Free Payroll Tool
Check payroll rules in any state
Minimum wage, paid leave, income tax, payday law, and new-hire reporting for all 50 states.
Open the State Compliance Checker →Blog · Payroll Management
How to Do Payroll Yourself: A Step by Step 2026 Walkthrough
How to do payroll yourself in 2026 runs through seven fixed steps: get an EIN, register state tax accounts, collect a W-4 and I-9 at hire, report the new hire, set a pay schedule, calculate gross to net, and deposit federal taxes monthly in year one. BEG runs the same process at $25 to $45 per employee per month for founders who would rather not.
Running payroll yourself is not one task, it is eight sequential ones, and most of the penalties employers actually pay trace back to doing one of them out of order rather than skipping it entirely. This walkthrough covers the steps in the order a first-time employer hits them: entity and tax IDs first, hiring paperwork second, the recurring pay-run math third, and the federal deposit and filing calendar last.
None of this replaces legal or tax advice for your specific situation, and none of the figures below are estimates; every rate and deadline is cited to the federal agency that sets it.
The eight steps, in order
| Step | What it requires | Where it stalls |
|---|---|---|
| 1. Get an EIN | Form the legal entity with the state first, then apply free at irs.gov. Domestic applicants with an SSN or ITIN get one immediately online. | Applying before the entity is formed, or letting the 15-minute online session time out mid-application. |
| 2. Register state tax accounts | A state withholding account if the state taxes wages, plus a state unemployment insurance account in every state, even the 9 with no income tax. | Assuming a no-income-tax state means no registration at all; SUTA still applies. |
| 3. Collect Form W-4 and Form I-9 at hire | A signed W-4 before the first paycheck and a completed I-9 Section 2 within 3 business days of the employee's first day of work for pay. | No valid W-4 on file forces default withholding as Single or Married filing separately with no adjustments, which is rarely what the employee wants. |
| 4. Report the new hire | Submission to the state new hire directory within 20 days of hire, or faster where the state requires it. | Defaulting every hire to the federal 20-day window in a state that requires 7 to 15 days. |
| 5. Set a pay schedule | A fixed, recurring pay frequency that meets or beats the state's minimum frequency law. | Picking monthly in a state that requires at least semi-monthly or weekly pay. |
| 6. Calculate gross to net every run | Gross wages, pretax deductions, FICA, federal and state withholding, post-tax deductions, in that order. | Forgetting the 0.9% Additional Medicare Tax once an employee crosses $200,000 for the year. |
| 7. Deposit federal taxes on the year one schedule | Monthly deposits by the 15th of the following month, because a first-year employer's lookback liability is treated as zero. | Missing the $100,000 next-day deposit rule if a single pay run pushes accumulated liability past that mark. |
| 8. File the recurring forms | Form 941 quarterly, Form 940 by January 31, and Form W-2 to employees and the SSA by January 31. | Treating Form 940 and Form 941 as duplicates; they cover different taxes on different schedules. |
Step 1: Get an EIN
An Employer Identification Number is the federal tax ID your business uses to report and deposit payroll taxes, and most state tax accounts ask for it during registration. Apply directly at irs.gov: it is free, immediate for a domestic entity with a responsible party who has a Social Security number or ITIN, and limited to one EIN per responsible party per day. Form the legal entity with the state first. Applying for an EIN before the state formation is complete is a common source of delay.
Step 2: Register state tax accounts
Two state-level registrations typically follow the EIN: a state withholding account, if the state taxes wages, and a state unemployment insurance account, which applies regardless of whether the state has an income tax. 9 states in this site's compliance data levy no tax on wages at all, which removes the withholding account but not the unemployment insurance registration. New hire reporting to the state directory is a separate, ongoing requirement on top of both accounts, covered in the new hire reporting requirements by state page.
Step 3: Collect Form W-4 and Form I-9 at hire
Form W-4 sets federal income tax withholding, and the employee should complete it before the first paycheck. If you never receive a valid one, federal rules require withholding as if the employee had checked Single or Married filing separately with no entries in Steps 2 through 4 of the current form, which is the default, not a suggestion.
Form I-9 runs on its own clock. Section 2, the employer's review of identity and work-authorization documents, has to be completed within 3 business days of the employee's first day of work for pay, per USCIS guidance. If the job lasts less than 3 days, Section 2 is due no later than the first day of work itself.
Step 4: Report the new hire
Federal law requires every new hire to be reported to the state new hire directory within 20 days, and a meaningful number of states shorten that window. Rather than defaulting every hire to 20 days, check the deadline and reporting agency for the state where the employee actually works on the new hire reporting requirements by state page.
Step 5: Set a pay schedule
Weekly, biweekly, semimonthly and monthly are all common pay frequencies, but the state where an employee works may set a floor on how often they can be paid, weekly for some occupations in a handful of states, at least semi-monthly in others. Confirm the minimum frequency law for every state where you have employees before locking in a company-wide calendar.
Step 6: Calculate gross to net every run
The order matters. Start from gross wages, subtract pretax deductions such as a traditional 401(k) contribution or a Section 125 cafeteria plan election, then apply FICA: 6.2% Social Security withheld from the employee plus a matching 6.2% from the employer up to the annual wage base, and 1.45% Medicare each side with no wage base limit. Once a single employee's wages for the year exceed $200,000, withhold an Additional Medicare Tax of 0.9% from that employee only; the employer never matches it. Apply federal withholding from the W-4 and state withholding where applicable, subtract any post-tax deductions, and what remains is net pay.
Overtime changes the gross-wage line before any of that math starts. The federal floor is time and a half after 40 hours in a workweek, but 5 states add a daily overtime trigger that can apply even in a week that stays under 40 hours; see the overtime laws by state page for which ones.
Step 7: Deposit federal taxes on the year one schedule
A brand-new employer's lookback-period tax liability is treated as zero, and under IRS Publication 15, that makes you a monthly schedule depositor for your first calendar year in business, regardless of how much you actually withhold once you start running payroll. Monthly deposits are due by the 15th of the following month. The one override is the $100,000 next-day deposit rule: if accumulated tax liability from a single day's payroll reaches $100,000, that amount is due the next business day and the business becomes a semiweekly depositor for the rest of that year and the next.
FUTA runs on its own separate math and its own separate deposit rule. The FUTA tax rate is 6.0% on the first $7,000 paid to each employee for the year, and most employers who pay state unemployment tax in full and on time receive a credit of up to 5.4%, bringing the net federal rate to 0.6% per IRS Topic 759. FUTA deposits are due by the last day of the month after a quarter in which accumulated liability exceeds $500.
Step 8: File the recurring forms
Three federal forms close the loop. Form 941 reports federal income tax withheld plus both shares of Social Security and Medicare, filed quarterly. Form 940 reports FUTA, filed annually, due January 31 or February 10 if all FUTA tax was deposited on time. Form W-2 goes to each employee and to the Social Security Administration, also due January 31. None of the three substitutes for the others, and none of them is the deposit itself, they reconcile what was already deposited against what was actually owed.
When the DIY version stops making sense
The eight steps above do not get harder with headcount so much as they get more frequent, one more W-4 and I-9 to collect, one more state's new hire deadline and pay-frequency law to track, one more overtime rule to apply correctly on a long shift. A first hire outside your home state, or a missed deposit or filing deadline that already cost a penalty, are the two most common points where founders hand the process to a managed payroll provider instead of continuing to run it themselves. Payroll for startups covers what that looks like on the buyer side, the same eight steps run by BEG rather than by you.
Managed Payroll, Handled.
BEG manages payroll at $25 to $45 per employee per month, all-inclusive, with a $500 monthly minimum. Get an instant cost comparison for your business.
Frequently Asked Questions
Do I need an EIN before I hire my first employee?
Yes. An Employer Identification Number is required to report and deposit federal payroll taxes, and most state tax accounts ask for it during registration. Apply directly at irs.gov; it is free, and third-party sites that charge for an EIN are not the IRS.
How long does it take to get an EIN?
Minutes, if you are a domestic entity applying online with the responsible party's Social Security number or ITIN in hand. The online session expires after 15 minutes of inactivity and cannot be saved, so gather your entity details first. Form the business with the state before applying; an EIN applied for ahead of state formation can delay the application.
What happens if an employee never submits a Form W-4?
You withhold as if the employee had checked Single or Married filing separately in Step 1(c) of the current Form W-4 and made no entries in Steps 2 through 4. That default almost always withholds more than an employee with dependents or a working spouse would choose, so it is worth following up rather than leaving it as the permanent setting.
How fast do I have to complete Form I-9?
Section 2 has to be completed within 3 business days of the employee's first day of work for pay. If the job lasts less than 3 days, Section 2 is due no later than the first day of work itself. The date entered is the actual date you examined the employee's identity and work authorization documents.
When do I have to report a new hire to the state?
Within 20 days of the date of hire under federal law, though a number of states shorten that window, in some cases to 7 days. The exact deadline and reporting agency for every state is on the new hire reporting requirements by state page linked below; check it per state rather than assuming the federal default everywhere.
How do I calculate FICA taxes on each paycheck?
Social Security is 6.2% withheld from the employee plus a matching 6.2% employer share, up to the wage base limit. Medicare is 1.45% each side with no wage base limit, plus an Additional Medicare Tax of 0.9% withheld from the employee only once that employee's wages for the year exceed $200,000. The employer never matches the additional 0.9%.
Am I a monthly or semiweekly tax depositor in my first year?
Monthly, in almost every case. A brand-new employer has no lookback-period tax liability, so it is treated as zero, and zero puts you on the monthly deposit schedule for your first calendar year regardless of how much you actually withhold. The one exception is the next-day deposit rule, which is triggered the moment accumulated liability in a single day reaches $100,000.
What is Form 941 used for?
Form 941 is the quarterly return that reports federal income tax withheld plus both the employee and employer shares of Social Security and Medicare tax. It reconciles what you deposited during the quarter against what you actually owed, and it is separate from the deposits themselves, which happen on their own monthly or semiweekly schedule.
What is Form 940 used for and when is it due?
Form 940 is the annual federal unemployment, FUTA, return. The FUTA tax rate is 6.0% on the first $7,000 paid to each employee, and most employers who pay their state unemployment tax in full and on time receive a credit of up to 5.4%, bringing the net federal rate to 0.6%. Form 940 is due January 31, or February 10 if all FUTA tax was deposited on time.
When are W-2s due?
January 31, both to each employee and to the Social Security Administration. That is the same deadline as Form 940 and applies whether you file on paper or electronically, so it is worth building the deadline into the same January close-out as your fourth-quarter Form 941 and annual Form 940.
Do state overtime rules affect how I calculate gross pay?
They can. The federal floor is time and a half after 40 hours in a workweek, but 5 states add a daily overtime trigger on top of that, which changes gross pay for a long single shift even in a week that stays under 40 hours. The full state-by-state breakdown is on the overtime laws by state page linked below.
What if my state has no income tax?
9 states levy no tax on wages, so there is no state withholding account to open or remit to in those states. State unemployment insurance registration still applies regardless of whether the state taxes income, and new hire reporting is a separate federal requirement that a no-income-tax state does not waive.
When should I stop doing payroll myself and hire it out?
Common triggers are a first hire outside your home state, headcount that makes the eight steps above a weekly time sink rather than a monthly one, or a missed deposit or filing deadline that already cost a penalty. At that point, the DIY version of this page and the managed version answer the same questions with someone else doing the work; see payroll for startups, linked below, for what that looks like.
What does BEG charge to run payroll instead of doing it myself?
$25 per employee per month inside your existing platform or $45 on BEG isolved HCM, all inclusive, with a $500 monthly minimum. EIN-linked tax accounts, new hire reporting, gross-to-net calculation, deposits and the 941, 940 and W-2 filings above are all included, not billed as separate add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries. BEG manages payroll at $25 to $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Sources: IRS, get an employer identification number; IRS Publication 15, Circular E, Employer's Tax Guide; IRS Topic 759, Form 940 filing and deposit requirements; USCIS, completing Form I-9 Section 2; ACF, new hire reporting answers to employer questions. This is general information, not legal or tax advice.
From the blog