- FICA (employer match): 6.2% Social Security + 1.45% Medicare — required on every payroll, no exceptions.
- FUTA: Effectively 0.6% on the first $7,000 per employee per year, thanks to Texas's full federal credit.
- TWC Unemployment Insurance: 2.7% for new employers on the first $9,000 of wages — filed quarterly, four times a year.
- No state income tax withholding. Zero. That's the one genuine win.
No State Income Tax ≠ No Payroll Tax
You moved to Texas — or started your business here — partly because there's no state income tax. Smart move. But here's the thing: "no state income tax" only means you don't withhold state personal income tax from your employees' paychecks. It says nothing about the three other payroll tax obligations sitting on your plate right now.
Every Texas employer owes federal FICA (Federal Insurance Contributions Act) taxes, FUTA (Federal Unemployment Tax Act) taxes, and quarterly payments to the Texas Workforce Commission (TWC) for unemployment insurance. Miss any of these and the IRS or TWC will find you — usually with penalties and interest attached.
Marcus, who runs a five-person landscaping company outside San Antonio, assumed his accountant would "handle the state stuff" and that Texas payroll was basically just running direct deposits. He missed two TWC quarterly filings in his first year, triggering a $150 penalty and a notice that rattled him far more than the dollar amount. The paperwork wasn't hard — he just didn't know it existed.
The 3 Taxes Every Texas Employer Owes in 2026
Honestly, the list is shorter than most states. No state disability insurance (SDI), no state income tax withholding. But the federal obligations and the TWC are non-negotiable. Here's the full picture:
| Tax | 2026 Rate | Who Pays | Filed Where |
|---|---|---|---|
| FICA — Social Security | 6.2% employer match (wage base: $176,100) | Employer + Employee each pay 6.2% | IRS via EFTPS / Form 941 |
| FICA — Medicare | 1.45% employer match (no wage cap) | Employer + Employee each pay 1.45% | IRS via EFTPS / Form 941 |
| FUTA | 0.6% effective rate on first $7,000 per employee | Employer only | IRS — Form 940 (annual) |
| TWC Unemployment Insurance (SUI) | 2.7% new employer rate; 0.23%–6.23% experience-rated. Wage base: $9,000 | Employer only | Texas Workforce Commission — Forms C-3 & C-4 |
A quick note on FUTA: the standard federal rate is 6%, but Texas employers who pay their TWC unemployment taxes on time receive a 5.4% credit against FUTA — dropping the effective rate to 0.6%. Texas has maintained this full credit status consistently, so the math generally works in your favor.
Texas employers who pay TWC unemployment insurance on time typically receive up to a 5.4% FUTA credit — cutting federal unemployment tax to roughly $42 per employee per year (0.6% × $7,000). That's one of the lowest effective FUTA costs in the country.
TWC Filing Deadlines — and Exactly What to Submit
This is where Texas employers most often slip up. The TWC quarterly filing isn't optional, and "I didn't know" doesn't hold up as a defense. Here's the exact sequence:
Missing a TWC quarterly filing triggers a penalty of $25–$100 per quarter plus interest on any unpaid tax. Put those four deadlines — April 30, July 31, October 31, January 31 — in your calendar right now, with a two-week advance reminder. Future-you will be relieved.
"Texas payroll is genuinely simpler than most states — no state income tax withholding, no SDI. But 'simpler' still means four quarterly TWC filings and consistent EFTPS deposits. Simple doesn't mean nothing."
Texas employers owe three payroll taxes in 2026: FICA employer match (7.65% combined), FUTA at an effective 0.6% per employee, and TWC unemployment insurance starting at 2.7% on $9,000 of wages. No state income tax withholding — that part really is zero. Stay on top of four TWC quarterly deadlines and EFTPS deposits, and you're fully compliant. A payroll tool that automates this calculates and reminds you beats any spreadsheet.
Frequently Asked Questions
Does Texas have a state payroll tax?
Texas has no state income tax, so employers don't withhold state personal income tax (PIT) from paychecks. But Texas employers still owe federal payroll taxes — FICA and FUTA — plus Texas Workforce Commission (TWC) unemployment insurance each quarter. No state PIT is a real advantage, but it doesn't eliminate payroll tax obligations entirely.
What is the Texas UI tax rate for 2026?
New Texas employers pay a TWC UI rate of 2.7% on the first $9,000 of each employee's wages in 2026. Once you've been operating long enough to build a claims history, your rate shifts to an experience-rated range between 0.23% and 6.23%. Businesses with no claims typically see their rate fall over time.
When are Texas TWC payroll tax filings due?
TWC quarterly reports — Form C-3 and C-4 — are due April 30, July 31, October 31, and January 31 each year. Federal payroll tax deposits (FICA and FUTA) follow IRS EFTPS schedules: monthly for most small businesses, semi-weekly for those with higher payrolls based on the IRS lookback period.
Texas payroll is legitimately one of the simpler setups in the country — no state income tax withholding, no disability insurance fund, no complex multi-rate state system. But "simpler" still means showing up four times a year for TWC and staying current with EFTPS. Get those processes automated and you'll barely think about it.
Stop chasing TWC deadlines manually.
PayHRoll handles FICA calculations, FUTA tracking, and TWC reporting reminders — built specifically for Texas small businesses with 1–10 employees.
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