Hiring your first employee: what to do and when

The day you hire, you become a withholding agent and a filer: you take tax out of wages, send it to the government and report it on a schedule. This page is the federal layer, and the state layer is on your state’s Stay compliant page, listed below this guide.

Employee or contractor

Before you hire, check that the person is an employee. The IRS weighs the facts in three categories: behavioral control, financial control, relationship. The IRS page on worker status lists the evidence in each one. If the person is a contractor, the 1099 guide covers your side of it.

If you and the worker still can’t tell, either of you can file Form SS-8 to ask the IRS to decide. The IRS then determines the worker’s status for federal employment taxes and income tax withholding. The Form SS-8 page has the form.

Before the first day

• Get an EIN. It’s free, and if the IRS approves it, you get it immediately online. Apply on the IRS EIN page.
• Collect Form W-4. Each new employee gives you Form W-4 (Employee’s Withholding Certificate), signed by the employee when they start work. Make it effective with the first wage payment. Publication 15 explains how you use it.
• Start Form I-9. The employee completes and signs Section 1 no later than their first day of employment, and can’t complete it before accepting an offer. You complete Section 2 within three business days after the first day of employment. Form I-9 is not filed with USCIS or ICE. Keep it for 3 years after hire or 1 year after termination, whichever is later. The instructions and the USCIS I-9 page cover each section.
• Check E-Verify. E-Verify is voluntary, except where a federal contract or a state requires it. The E-Verify facts page says more.
• Report the new hire. Report each new and rehired employee to your state new hire directory within 20 days of the hire date. Some states require it sooner. The federal new hire reporting page explains the rule.
• Register with your state. Your state tax office sets employer withholding obligations, so ask it what you owe. State unemployment insurance: varies by state; register with the state workforce agency.
• Arrange workers’ compensation. It is required through a commercial carrier, self-insured, or state workers’ compensation program. Your state sets the rules, so confirm yours before the first day. The SBA hiring page covers all three.

Your first-year calendar

Form 941 is due April 30, July 31, October 31, January 31. Form 940 is due the last day of the first calendar month after the calendar year ends, and W-2s by January 31. Deposits run on their own schedule. The dates below are for filings due in 2027.

What	When	Where
Form I-9, Section 2	Within three business days after the first day of employment	Keep it on file; don’t file it
New-hire report	Within 20 days of the hire date, sooner in some states	Your state’s new-hire directory
Federal tax deposit, monthly schedule	By the 15th day of the following month, if you reported $50,000 or less for the lookback period	EFT, made through EFTPS, IRS Direct Pay or your IRS business tax account
Federal tax deposit, semiweekly schedule	On the IRS semiweekly schedule, if you reported more than $50,000 for the lookback period	EFT, as above
Federal tax deposit, next-day rule	The next business day once $100,000 or more builds up on any day	EFT, as above
Form 941 for the fourth quarter of 2026	February 1, 2027*	IRS
Form 940 for 2026	February 1, 2027*	IRS
Form W-2 to each employee, and to the SSA with Form W-3	January 31, moved to February 1, 2027*	Employee and Social Security Administration
Form 941 for the first quarter of 2027	April 30, 2027	IRS
Form 941 for the second quarter of 2027	August 2, 2027*	IRS
Form 941 for the third quarter of 2027	November 1, 2027*	IRS
FUTA deposit	For any quarter your FUTA tax, including any carried forward, is over $500	EFT

* The IRS calendar for 2027 wasn’t out when this was written, so these dates are worked out from the weekend rule: the due date moves to the next day that is not a Saturday, Sunday or legal holiday. Check each one on Publication 509, and see Publication 15 for the semiweekly schedule and the FUTA deposit due dates.

The IRS moves the smallest employers, those whose yearly liability for Social Security, Medicare and withheld income tax is $1,000 or less, to Form 944, filed once a year, and only once it has told you in writing. Farm employers file Form 943 instead of Form 941.

Payroll taxes in one paragraph

You withhold income tax from each paycheck based on the employee’s Form W-4. You also withhold Social Security and Medicare tax from the employee, and you pay an employer share of your own: 6.2% for Social Security and 1.45% for Medicare. Social Security tax applies only up to a wage base limit, which is $184,500 for 2026. On top of that you pay FUTA, the federal unemployment tax: 6% on the first $7,000 you pay each employee in a year, less a credit of up to 5.4%. An employer entitled to the full credit pays 0.6%. Publication 15 has the full rules.

Wages, hours and records

The federal minimum wage is $7.25 an hour. Where your state sets a different minimum, the higher of state or federal minimum applies. See the DOL minimum wage page.

Unless an employee is exempt, hours over 40 in a workweek are paid at time and one-half the regular rate. The DOL overtime page explains who is exempt.

Some federal laws require you to post notices where employees work. The DOL posters page lists them.

Each kind of record has its own keep period. Under the DOL’s wage rules, the periods are three years for payroll records (two years for wage computation records), described in Fact Sheet 21. Employment tax records are kept for at least 4 years after the tax is due or paid, whichever is later, per the IRS records page. Form I-9 has its own period, covered above.

What your state adds

Each of these is a state rule on top of the federal ones. None of the figures are on this page, because they differ by state.

• Minimum wage. The state may set its own. The DOL state minimum wage page lists them.
• Paid sick leave. Some states require it. California’s is on the state’s paid sick leave page. For any other state, check your state’s labor department and its Stay compliant page.
• Paid family and medical leave contributions. Some states run a leave program that employers contribute to. Check your state’s Stay compliant page and its labor or tax agency.
• New-hire reporting. Each state sets its deadline and its portal, and some require it sooner than the federal rule. New York explains its own on the Tax Department’s new hire page. For other states, see your state’s Stay compliant page.
• Withholding registration. The state tax office decides what you owe. The SBA hiring page is the federal starting point, and your state’s Stay compliant page has the state one.
• Unemployment registration. The state workforce agency handles it, and the rules vary by state. See your state’s Stay compliant page.
• Workers’ compensation. The state runs or approves it. See your state’s Stay compliant page and the SBA hiring page.

Pick your state at Start a business.

Do this

1. Get your EIN from the IRS. It’s free, and you can apply on the IRS EIN page.
2. Collect a signed Form W-4 before the first paycheck. Publication 15 explains how it sets withholding.
3. Complete Form I-9, Section 2, within three business days after the first day of employment. Keep the form; don’t file it. The USCIS I-9 page has the form and the retention rule.
4. Report the new hire within 20 days. Send it to your state’s new-hire directory, or sooner if your state says so. The federal reporting page explains the rule.
5. Set up EFT for federal tax deposits. Use EFTPS, IRS Direct Pay or your IRS business tax account, then deposit on your monthly or semiweekly schedule. EFTPS is free.
6. Pay FUTA on the first $7,000 of each employee’s wages. Deposit it when your FUTA tax for a quarter is over $500. Publication 15 has the rate and the credit.
7. File Form 941 each quarter and Form 940 each year, then send W-2s and Form W-3 by January 31. The IRS due dates page lists them.
8. Register with your state and check its rules. That means minimum wage, paid sick leave, paid leave contributions, withholding, unemployment insurance and workers’ compensation. The SBA hiring page is the starting point, and your state’s Stay compliant page below has the state version.

The small business taxes guide has the rest of the federal calendar.