Why this matters
You can't legally run a first payroll until the tax accounts exist: a federal EIN, state income tax withholding, and state unemployment insurance. Registration is mostly free and fast, but processing can take days to weeks in some states — start before your hire's first day, not after.
What "done" looks like
- EIN issued by the IRS
- State withholding account open (unless your state has no income tax)
- State unemployment insurance (SUI) account open
- Payroll software connected to all three, with a filing calendar in place
How to do it
- Get an EIN at irs.gov — the online assistant issues it immediately, free.
- Register for state income tax withholding (skip only in no-income-tax states like Texas or Florida).
- Open a state unemployment insurance account with your state workforce agency; you'll get a new-employer tax rate.
- Set up payroll software (Gusto, ADP, QuickBooks Payroll, or similar) and enter every account number before the first payday — most will file and deposit for you.
- Calendar the deadlines: federal Form 941 quarterly, Form 940 annually, plus your state's schedules. Missed deposits accrue penalties fast.
Common mistakes
- Paying a third-party "filing service" for an EIN the IRS issues free in minutes.
- Registering federally but forgetting the state accounts — payroll software can't file without the numbers.
- Waiting until the first payday; some state registrations take weeks to process.
Real-world examples
- The IRS issues EINs free through its online assistant and warns against look-alike sites that charge for the same thing.
- Federal unemployment tax (FUTA) is 6.0% on the first $7,000 of wages, but on-time state unemployment payments earn a credit that drops it to an effective 0.6% for most employers.
From a founder's point of view
Registration is the least glamorous step of hiring. Nothing about it is hard — it's pure sequencing. Do it the week you decide to hire, and payroll day becomes a non-event.
Rule of thumb
All account numbers in hand before you make the offer; if payroll software asks for a number you don't have, you registered too late.