Business GuideUpdated for 2026

Hiring Your First Employee in 2026: Complete Checklist

Congratulations on growing your business! This step-by-step guide covers everything you need to legally hire your first employee—from getting an EIN to collecting W-4s and I-9s to creating your first paystubs.

Jump to forms you'll need:

SS-4 (EIN)W-4 Form I-9 Form W-9 Form W-2 Form Paystubs

Phase 1

Before You Hire

Complete these tasks BEFORE you bring on your first employee:

Get an Employer Identification Number (EIN)

Required for tax purposes. Free from the IRS—takes 5 minutes online.

Generate SS-4 Form

Register with your state's labor department

Required for unemployment insurance taxes. Requirements vary by state.

Get workers' compensation insurance

Required in most states. Protects you and employees from work injuries.

Set up a payroll system

Choose payroll software or a payroll service to handle taxes and payments.

Create Paystubs

Create an employee handbook (optional but recommended)

Documents policies, expectations, and procedures. Protects both parties.

Getting Your EIN is Free and Fast

Apply for an Employer Identification Number (EIN) on the IRS website. It's completely free and you'll receive your number immediately online. You'll need your EIN for:

• Opening a business bank account
• Filing employment tax returns
• Reporting wages to employees (W-2s)

Generate SS-4 (EIN Application) Form

Phase 2

New Hire Paperwork

Collect these forms from your new employee during onboarding:

Form W-4

Employee's Withholding Certificate

Generate W-4 Form

Purpose

Determines how much federal income tax to withhold from paychecks

Deadline

Before first paycheck

Your Action

Calculate withholding based on W-4 and apply to each paycheck

Form I-9

Employment Eligibility Verification

Generate I-9 Form

Purpose

Verifies employee is legally authorized to work in the U.S.

Deadline

Section 1: First day | Section 2: Within 3 business days

Your Action

Examine employee's identity and work authorization documents

Form W-9

Request for Taxpayer Identification Number

Generate W-9 Form

Purpose

Collects employee's SSN for tax reporting

Deadline

Before first paycheck

Your Action

Keep on file for your records and W-2 preparation

State W-4 (if applicable)

State Tax Withholding Form

Purpose

Some states require separate withholding forms

Deadline

Before first paycheck

Your Action

Check your state's requirements

Direct Deposit Authorization

Bank Account Information Form

Purpose

Allows you to deposit paychecks directly to employee's bank

Deadline

Before first paycheck (optional)

Your Action

Set up in your payroll system

⚠️ I-9 Compliance is Critical

The I-9 form has strict deadlines: Section 1 must be completed on or before the first day of work, and you must examine original documents and complete Section 2 within 3 business days. Penalties for violations range from $252 to $2,507 per form for paperwork errors.

Phase 3

Ongoing Employer Responsibilities

Once you've hired your employee, these are your ongoing obligations:

Issue paystubs every pay period

Every paycheck

Most states require you to provide detailed pay stubs showing earnings and deductions.

Create Paystubs

Withhold and deposit employment taxes

Each pay period

Withhold federal income tax, Social Security (6.2%), and Medicare (1.45%) from employee wages.

Pay employer portion of taxes

Each pay period

You pay matching Social Security (6.2%) and Medicare (1.45%), plus FUTA (0.6%).

File Form 941 (Quarterly Tax Return)

Quarterly

Report wages paid, tips, federal income tax withheld, and employer/employee Social Security and Medicare taxes.

File Form 940 (FUTA Tax Return)

Annually

Report federal unemployment tax. Due January 31 for previous year.

Issue W-2 forms

Annually by January 31

Provide W-2 to each employee AND file with the SSA by January 31.

Generate W-2 Forms

2026 Employment Tax Rates

Tax	Employee Pays	Employer Pays	Notes
Social Security	6.2%	6.2%	On wages up to $168,600
Medicare	1.45%	1.45%	On all wages (no cap)
Additional Medicare	0.9%	—	On wages over $200,000
Federal Income Tax	Varies	—	Based on W-4
FUTA	—	0.6%	First $7,000 per employee

* These rates are for 2026. State unemployment insurance (SUTA) rates vary by state and your company's experience rating.

Frequently Asked Questions

What forms do I need when hiring my first employee?

The essential forms are: Form W-4 (Employee's Withholding Certificate) for federal tax withholding, Form I-9 (Employment Eligibility Verification) to verify work authorization, and your state's W-4 equivalent if required. You'll also need an SS-4 to get your EIN if you don't already have one.

Do I need an EIN to hire an employee?

Yes, you must have an Employer Identification Number (EIN) before hiring employees. You can apply for free on the IRS website or by mailing Form SS-4. Online applications receive their EIN immediately.

When do I need to complete the I-9 form?

The employee must complete Section 1 of Form I-9 on or before their first day of work. You (the employer) must complete Section 2 within 3 business days of the employee's start date. You must physically examine the employee's original identity and work authorization documents.

How do I calculate payroll taxes for my first employee?

For each paycheck, withhold: Federal income tax (based on W-4), Social Security tax (6.2% of gross wages up to $168,600 in 2026), Medicare tax (1.45% of all wages), and state/local taxes if applicable. As the employer, you also pay matching Social Security and Medicare taxes.

Do I have to provide paystubs to employees?

Most states require employers to provide detailed pay stubs showing gross wages, deductions, and net pay. Even in states where it's not required, providing paystubs is a best practice that prevents disputes and helps employees with loans, rentals, and tax filing.

What's the difference between a W-2 employee and a 1099 contractor?

W-2 employees work under your direction, use your equipment, and have taxes withheld. You pay employment taxes for them. 1099 contractors control how they do their work, provide their own tools, and pay their own taxes. Misclassifying employees as contractors can result in significant IRS penalties.

What happens if I don't file the I-9 correctly?

I-9 violations can result in fines from $252 to $2,507 per form for paperwork errors, and $627 to $25,076 per worker for knowingly hiring unauthorized workers. ICE conducts audits, so proper I-9 compliance is essential.