Running a construction business is like managing a massive job site—there are countless moving parts, strict deadlines, and no room for error. Just as a faulty foundation can spell disaster for a building, mishandling payroll and taxes can sink your business with hefty fines, audits, and compliance nightmares.
With 2025 ushering in new payroll and tax regulations, general contractors must stay ahead of these changes to avoid costly mistakes. The good news? You don’t have to handle it all alone. ConstructionPayroll.com has all the payroll software features your team needs to simplify its processes, tax compliance, and reporting, helping construction businesses stay on solid ground.
Let’s break down the essential payroll and tax laws you need to know in 2025—and how ConstructionPayroll.com makes compliance easier than ever.
Federal Payroll Taxes: The Foundation of Compliance
Just as every structure starts with a strong foundation, federal payroll taxes are the bedrock of compliance. The IRS requires contractors to withhold and pay various employment taxes, including:
Social Security & Medicare Taxes (FICA)
In 2025, both employers and employees contribute 6.2% of wages for Social Security, up to a wage base of $176,100.
Medicare tax remains at 1.45% for both employer and employee, with an additional 0.9% for individuals earning over $200,000.
Federal Unemployment Tax Act (FUTA)
Employers pay a 6% tax on the first $7,000 of wages per employee.
Remember, if your business pays state unemployment taxes on time, you may qualify for a credit that lowers this rate to 0.6%.
Federal Income Tax Withholding
Contractors must withhold federal income taxes based on Form W-4 and IRS tax tables.
The IRS updates withholding rules periodically, and staying compliant requires keeping up with these changes.
Construction payroll is complex, with fluctuating job hours, seasonal labor, and multi-state operations. Our payroll platform automatically calculates, withholds, and submits all required federal payroll taxes, reducing compliance risks and keeping you IRS-ready.
State Payroll Taxes: Local Regulations That Matter
Federal payroll taxes are just the beginning—each state has its own set of payroll regulations that general contractors must follow.
State Unemployment Insurance (SUI) Taxes
Each state sets its own tax rates and wage bases. For example, in Texas, the taxable wage base is $9,000, with rates ranging from 0.25% to 6.25% in 2025.
Overtime and Minimum Wage Rules
The federal minimum wage remains $7.25, but many states have their own rates, often higher.
States like California require daily overtime pay after 8 hours, while others only require it after 40 hours per week.
Managing multi-state payroll compliance is overwhelming, especially in construction, where projects span different locations. Our platform helps you meet state-specific tax and wage laws automatically, eliminating the guesswork.
New & Upcoming Payroll Regulations in 2025
Laws are always evolving, and 2025 is no different. Here are some key updates contractors need to be aware of:
Bonus Depreciation Phase-Out
In previous years, businesses could deduct 100% of eligible equipment purchases immediately.
In 2025, this deduction drops to 40% and will phase out completely by 2027.
Construction companies should consider making large equipment purchases sooner rather than later.
Expiring Tax Cuts for Pass-Through Entities
The 20% deduction for pass-through businesses (like LLCs and S-Corps) expires at the end of 2025.
Contractors should discuss tax-saving strategies with an accountant now.
Increased IRS Audits for Misclassification of Workers
The IRS is cracking down on businesses that misclassify employees as independent contractors.
If you 1099 workers who should be W-2 employees, you could face steep penalties and back taxes.
Our system automatically classifies employees and independent contractors correctly, reducing audit risks. Plus, we maintain detailed payroll records and submit accurate filings, helping you prepare if the IRS comes knocking.
Certified Payroll & Davis-Bacon Act Compliance
For contractors working on federally funded projects, Davis-Bacon and certified payroll reporting aren’t just recommendations—they’re requirements. These regulations ensure that workers on public works projects receive fair wages, but they also add layers of administrative responsibility that can be overwhelming.
One mistake—whether it’s misreporting wages, missing a deadline, or using incorrect classifications—can lead to penalties, withheld payments, or even disqualification from future contracts. That’s why staying compliant isn’t just about checking a box; it’s about protecting your reputation, cash flow, and eligibility for lucrative government projects.
Certified payroll is the system used to enforce these wage protections. Under the Davis-Bacon Act, contractors must pay prevailing wages based on job type and project location. To prove compliance, they must submit Form WH-347 every week, detailing wages, benefits, and hours worked for each employee. Manually handling this process can be time-consuming and error-prone, but ConstructionPayroll.com simplifies it.
Our platform tracks prevailing wage rates for your projects and generates accurate, ready-to-submit WH-347 reports in minutes. Instead of scrambling to meet deadlines or risking costly errors, you can focus on what you do best—building quality projects.
Staying Compliant: A General Contractor’s Best Practices
Use Construction-Specific Payroll Software
Most standard payroll systems are designed for straightforward office environments, not the unique challenges of the construction industry. Managing payroll for a construction workforce is far more complex, with fluctuating job sites, varying pay rates, and strict government reporting requirements.
Contractors need a system that can accurately track union wages, handle certified payroll for federally funded projects, and manage compliance across multiple states—all while keeping up with ever-changing labor laws. Without a payroll solution built specifically for construction, businesses risk compliance violations, payroll errors, and unnecessary administrative headaches.
Automate Tax Filings
IRS penalties can pile up fast. Automating payroll tax payments ensures you never miss a deadline.
Partner with a Payroll Specialist
Keeping up with labor laws, tax changes, and reporting requirements is a full-time job. Let experts like our team at ConstructionPayroll.com handle it.
Why General Contractors Trust ConstructionPayroll.com
At ConstructionPayroll.com, we know that handling payroll manually is like using a hammer when you need a power drill.
- No More Compliance Headaches – We handle federal, state, and local payroll taxes automatically.
- Certified Payroll in Minutes – Our software generates Davis-Bacon and prevailing wage reports effortlessly.
- Multi-State Payroll? No Problem. – We track state-specific tax rates and wage laws, so you don’t have to.
- IRS-Proof Records & Reports – We maintain detailed payroll documentation to keep you audit-ready.
Stay in Compliance in 2025 With ConstructionPayroll.com
Staying compliant with payroll and tax regulations in 2025 isn’t just about avoiding fines—it’s about building a stronger, more resilient business. Just like a sturdy foundation keeps a building standing, proper payroll management keeps your company financially secure.
With ConstructionPayroll.com, you can focus on what you do best—building great projects—while we handle the heavy lifting of payroll compliance.
Ready to simplify payroll? Contact ConstructionPayroll.com today and build with confidence.