Hiring Your First Employee: A Federal Payroll Checklist

Hiring your first employee adds new rules to your business. This checklist covers the federal basics. Your state will add its own steps. For New York, see hiring your first employee in New York.

Before the first paycheck

1. Make sure the person is an employee. See contractor vs. employee.
2. Have an EIN. If you do not have one yet, see how to apply.
3. Get the employee’s Social Security number. The IRS asks you to record the employee’s name and number as they appear on the Social Security card.
4. Have the employee complete Form W-4. You use it to figure how much income tax to withhold.
5. Complete Form I-9. This form verifies that the employee may work in the United States. You keep it with your records. You do not send it to the IRS.
6. Report the new hire to your state, if your state requires it. Most states have a deadline.
7. Register with your state for payroll tax and unemployment insurance, and check your workers’ compensation requirements.

After you start paying

• Withhold taxes from each paycheck: federal income tax, plus the employee’s Social Security and Medicare tax.
• Pay the employer share of Social Security and Medicare tax.
• Deposit the taxes on schedule. See payroll tax deposits.
• File Form 941 every quarter, and Form 940 once a year if you owe federal unemployment tax.
• Give each employee a Form W-2 and file Forms W-2 and W-3 with the Social Security Administration after year end.

Keep good records

Keep payroll records, including each employee’s pay, withholding, and deposit dates. IRS Publication 583 and the IRS employer pages explain what to keep. See what to scan and keep for general guidance.

Consider a payroll service

Many small businesses use a payroll provider or an accountant to handle withholding, deposits, and filings. Compare options and ask what is included.

Need help getting started? Book a call with FlowTex.

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Sources

• IRS: Hiring employees
• IRS: Topic No. 757, Forms 941 and 944 – Deposit requirements

This article is general information, not tax or legal advice. State rules vary. Talk to a qualified professional before you hire.