Why this matters
As a general US checklist, you can't legally run a first payroll until the required tax accounts exist. Depending on your entity history, each employee's work location, and applicable state rules, these may include a federal EIN, state income tax withholding, and state unemployment insurance. Confirm the federal and state requirements for each employee location. Registration is mostly free and fast, but processing can take days to weeks in some states, so start before your hire's first day, not after.
What "done" looks like
- EIN issued by the IRS, if required
- State withholding account open, if required
- State unemployment insurance (SUI) account open, if required
- Payroll software connected to the required accounts, with a filing and deposit calendar in place
How to do it
- Get an EIN at irs.gov if required. The online assistant issues it immediately, free.
- Register for state income tax withholding where required for each employee's work location.
- Open a state unemployment insurance account where required with the applicable state workforce agency. You'll get a new-employer tax rate.
- Set up payroll software (Gusto, ADP, QuickBooks Payroll, or similar) and enter every required account number before the first payday. Most will file and deposit for you.
- Calendar filing and deposit deadlines: federal Form 941 is generally filed quarterly and Form 940 annually, plus your state's schedules. Federal payroll-tax deposits follow the semiweekly or monthly schedule assigned under IRS rules. 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 required 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
Confirm which account numbers you need before you make the offer. If payroll software asks for a required number you don't have, you registered too late.
