How to Do Payroll Yourself: DIY Payroll Guide for Small Businesses 2026

Yes — you can legally run payroll yourself, and plenty of small business owners with one to five employees do it every pay period without an accountant. What it requires isn't a CPA license; it's a repeatable process and enough discipline to hit deadlines. Miss those deadlines and the IRS gets expensive. Follow the five steps below and you'll be fine.

How to Calculate Payroll Yourself: 5 Steps

1. 1
   Calculate gross pay. For hourly workers, multiply the hourly rate by hours worked — including 1.5× for any overtime over 40 hours in the week (FLSA requirement). For salaried employees, divide their annual salary by the number of pay periods (26 for biweekly, 24 for semi-monthly, 12 for monthly).
2. 2
   Subtract pre-tax deductions. Health insurance premiums, FSA contributions, and traditional 401(k) deferrals all reduce taxable wages before you calculate withholding. Get written authorization from each employee for these deductions — you'll want that paper trail.
3. 3
   Withhold FICA taxes. For 2026, the employee's share is 6.2% for Social Security and 1.45% for Medicare — applied to gross wages after pre-tax deductions. The Social Security wage base for 2026 is set by the IRS; check IRS.gov for the current annual ceiling.
4. 4
   Withhold federal income tax. Pull IRS Publication 15-T for the 2026 wage bracket tables. The amount you withhold depends on the employee's W-4 elections — their filing status, dependents, and any additional withholding they've requested. No W-4 on file means you withhold at the highest single rate.
5. 5
   Subtract state income tax → net pay. State withholding varies widely — nine states have no income tax at all, while others like California run their own tax tables. Check your state's revenue department for the current 2026 withholding method. What remains after all deductions is your employee's take-home pay.

Quick example: Take Jordan, who earns $20/hr and works 40 hours. Gross pay = $800. Jordan contributes $50/biweekly toward health insurance, leaving $750 in taxable wages. FICA: $46.50 (SS) + $10.88 (Medicare) = $57.38 withheld. Federal income tax varies by W-4 — assume roughly $60 for a single filer with standard withholding. Before state tax, Jordan nets around $632. Skip the math on your end and use our free paycheck calculator instead.

Record-Keeping & Deposit Deadlines You Can't Miss

• Keep records for 4 years. The IRS requires you to retain W-4s, pay stubs, payroll journals, and all filed tax returns for at least four years from when taxes were due or paid — whichever is later.
• Deposit federal taxes on schedule. Most new small employers start on a monthly deposit schedule: taxes due for the prior month get deposited by the 15th of the following month. You must use the EFTPS system. Your schedule (monthly vs. semi-weekly) is determined by your IRS lookback period.
• File quarterly and annually. Form 941 is due every quarter. W-2s must be delivered to employees by January 31, 2027 — same deadline to send Copy A to the Social Security Administration.

When DIY Payroll Stops Making Sense

Honestly, doing payroll yourself works well until it doesn't. The tipping point is usually employee #3 — or the first time someone works in a different state than your business. Here's a simple way to read the room:

When the time cost exceeds the tool cost, DIY stops being the smart move. A payroll tool that costs $30–$50/month pays for itself the first time it prevents a missed deposit penalty — let alone the hours you get back. PayHRoll for small businesses is built for exactly this transition.

"The goal isn't to do payroll manually forever — it's to understand it well enough to catch errors and know when to automate."

Frequently Asked Questions

Can I do payroll myself with just one or two employees?

Absolutely. One or two salaried employees in a single state is the ideal DIY scenario. The calculations are straightforward, federal deposit requirements are manageable on a monthly schedule, and you only have one state's withholding rules to track. Most owners at this stage spend 30–60 minutes per pay period once they've run it a few times.

What tax forms do I need to file when running payroll myself?

The main ones: Form 941 (quarterly federal payroll tax return), W-2s for each employee by January 31, and Form 940 annually for federal unemployment tax (FUTA). You'll also need to file your state's equivalent payroll returns — check your state revenue department for the specific forms and deadlines.

How long does it take to do payroll yourself each pay period?

For a first-timer with two employees, budget 1–2 hours. Once you've built a spreadsheet template and memorized the steps, most owners get it down to 30–45 minutes. If you're regularly hitting two hours or more, that's a strong signal that payroll software would save you money in reclaimed time alone.