Most first-time employers start with the software and discover the rest later: a state account they never opened, a new hire they never reported, a deposit date nobody knew. Software runs the calculation; it does not create your legal identity as an employer. This checklist follows IRS Publication 15 (2026) for the federal steps and leaves the state steps to your state's agencies, which differ. We read the sources on October 27, 2026; nothing here comes from setting up an account in either product.
For whom: a US business hiring its first employee. Not for: paying contractors only (no payroll taxes to withhold), or an S corporation owner paying only themselves (see S corp owner payroll).
The order that works
| Step | What to do | Source |
|---|---|---|
| 1. Employer ID | Get an EIN online at IRS.gov/EIN, or by fax or mail with Form SS-4 | Publication 15 |
| 2. State accounts | Register with your state for income tax withholding (if it has one) and for state unemployment insurance | Your state's agencies |
| 3. Pay schedule | Choose weekly, biweekly, semimonthly or monthly within your state's payday rules | DOL state payday overview, then your state's law |
| 4. Each new hire | Complete Form I-9 to verify work eligibility (E-Verify is available), collect the 2026 Form W-4, record the name and SSN | Publication 15 |
| 5. New hire registry | Report each new employee to your state's new hire registry; many states accept a copy of the W-4 with employer details added | Publication 15 |
| 6. Deposit schedule | A new employer generally starts as a monthly schedule depositor: deposit each month's taxes by the 15th of the next month through EFTPS (free). If you accumulate $100,000 or more of taxes on any day within a deposit period, deposit by the next business day; you then become a semiweekly depositor for at least the rest of that year and the next | Publication 15 |
| 7. Returns | Form 941 each quarter by default, or the annual Form 944 if the IRS notifies you to file it (confirm which before setup); Form 940 and W-2s each year; plus your state's returns | Publication 15 |
| 8. Software | Choose a provider and connect it to the accounts above | — |
Two steps catch people. For step 2, check your state's registration deadline and what your payroll provider needs at onboarding; we recommend registering before the first paycheck, because your first state deposit or return will need the account number. Step 5 applies to every new hire, including someone rehired after at least 60 consecutive days away.
What payroll software does and does not do
A full-service provider calculates withholding, pays the deposits and files the returns once it has your account numbers. Square Payroll's pricing page says it files federal payroll taxes and state income and unemployment taxes; OnPay's says federal, state and local filings are included. OnPay's main pricing page lists automatic state tax registrations under its multi-state payroll features; Square's pricing page does not mention registering state accounts. Ask the provider which states and accounts it registers for you, and plan to do the rest of step 2 yourself. And the IRS holds the employer responsible for deposits even when a provider makes them; see what your provider files and what stays yours.
Our pick
Full-service software from the first paycheck. A first-time employer is learning the deposit calendar while paying people, and full-service payroll takes that calendar off your desk. Square Payroll lists full-service payroll at $35 a month plus $6 per person paid, below OnPay's $49 plus $6 per worker; OnPay is the pick if your city or county has its own payroll tax, because its pricing page says local filings are included.
- Do it yourself only for one employee in one state, with Publication 15 at hand and a reminder for every deposit; see do payroll yourself, use software, or hire a service.
- Hiring in several states from the start? Use the multistate payroll checklist before choosing.
For prices at 1, 5 and 20 employees, see payroll software prices.
Traceable evidence
Sources for this decision
- vendorOnPay pricing pageOnPay · checked Oct 27, 2026 · supports: OnPay's own pricing page as read on 2026-10-27, supporting the entry list price of its Payroll Essentials plan ($49/month + $6 per worker), and whether a free plan exists. It does not prove the total cost for a given buyer, later price changes, promotions, negotiated discounts or taxes.Open source ↗
- vendorSquare Payroll pricing pageSquare Payroll · checked Oct 27, 2026 · supports: Square Payroll's own pricing page as read on 2026-10-27, supporting the entry list price of its Full-service payroll plan ($35/month + $6 per person paid) and the page details recorded with it (Contractor-only payroll: $6 per person paid, no base fee), and whether a free plan exists. It does not prove the total cost for a given buyer, later price changes, promotions, negotiated discounts or taxes.Open source ↗
- regulatorPublication 15 (2026), (Circular E), Employer's Tax GuideInternal Revenue Service · checked Oct 27, 2026 · supports: IRS Publication 15 (2026): 2026 social security rate of 6.2 percent each for employer and employee on wages up to 184,500 dollars, Medicare 1.45 percent each with no wage base, 0.9 percent Additional Medicare Tax withheld on wages over 200,000 dollars with no employer share, FUTA 6.0 percent on the first 7,000 dollars with up to a 5.4 percent credit (0.6 percent net), monthly depositor status for 50,000 dollars or less in the lookback period and for new employers' first calendar year, deposit by the 15th of the following month, the 100,000 dollar next-day rule for taxes accumulated within a deposit period, which also makes a monthly depositor semiweekly, late-deposit penalties of 2, 5, 10 and 15 percent (15 percent for amounts unpaid more than 10 days after the first notice or after notice and demand for immediate payment, whichever is earlier), the 100 percent trust fund recovery penalty on responsible persons who willfully fail to collect or pay over trust fund taxes, quarterly Form 941 and annual 940, employers notified by the IRS filing the annual Form 944 instead of Forms 941, W-2 duties, applying for an EIN online or with Form SS-4, Form I-9 and E-Verify for new hires, the 2026 Form W-4, reporting new employees (including rehires after 60 consecutive days of separation) to a state new hire registry where many states accept a copy of Form W-4, references to Publication 15-T withholding tables, EFTPS and SSA W-2 e-filing described as free, and the rule that an employer remains responsible when a third-party payer fails; it does not cover state taxes.Open source ↗
- officialEFTPS, Electronic Federal Tax Payment SystemU.S. Department of the Treasury · checked Oct 27, 2026 · supports: Treasury's EFTPS page stating that the Electronic Federal Tax Payment System is provided free by the U.S. Department of the Treasury and can be used to pay any tax due to the IRS; it does not compute tax or file returns.Open source ↗
- regulatorState Payday RequirementsU.S. Department of Labor · checked Aug 5, 2026 · supports: DOL's state payday-frequency overview as a jurisdiction-screening source; it does not resolve current state law, worker categories or exceptions.Open source ↗
- vendorSquare Payroll official product siteSquare Payroll · checked Aug 5, 2026 · supports: Vendor-published product scope used to verify capabilities relevant to this buyer context: Small hourly businesses evaluating payroll beside Square point-of-sale and team workflows.. It does not prove the guide's fit verdict, configured performance, current pricing or compliance.Open source ↗
- vendorOnPay official product siteOnPay · checked Aug 5, 2026 · supports: Vendor-published product scope used to verify capabilities relevant to this buyer context: Small employers and accountant-managed businesses comparing a focused payroll and HR workflow.. It does not prove the guide's fit verdict, configured performance, current pricing or compliance.Open source ↗
- vendorSquare Payroll pricing page, plan featuresSquare · checked Oct 27, 2026 · supports: Square Payroll's pricing page as read on October 27, 2026: full-service payroll at a monthly fee plus a per-person fee, contractor-only payroll per person paid with no base fee and without automated tax filings, Square's statement that it calculates, withholds and files all federal payroll taxes and files state income and unemployment taxes where applicable in each jurisdiction, digital W-2 and 1099 delivery, and an annual fee of $3 per employee or contractor for employers who opt in to mailed paper W-2s or 1099s; it does not name local taxes or Forms 941 and 940.Open source ↗
- vendorOnPay pricing page, plan featuresOnPay · checked Oct 27, 2026 · supports: OnPay's pricing page as read on October 27, 2026: Payroll Essentials at a base fee plus a per-worker fee, a one-month-free offer link without stated terms, and statements that W-2s, 1099s and year-end filings and federal, state and local tax filings are included; it does not state a filing guarantee.Open source ↗
- vendorOnPay main pricing pageOnPay · checked Oct 27, 2026 · supports: OnPay's main pricing page as read on October 27, 2026: a base fee plus a per-worker fee, Form 941 and 943 filings supported, end-of-year filings, W-2s and 1099s, all federal, state and local tax filings and payments, an error-free guarantee described as taking care of the tax agency if OnPay makes a mistake, automatic state tax registrations listed under multi-state payroll, and a first-month-free offer without stated terms; it does not name Form 940 or state the guarantee's terms.Open source ↗