tax information has been updated, a Tax Reconciliation Payroll Run will automatically be processed, debiting or crediting your bank account to correct the amount of taxes previously processed.

Note: If a state’s status shows as Complete when viewing your State Tax Details, this means a minimum amount of information has been entered to complete onboarding. You may still be required to enter more information after onboarding has been completed for future payroll runs.

Update Existing Tax Details

Most state tax agencies will provide business owners with new rates to use. If you’re updating your existing tax information with new tax rates, use the below steps:

Select the Payroll section on the left
Then select the More Actions button in the top right corner
Select Payroll Settings
Then select State Tax Details
Select one of the states listed, which are populated by any work location or employee home addresses entered
Select the Edit link next to any field to update the information
Under the rate, select the Add New link
Choose an Effective From date and enter the new rate in the fields provided
Then select Save
Then select Back and select Finish when you’re done updating your State Tax details.

State Unemployment Tax

If there are any payroll taxes that your business is not required to pay, reach out to our Support team with the following information to have this applied to your FreshBooks Payroll account:

The specific name of the tax
The effective date for the tax exemption
The reason provided by the relevant tax authority for the exemption

State Tax Exemptions

If you have not registered for State Unemployment Tax with your state’s tax agencies, FreshBooks Payroll can still deduct an estimated amount based on the New Employer Rate for your listed state. Once you receive your state tax account number, update your State Tax Details in your Payroll Settings. The updated rate will be used when filing and paying state taxes, and a Reconciliation Payroll will be completed automatically to debit or credit your bank account based on the finalized amount of the tax liability.

If this information is not entered prior to your tax deadline dates, there may be penalties and interest for late payments. In some cases, state taxes will have to be paid by your business outside of FreshBooks.

Failed Tax Filings

State Tax payments and filings made by Gusto’s automated tax system can be rejected by tax agencies for a variety of reasons:

The tax account number entered in FreshBooks is incorrect
Gusto has not been authorized to pay a specific tax on your behalf
A filing from another source has already been accepted for the same reporting period
The information entered in FreshBooks does not match what the tax agency is expecting

If you’ve received an email notification regarding a failed tax filing, update your State Tax account information and confirm with the tax agency that Gusto has been authorized to pay and file on your behalf.

Two more attempts will be made to pay and file state taxes, using the most recently updated information entered in FreshBooks. After the third attempt, the funds debited for that tax will be returned to you so it can be paid and filed outside of FreshBooks. FreshBooks Payroll is not responsible for late deposit penalties or interest charges accrued from late payments.

Reach out to our Support team if you have any questions or concerns about your state tax payments or filings.

Tax Resources

Review tax-related information from these resources: