Trucking & Transportation Companies: Payroll Setup Guide (2026)

Step 1: accounts and registrations

Every trucking company starts with an EIN, a withholding account in each state where someone works (unless that state has no wage tax), an unemployment insurance account in each of those states, and access to each state's new hire directory. New employers deposit federal employment taxes monthly during the first calendar year because there is no lookback period yet.

Step 2: classify OTR drivers and local drivers before the first check

Whether a driver is an employee or an independent contractor under the FLSA turns on the economic reality test in 29 CFR part 795, which weighs six factors including control, investment and permanence; receiving a 1099 or signing a contractor agreement does not by itself make a worker a contractor. The Department announced a proposed rule to revise this test on February 26, 2026 (91 FR 9932).

Step 3: build the trucking company pay codes

Per-diem pay for drivers, owner-operator vs W-2 classification, DOT compliance and mileage reimbursement each become a pay code with its own taxability and overtime treatment. Building them before the first run is cheaper than correcting a quarter of 941s afterward.

For travel on or after October 1, 2025, the special meals and incidental expenses rate for the transportation industry is $80 per day within the continental United States and $86 per day outside it. Notice 2025-54 supersedes Notice 2024-68, which covered October 1, 2024 through September 30, 2025.

Step 4: set the records up to be kept

A motor carrier must retain each driver's records of duty status and supporting documents for not less than 6 months from the date of receipt, and the driver must keep the previous 7 consecutive days of records available for inspection while on duty.

Each motor carrier must keep a driver qualification file for every driver it employs and retain it for as long as the driver is employed and for three years afterward; the annual motor vehicle record, annual review note and medical examiner's certificate may be removed three years after their date of execution.