What changes when you hire in the US
The moment your company hires an employee who works in the US, it becomes an employer in the eyes of the IRS and the state. That brings duties that did not exist before: withholding income tax from pay, paying the employer share of Social Security and Medicare, depositing those taxes on time, and filing returns every quarter and every year.
Each state adds its own layer. Most have a state income tax withholding account and all have unemployment insurance, and each needs a separate registration before the first payroll. This service gets those registrations done and payroll running before your first payday.
Who this is for
- Foreign-owned US LLCs and C-Corps hiring their first employee in a US state.
- Founders who are moving to the US and will be paid through their own company.
- Companies that hired a remote employee in a new state and need to register there.
- Businesses that have been paying US workers informally and need to put it on a proper footing.
If everyone who works for you lives outside the US, US payroll usually does not apply to them. Contractors are also handled differently from employees. Classification is a legal question, so if you are unsure, speak to an employment lawyer or CPA before deciding.
Employee or contractor?
US law looks at how the work is controlled, not what the contract calls it. A person who works set hours, uses your equipment and follows your instructions on how to do the job may be an employee even if you call them a contractor. Misclassifying employees as contractors can lead to back taxes, penalties and interest at both federal and state level, so settle this question before the first payment.
What BookMyLLC handles
- Checking your EIN is set up for employment taxes, since the IRS expects a single-member LLC with employees to report employment taxes under its own EIN.
- State income tax withholding registration, where the state has an income tax.
- State unemployment insurance registration.
- Local tax registrations where a city or county levies payroll taxes.
- Payroll software setup: pay schedule, employee records, tax settings and direct deposit.
- A filing calendar for federal and state deposits and returns.
Step-by-step process
- Confirm the basics. Your company has an EIN, a US bank account for payroll funding, and a signed offer with the employee's start date and pay.
- Register with the state. We file the withholding and unemployment insurance registrations in the state where the employee works.
- Onboard the employee. They complete Form W-4 for federal withholding, any state equivalent, and Form I-9 to confirm they can work in the US.
- Report the new hire. Federal law requires employers to report new employees to the state's new hire directory within 20 days of hire, and some states require it sooner.
- Run payroll. Each pay run calculates withholding, the employer's share of taxes and net pay.
- Deposit and file. Federal employment taxes are deposited electronically, Form 941 is filed each quarter, and Form 940 and Forms W-2 follow at year end.
The main federal filings
| Filing | What it covers | How often |
|---|---|---|
| Form 941 | Income tax withheld, Social Security and Medicare | Quarterly |
| Form 940 | Federal unemployment tax (FUTA), paid by the employer only | Annually |
| Form W-2 and W-3 | Each employee's annual wages and withholding | Annually |
| Tax deposits | Withheld and employer taxes, paid by electronic funds transfer | Monthly or semi-weekly, depending on size |
States have their own quarterly withholding and unemployment returns on top of these. This overview is general information, not tax advice; your CPA should confirm your deposit schedule.
Paying yourself as the owner
Owners are often surprised that payroll may not apply to them. A member of an LLC taxed as a disregarded entity or partnership is generally not an employee of the LLC, and takes money out as draws or distributions rather than wages. A C-Corp is different: an owner who works in the US business is usually paid through payroll like any other employee.
For a non-resident owner working from abroad, US payroll for yourself rarely applies at all. If you move to the US, your immigration status also decides whether you may be paid, so get that answer first. Talk to a CPA before setting up owner pay, because the right answer depends on the entity's tax classification and where you live.
Information you need
- Company legal name, EIN, and US business address.
- The state and address where each employee works.
- Each employee's legal name, address, SSN, start date, pay rate and pay frequency.
- Owner and officer details that states ask for on employer registrations.
- Bank details for funding payroll and tax payments.
Timeline
Many states issue withholding and unemployment account numbers online within days, while others take a few weeks. Start at least two to three weeks before the first payday if you can, so the accounts exist when the first deposits fall due.
Common mistakes to avoid
- Paying employees as contractors. Misclassification brings back taxes, penalties and interest.
- Registering in the wrong state. Payroll taxes usually follow where the employee works, not where the company was formed.
- Late deposits. Withheld taxes belong to the government, and late deposit penalties add up quickly.
- Forgetting new hire reporting. It is a separate step from payroll registration.
- Using a personal account to pay staff. Payroll should run from the company's own bank account.
If you also need to confirm work authorization electronically, see E-Verify enrollment. Payroll feeds your books and tax returns, so pair it with US bookkeeping and tax preparation and planning. For background, read how to pay yourself from your LLC.
US payroll at a glance
| Setup step | Who issues it | Why you need it |
|---|---|---|
| Federal EIN | IRS | Identifies the employer |
| State withholding account | State revenue department | Employees' state income tax is paid through it |
| State unemployment account | State labour agency | Employers pay unemployment insurance |
| Workers' compensation | Insurer | Required in most states once you have employees |
| E-Verify, where required | DHS | Some states require it for new hires |
Employee or contractor
| Employee | Contractor | |
|---|---|---|
| Control | You direct how and when work is done | They decide how to do the work |
| Tax withholding | You withhold and deposit taxes | They pay their own taxes |
| Forms | W-4 and W-2 | W-9 and 1099-NEC |
| Benefits | May apply | Do not apply |
The label does not decide the status; the working relationship does. Misclassifying someone can lead to back taxes and penalties, so ask us if you are unsure.
Calendar of recurring payroll duties
- Each pay run: calculate wages and withholding, and pay employees.
- Each period: deposit federal and state payroll taxes on time.
- Each quarter: file the quarterly payroll return and state reports.
- Each January: send W-2 and 1099-NEC forms and file the annual returns.
Late deposits attract penalties quickly, which is why a scheduled service is worth having. See E-Verify for the related hiring step.
Before your first payday
- Confirm the employee's work location, because that sets which state rules apply.
- Collect Form W-4 and Form I-9 on or before the first day.
- Register for state withholding and unemployment accounts, which can take days to weeks.
- Arrange workers' compensation coverage where the state requires it.
Starting two to three weeks before payday leaves room for the accounts to be issued. Our E-Verify service covers the extra step some states require.
