What employer records are necessary to setup payroll?
Before you can start paying your employees, the government requires you to have several documents. These documents include:
Employer Identification Number (EIN)
Like a Social Security number for your business, an EIN is a nine-digit number the IRS uses to track a company for tax purposes. It's free to get an EIN. You can apply online, or you can fill out Form SS-4 and send it to the IRS via mail or fax.
State/Local Tax ID Number
If your state assesses income tax, your business must apply for a state tax ID number through the relevant state agency. If your local government also charges income tax, you need to apply for a local tax ID number, too.
State Unemployment ID Number
Businesses must pay state unemployment tax on behalf of employees. Most states require that you apply for a separate state unemployment tax ID number — you can't use your regular state income tax number.
Whenever you hire a new employee, you both need to complete federal I-9 forms. This form can help demonstrate that your new employee is legally authorized to work in the United States.
New employees must also complete federal W-4 forms. Your employee will list their income and family information. Then, you can calculate how much money to withhold from their paycheck for federal income taxes.
State Withholding Allowance Certificate
If your state has an income tax, it may require each of your employees to fill out a state withholding allowance certificate to set their tax withholding. Other states accept the federal W-4 form instead.
Department of Labor (DOL) Records
The DOL requires you to track employee payroll information like weekly hours worked, wages and earned overtime. You may need this information in case you're audited by the DOL or applicable state wage and hour agency, as it can help demonstrate your company’s pay practices which can help the agency determine whether they are consistent with federal and state wage and hour rules. You can look up some of your state's wage and hour requirements through the DOL.