This is the before-day-one list: the registrations, forms and records a US business needs in place before it pays its first employee. Running payroll each payday is a separate job, covered in our guide on how to do payroll for a small business. Here we stop at the first paycheck.
Federal rules are the same everywhere. State rules (registrations, new hire deadlines, workers' compensation, pay frequency) vary, so each step says where to check.
Before you hire: employee or contractor?
Everything below applies to employees. If the person controls how they do the work, invoices you and runs their own business, they may be an independent contractor, and the steps are different: a Form W-9 and, at year end, a Form 1099-NEC. If you set the hours and direct how the job is done, plan on an employee. Our post on 1099 vs W-2 workers goes through the test.
The checklist, step by step
- Get an employer identification number (EIN). The IRS issues it free and immediately online. Beware of sites that charge for it; the IRS says you never have to pay a fee for an EIN.
- Register with your state: an unemployment insurance account with the state workforce agency and, if the state has an income tax, a withholding account with the revenue department. Some cities and counties have their own payroll taxes.
- Check your state's workers' compensation rules. Each state sets who must carry it and which small employers are exempt, so ask your state's workers' compensation agency before the first day.
- Make the offer and agree the pay: hourly rate or salary, whether the job is exempt from overtime, and the pay schedule your state allows.
- Have the employee complete Section 1 of Form I-9 by their first day. You complete Section 2, after checking their identity and work-authorization documents, within three business days of the start date.
- Ask for a signed Form W-4 when they start. It sets federal income tax withholding from the first paycheck. If you don't get one, the IRS says to withhold as if the employee is single.
- Record the employee's name and Social Security number exactly as on their card, for the Form W-2.
- Report the new hire to your state's new hire directory within 20 days of hire, or sooner if your state sets a shorter deadline.
- Put up the required workplace posters. The DOL's elaws Poster Advisor tells you which federal posters apply; your state has its own.
- Set up payroll: your pay schedule, how you will work out withholding, and how you will deposit federal payroll taxes and file Form 941 each quarter.
The federal forms in one table
| Form | Who fills it in | When | Where it goes |
|---|---|---|---|
| EIN application (SS-4, online) | You | Before the first payday | IRS; the EIN is issued online immediately |
| Form I-9 | Employee (Section 1), you (Section 2) | Section 1 by day one; Section 2 within three business days | Your files, not filed with the government |
| Form W-4 | Employee | When they start | Your payroll file |
| New hire report | You | Within 20 days of hire (shorter in some states) | Your state's new hire directory |
| Form 941 | You | Each quarter | IRS |
| Form 940 | You | Once a year | IRS, if you meet the FUTA test |
| Form W-2 | You | By 1 February 2027 for 2026 pay | Employee, and the Social Security Administration |
Federal new hire reports carry seven items: the employee's name, address and Social Security number, the date of hire, and your name, address and EIN.
What does a first employee cost on top of wages?
Federally, you pay 7.65% of wages as your share of Social Security and Medicare, plus federal unemployment tax (FUTA) of 6% on the first $7,000 of each employee's wages, usually cut to 0.6% by the state credit. State unemployment tax and workers' compensation come on top, at rates your state and insurer set. Our post on employer payroll taxes works through an example.
Records to keep from day one
- Employment tax records: the IRS says to keep them for at least 4 years.
- Form I-9: three years after the date of hire, or one year after employment ends, whichever is later (USCIS).
- Time records and pay rates for every hourly employee, so you can show minimum wage and overtime were paid.
- A copy of each pay stub or wage statement you give, with the period dates, hours, gross pay, each deduction and net pay.
The first payday
On the first payday you work out gross pay, withhold federal income tax from the W-4, Social Security (6.2%) and Medicare (1.45%), and any state and local tax, then pay the net amount. Most states require a written wage statement each payday, and our guide to pay stub requirements by state lists what it must show. Your own share of Social Security and Medicare is due with the withheld amounts on your deposit schedule.
Where PayDocs fits
PayDocs doesn't register you anywhere or file forms. It makes the documents you hand over: a pay stub each payday from your figures, and Form W-2 copies at year end. PayDocs works out federal income tax, Social Security, Medicare and supported state taxes for 2026 pay dates (see what we calculate). You preview free and pay per document, which suits a business with one or two people on payroll.
This is general information about US federal rules as of 7 October 2026, not tax or legal advice. State rules add to it; check your state's labor and revenue departments.
Questions
What paperwork do I need to hire my first employee?
An EIN, state unemployment and withholding registrations, Form I-9 and Form W-4 from the employee, and a new hire report to your state within 20 days. Then payroll records, workplace posters and any workers' compensation cover your state requires.
Do I send Form I-9 to the government?
No. You complete it with the employee and keep it on file for three years after the hire date or one year after employment ends, whichever is later, ready for a government inspection.
What if my new employee doesn't give me a Form W-4?
The IRS says to withhold federal income tax as if the employee is single until they give you a completed Form W-4.
How much does an EIN cost?
Nothing. The IRS issues EINs free and, when you apply online and the application is approved, immediately. Websites that charge a fee for an EIN are not the IRS, and you never need to pay one.
When do I report a new hire?
Federal law requires a report to your state's new hire directory within 20 days of the hire date. Some states set a shorter deadline, so check your state's directory.
Sources
- IRS: Hiring employees
- IRS: Get an employer identification number
- USCIS: Handbook for Employers M-274, who must complete Form I-9
- USCIS: Handbook for Employers M-274, retaining Form I-9
- Administration for Children and Families: New hire reporting
- US Department of Labor: Workplace posters
- IRS: Publication 15 (2026), Employer's Tax Guide
Sources checked October 7, 2026. This article explains how pay documents work; it is not tax or legal advice.
