Adding Payroll for Your First Employee: 2026 Checklist

Dad’s short answer

Set up payroll before day one. For one employee in one state, Gusto Simple lists at $55 a month⁵; Patriot is cheaper if every dollar counts.

Day one: W-4 and I-9 Section 1.¹⁶ Within 3 business days: I-9 Section 2.²
Within 20 days: report the hire to your state. Some states want it sooner.³
Every paycheck: withhold and match 6.2% Social Security and 1.45% Medicare, then file Form 941 every quarter.⁴⁷
Want the dates for your hire? Use the first-hire checklist.

Provider	Best for	Starting price
Gusto	Most small teams that want payroll taxes filed for them, in one state (Simple) or several (Plus)	Simple $49/mo + $6/person; Plus $80/mo + $12/person⁵
Patriot Software	The lowest full-service price for teams of 2 or more	Full Service $37/mo + $5/worker; Basic $17 + $4 if you file taxes yourself⁸
QuickBooks Payroll	People already doing their books in QuickBooks	From $88/mo + $6.50/employee, bundled with Simple Start accounting⁹
Square Payroll	Shops and restaurants already on Square POS	$35/mo + $6/person; contractor-only $6/person¹⁰
OnPay	Teams in several states that want one flat rate	$49/mo + $6/person, multi-state included¹¹

Starting list prices from each company’s pricing page, verified Oct 31, 2026. Add-ons and promos not included. Confirm on their site.

Start on Gusto’s website →

Goes through our referral page first. We earn a reward if you sign up; your price doesn’t change.

Dad story

Picture a dog groomer in Arizona.

Business is good. She hires her first bather. Call him Leo.

Leo starts Monday.

By Thursday, the I-9 has to be done.²

Within 20 days, the state wants to know he exists.³

Leo just wants to know when payday is.

The dogs don't care about paperwork. The government does.

Your first-employee payroll checklist

Get your EIN. You need a valid EIN to file and pay employment taxes electronically.⁷
Register with your state. Usually a withholding account and an unemployment insurance account. Your state's revenue and labor sites walk you through it.
Collect Form W-4 on day one, and use it starting with the first paycheck.¹
Complete Form I-9 within 3 business days of the first day of paid work.²
Report the new hire to your state within 20 days. Some states want it sooner.³
Pick a pay schedule (weekly, biweekly, semimonthly or monthly) and check your state's rules on pay frequency.
Run payroll. Withhold income tax, Social Security and Medicare. Pay your matching share.
Deposit taxes on time, and file Form 941 every quarter by April 30, July 31, Oct 31 and Jan 31.⁷
Year-end: a W-2 for each employee. For 2026 wages it's due by February 1, 2027.²³ Most employers also file Form 940 for federal unemployment.⁷

The math on one paycheck

Quick math

Leo earns $800 every two weeks.

Social Security: 6.2% from Leo, 6.2% from you. That's $49.60 each.⁴

Medicare: 1.45% each. $11.60 each.⁴

Plus income tax withholding from his W-4, plus your state and federal unemployment taxes.

Leo sees $800 on the offer letter. You see $861.20 plus unemployment tax on the spreadsheet.

(Made-up groomer. Real 2026 rates.)

What happens if a deposit is late

The IRS charges 2% if a deposit is 1–5 days late, 5% for 6–15 days, 10% after that, and 15% if it's still unpaid 10 days after the first notice.²⁴ This is the main reason people stop doing payroll by hand.

Should you use payroll software for one employee?

You don't have to. But a full-service provider calculates, deposits and files for you. Gusto Simple is $49/month + $6 per person, so $55 for one employee at list price.⁵ It includes unlimited payrolls and automatic federal, state and local filings, including W-2s and Form 941.²⁵

Even with software, you're still the employer. The IRS holds you ultimately responsible for the deposits, so check them in EFTPS now and then.²⁶

What would payroll cost?

✓ Prices checked Oct 31, 2026

Current provider

What you pay now ($/mo, optional)

W-2 employees

Contractors paid / mo

States

List prices from each company’s own pricing page. Promos, add-ons and taxes not included. Quote-only providers show “quote only.” How we calculate

Start on Gusto’s website →

Goes through our referral page first. We earn a reward if you sign up; your price doesn’t change.

Already on another provider? See how to switch at year-end.

FAQ

What forms does a new employee fill out?

At minimum, a federal Form W-4 for withholding and Form I-9 for work eligibility. Ask for the W-4 when they start.¹ Many states have their own withholding form too.

How fast do I have to complete Form I-9?

You complete Section 2 within 3 business days of the employee's first day of paid work. Start Monday, finish by Thursday.²

Do I have to report a new hire to my state?

Yes. Federal law requires reporting new hires to the state within 20 days, and some states require it sooner.³

What payroll taxes do I pay as an employer?

For 2026: Social Security is 6.2% each for you and the employee, on wages up to $184,500. Medicare is 1.45% each, with no cap.⁴ Federal unemployment goes on Form 940. Your state has its own taxes too.

How much does Gusto cost for one employee?

Gusto Simple is $49/month + $6/month per person, so $55 for one person at list price.⁵

Sources, checked Oct 31, 2026

Every number on this page comes from one of these pages. Prices change; if a vendor updates its page, theirs wins.