Question 1

Do I need a payroll service?

Accepted Answer

Not required, but many small businesses use one to handle withholding, filings and deadlines correctly.

Question 2

Can I pay my first employee in cash?

Accepted Answer

You can pay in cash only if you still withhold and report taxes properly. Paying “off the books” is illegal and risky.

Question 3

What do I need to do before hiring my first employee?

Accepted Answer

Get an EIN, register with your state for payroll taxes, get workers’ comp insurance, and set up payroll.

Question 4

What forms does a new employee fill out?

Accepted Answer

Form I-9 for work eligibility, Form W-4 for federal withholding, and any state withholding form.

Question 5

How do I know if someone is an employee or a contractor?

Accepted Answer

If you control how, when and where they work, they’re usually an employee. Contractors run their own business. Check IRS and Department of Labor guidance.

Question 6

What payroll taxes do employers pay?

Accepted Answer

Your share of Social Security and Medicare, plus federal and state unemployment taxes, in addition to withholding the employee’s taxes.

Question 7

Do I need workers’ comp for one employee?

Accepted Answer

Most states require it once you have employees, though thresholds and rules vary by state.

Question 8

What is new hire reporting?

Accepted Answer

Reporting each new employee to your state’s new hire registry, usually within a few weeks of hiring.

Common questions: Hiring your first employee