How to Run Payroll for Your First Employee

Before the first payday

Get an EIN from the IRS. You need one if you report employment taxes or give tax statements to employees. If you said you would have federal tax obligations when you applied, the IRS pre-enrolls you in EFTPS, the system used to make tax deposits.
Register with your state. Most employers pay both federal and state unemployment tax, so open a state unemployment insurance account with your state workforce agency. If your state has an income tax, register for state withholding as well.
Collect a signed Form W-4 from the employee when they start work. It tells you how much federal income tax to withhold. Employees do not have to fill out a new one every year, only when they want to change it.
Record the employee's name and Social Security number as shown on their card, and complete Form I-9 to confirm they can work in the US.
Report the new hire to your state new hire registry. All 50 states have one (see new hire reporting).
Pick a pay schedule that meets your state law. Some states require paying at least twice a month (California does, with some exceptions), so check before choosing monthly pay.
Set up workers compensation coverage if your state requires it (see workers compensation requirements).

What to withhold and pay each payday

Federal payroll taxes, 2026
Tax	Employee share	Employer share	Notes
Federal income tax	Withheld based on Form W-4	None	Use the tables in IRS Publication 15-T (2026).
Social Security	6.2%	6.2%	Stop once an employee earns $184,500 in 2026.
Medicare	1.45%	1.45%	No wage limit.
Additional Medicare Tax	0.9% on wages over $200,000 in the year	None	Start withholding in the pay period wages pass $200,000.
Federal unemployment (FUTA)	None	6.0% of the first $7,000 per employee	A credit of up to 5.4% for state unemployment tax paid on time usually brings this to 0.6%.

Only the employer pays FUTA; it is never taken out of the paycheck. On top of the federal taxes you will usually have state income tax withholding (in states that have one) and state unemployment tax, whose rate your state sets.

When to deposit the taxes

Federal tax deposits have to be made electronically. Your deposit schedule depends on how much tax you reported during a lookback period (for 2026, July 1, 2024 through June 30, 2025).

Monthly: if you reported $50,000 or less in the lookback period. Deposit taxes on wages paid during a month by the 15th of the following month. A new business is a monthly depositor for its first calendar year.
Semiweekly: if you reported more than $50,000. Taxes on wages paid Wednesday to Friday are due the following Wednesday; wages paid Saturday to Tuesday are due the following Friday.
Next day: if you ever build up $100,000 or more in tax on a single day, deposit it by the next business day, whatever your schedule.
FUTA: deposit quarterly once you owe more than $500, by the last day of the month after the quarter ends.

Your filing calendar

Federal employment tax filings
Form	What it reports	Due
Form 941	Wages, withheld income tax, and Social Security and Medicare tax for the quarter	April 30, July 31, October 31 and January 31
Form 940	FUTA tax for the year	January 31
Form W-2 (with Form W-3)	Each employee's wages and withholding for the year	January 31, to the employee and to the Social Security Administration

If you made every deposit on time, you get 10 extra calendar days to file Forms 941 and 940. A few very small employers file Form 944 once a year instead of Form 941, but only after the IRS tells them in writing that they can.

Records to keep

All employment tax records: at least 4 years (IRS).
Payroll records under the Fair Labor Standards Act (FLSA): at least 3 years.
Time cards, schedules and wage rate tables: 2 years.
For non-exempt employees, the hours worked each day and week, regular rate, overtime pay, deductions and total pay each period.

States can require longer. See how long to keep employee records.

Choosing a payroll provider

You can run payroll by hand, but most small companies use a provider. Whatever you choose, the IRS is clear that you stay responsible for filing returns and making deposits even when a third party does the work. If the provider misses a deposit, the liability is still yours. Look for a provider that:

Calculates, deposits and files federal and state payroll taxes for you, including Forms 941, 940 and W-2.
Handles every state where you have employees, including state withholding and unemployment registrations.
Lets you see each deposit and filing so you can confirm it happened.
Supports overtime, final paychecks and state pay frequency rules (see overtime rules and final paycheck laws).

Common questions

When is my first Form 941 due?

By the last day of the month after the quarter in which you first paid wages. If you first pay wages in May, the second-quarter Form 941 is due July 31.

Does my employee need a new W-4 every year?

No. A new employee fills out Form W-4 when they start, and only needs a new one if they want to change their withholding.

Do I pay FUTA if I also pay state unemployment tax?

Yes, but paying state unemployment tax on time earns a credit of up to 5.4% against the 6.0% FUTA rate, so most employers pay 0.6% on the first $7,000 of each employee’s wages.

If I use a payroll provider, am I still liable for missed deposits?

Generally yes. The IRS says employers remain responsible for deposits and returns even when they contract with a third party to do them.

How MambaHR handles this

MambaHR turns every hire, raise, leave and exit into a payroll change, either as a change file for the payroll provider you already use or sent to Deel-managed payroll (Powered by Deel). A person approves every payroll run, and MambaHR does not run payroll itself. Payroll is an add-on on every plan.

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Sources

Last reviewed October 2, 2026. This page is general information, not legal advice. Laws change and exceptions apply, so check the sources above or an employment lawyer before you act on a specific case.