Free payroll software in 2026: what actually works
Most 'free payroll' offers turn into a paid product the moment you want direct deposit, tax filing, or W-2s. Here is what each free option actually does and where it falls down.
Free option comparison
| Option | Cost | Files taxes | Risk |
|---|---|---|---|
Payroll4Free The closest thing to genuinely free. Free for calculation and pay-stub generation. Direct deposit is paid, tax filing is paid, and the interface is dated. Acceptable for one or two employees in a single state. | $0 to $30/mo (free if you self-print and self-deposit) | No on the free tier; $30/mo to add tax filing | Medium to high |
Wave Payroll Not free. Since 2 April 2025 Wave is a single $40 base plan with $6 per employee and automatic tax filing in all 50 states. The old free and $20 self-service tiers no longer exist. Wave Accounting (bookkeeping) is still free, but payroll is not. | $40/mo + $6/ee (single plan, taxes filed in all 50 states) | Yes, automatic tax filing in all 50 states | Low |
ExcelPayroll An Excel macro that calculates federal withholding and prints checks. Zero compliance handholding. Suitable only for one employee with a fixed salary in a no-state-tax state and a strong accounting background. | Free (Excel template) | No (you fill 941, 940, W-2 forms manually) | High |
Square Payroll (contractor-only) Effectively free in months you do not pay any contractors. The cheapest legitimate option for businesses paying 1099 contractors only. | $6/contractor, no base | 1099-NECs filed for $0 to $5/form | Low |
Gusto contractor-only Polished employee portal, but no longer free: Gusto's contractor-only plan now carries a $35 base fee plus $6 per contractor. Square's contractor-only plan ($6 per contractor, no base) is the cheaper choice if you do not need a POS. | $35/mo + $6/contractor | 1099-NECs included | Low |
What happens when things go wrong
Late tax deposit
On Payroll4Free or DIY, you file the 941 deposit yourself. Miss it by one day, the IRS penalty is 2 percent. Five days, 5 percent. Fifteen days, 10 percent.
Patriot Full Service, OnPay, Gusto file deposits automatically. Most providers also offer a tax penalty guarantee.
January W-2 deadline
On Payroll4Free or DIY, you create and file W-2s yourself by January 31. One missed form is a $60 to $660 penalty per W-2.
OnPay, Gusto, Square include W-2 filing. Patriot bills $25 per form set.
Adding an employee in a new state
On Payroll4Free or DIY, you register with the new state, add new withholding accounts, and add new SUI rates. Two to three hours of work and easy to mis-file.
OnPay handles new-state registration in the base price. Gusto Plus and others handle it on the upgrade tier.
When 'free' costs more than $40/mo
DIY or Payroll4Free at three employees costs roughly 4 hours per pay period at a $25 hour rate, or $200 per month in time alone. Add a single late-deposit penalty (2 percent on a typical $3,000 deposit is $60) and your "free" option costs more than the cheapest paid service. The break-even favours paid service at three or more employees in nearly every scenario.
Free works only for: solo owners, one fixed salary, a single state, and strong accounting discipline. If any of those is missing, $21 to $40 per month from a paid provider (Patriot Basic at $17 + $4 self-service up to the cheaper done-for-you-tax options) is the cheapest honest option.