Setting up payroll for your first employee in New York involves several federal and state requirements. Missing a step can result in penalties from the IRS or the New York State Department of Labor. Here is a step-by-step guide for small business owners.
Step 1: Get Your EIN
Before you can run payroll you need an Employer Identification Number from the IRS. An EIN is your business tax ID — you use it to file payroll taxes and issue W-2 forms. You can apply for an EIN for free at irs.gov. The number is issued immediately online.
Step 2: Register as a New York State Employer
New York State requires employers to register with the New York State Department of Labor for unemployment insurance. You also need to register with the New York State Department of Taxation and Finance to withhold New York State income tax from employee paychecks.
Both registrations are done online through the NY.gov business portal.
Step 3: Have Your Employee Complete Onboarding Forms
Before your employee receives their first paycheck they need to complete:
- Form W-4 — federal withholding allowances
- Form IT-2104 — New York State withholding allowances
- Form I-9 — employment eligibility verification
- Direct deposit authorization form if you pay by direct deposit
Keep all completed forms on file. The I-9 must be completed within 3 days of the employee’s start date.
Step 4: Report the New Hire to New York State
New York State law requires employers to report every new hire within 20 days of their start date. This is done through the New York State New Hire Reporting Center at newhire.nysdol.gov. You will need the employee’s name, address, Social Security number, and start date.
Step 5: Set Up a Payroll Schedule
Decide how often you will pay your employee. New York State law requires that most employees are paid at least twice per month. Common schedules are:
- Weekly
- Bi-weekly (every two weeks)
- Semi-monthly (twice per month)
Once you set a pay schedule you must stick to it consistently.
Step 6: Calculate Payroll and Withhold Taxes
For each pay period you need to calculate and withhold:
- Federal income tax (based on W-4)
- New York State income tax (based on IT-2104)
- Social Security tax — 6.2% from employee, 6.2% from employer
- Medicare tax — 1.45% from employee, 1.45% from employer
- New York City income tax if the employee works in NYC
Step 7: File and Pay Payroll Taxes
Payroll taxes must be deposited with the IRS on a regular schedule — either monthly or semi-weekly depending on your total tax liability. You also need to file:
- Form 941 — quarterly federal payroll tax return
- NYS-45 — quarterly New York State payroll tax return
- W-2 — annual wage statement issued to the employee by January 31
Step 8: Carry New York State Workers Compensation Insurance
New York State requires all employers to carry workers compensation insurance before the first employee starts work. This is not optional. You can obtain coverage through a private insurer or the New York State Insurance Fund at nysif.com.
Summary
Setting up payroll for your first employee in New York requires registering with federal and state agencies, collecting the correct forms, withholding the right taxes, and meeting ongoing filing deadlines. If you want to avoid mistakes and focus on running your business, a payroll service handles all of this for you.
Ready to hire your first employee but not sure where to start? Accynta sets up and manages payroll for small businesses in New York — registrations, withholdings, and filings included. Contact us and we will handle it.