What needs setting up before the first payroll?
Get an EIN
The business's federal employer number. See what an EIN is.
Register with your state
For state income tax withholding, where the state has an income tax, and for state unemployment insurance.
Enroll in EFTPS
The Treasury's free electronic system for federal tax deposits.
Collect employee forms
Form W-4, any state withholding form, and Form I-9. See hiring your first employee.
Choose a pay schedule and a payroll system
Weekly, biweekly, semimonthly or monthly, within your state's rules on pay frequency.
How do you get from gross pay to net pay?
| Step | Example, $4,000 monthly salary |
|---|---|
| Gross pay | $4,000.00 |
| Less Social Security, 6.2% | - $248.00 |
| Less Medicare, 1.45% | - $58.00 |
| Less federal income tax, from Form W-4 and IRS tables | varies |
| Less state income tax, where applicable | varies |
| Less other deductions, such as retirement or health premiums | varies |
| Net pay | What the employee receives |
The employer also owes its own $306 of Social Security and Medicare for this pay, plus unemployment taxes. See payroll taxes explained.
Pre-tax benefits reduce taxable wages. See employee benefits tax treatment.
When are taxes deposited?
New employers generally start on the monthly schedule: taxes for a month are due by the 15th of the next month. Employers with larger past liabilities deposit semiweekly, and any employer that accumulates $100,000 or more of tax on one day deposits by the next business day. See how to pay the IRS. The IRS tells you your schedule each year.
Which returns follow?
- Form 941, each quarter, reporting wages, withholding and FICA, by the last day of the month after the quarter.
- Form 940, each year, for federal unemployment tax.
- Forms W-2 and W-3, to employees and the Social Security Administration by January 31.
- State returns for withholding and unemployment, on the state's schedule.
Each form is explained in Form 941, Form 940 and Forms W-2 and W-3.
Should you use payroll software?
For most small businesses, yes. Payroll services calculate withholding, make deposits and file returns, which removes the most common and costly errors: late deposits and wrong withholding. Check which filings and states the service covers.
What records must you keep?
Pay records, time records where required, Forms W-4, deposit confirmations and filed returns, for at least 4 years. See how long to keep business records.
Restaurants have extra tip reporting steps; see restaurant bookkeeping.
Rather not run payroll yourself?
We set up your payroll registrations, run each payroll, deposit taxes on time and file every federal and state payroll return.
Questions people ask
How do I run payroll for the first time?
Register with the IRS and your state, collect employee forms, then each period calculate gross pay, withhold taxes, pay net pay and deposit the taxes.
When are payroll taxes due?
On the monthly or semiweekly deposit schedule the IRS assigns. New employers usually start monthly, due by the 15th of the next month.
Which forms does an employer file?
Form 941 quarterly, Form 940 yearly, Forms W-2 and W-3 by January 31, plus state withholding and unemployment returns.
Do I need payroll software?
It is not required, but for most small businesses it prevents the most common errors with withholding, deposits and filings.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IRS Publication 15 (Circular E): Employer's Tax Guide
- IRS: Form 941, Employer's Quarterly Federal Tax Return
- IRS: Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
- Social Security Administration: Contribution and benefit base, 2026
Rules and fees change. If you are reading this long after September 30, 2026, confirm the figures with the source before you rely on them.
Related guides
More in Payroll and contractors
This guide is general information. It is not tax or legal advice for your situation.