Employer Compliance Checklist for Small Businesses

Register for State and Federal Employer Taxes

Before your first paycheck, register with your state's revenue or labor agency for income tax withholding and unemployment insurance, in addition to the federal EIN you already use to identify the business to the IRS. Most states require this registration separately from your state's business formation filing, so don't assume forming your LLC or corporation automatically sets up your payroll tax accounts.

Complete Form I-9 for Every New Hire

Every employer must complete Form I-9 to verify a new employee's identity and authorization to work in the United States, regardless of the employee's citizenship. The employee completes Section 1 on or before their first day of work, and the employer completes Section 2, verifying original documents, within 3 business days of the employee's start date, per U.S. Citizenship and Immigration Services. Keep completed I-9 forms for 3 years after the date of hire or 1 year after employment ends, whichever is later, and store them separately from other personnel files.

Report New Hires to Your State

Federal law requires employers to report basic information, including the employee's name, address and Social Security number, and the employer's name, address and federal EIN, to the state within 20 days of the hire date, according to the Administration for Children and Families. Some states set a shorter deadline. This information feeds the National Directory of New Hires, used primarily to help enforce child support orders.

Carry Workers' Compensation Insurance

Most states require an employer to carry workers' compensation insurance once it has one or more employees, though a few states set a higher employee-count threshold and the rules on whether an owner or corporate officer counts as an employee vary by state. Confirm your specific state's threshold and whether you're required to purchase a policy or may self-insure, since operating without required coverage can expose the business to penalties and direct liability for a workplace injury.

Display Required Workplace Posters

Covered employers must display certain federal posters where employees can see them, including notices for the Fair Labor Standards Act's minimum wage and overtime rules and, for employers engaged in business affecting commerce, Occupational Safety and Health Act protections. The Family and Medical Leave Act poster applies once an employer has 50 or more employees within 75 miles, per the Department of Labor; willfully refusing to post it can bring a civil penalty from the Wage and Hour Division. Most states also require their own posters covering state-specific protections, in addition to the federal set.

Deposit Withheld Payroll Taxes on Schedule

Once you withhold federal income tax, Social Security and Medicare tax from employee wages, the IRS assigns your business a deposit schedule, either monthly or semi-weekly, based on your reported tax liability. Missing a scheduled deposit, even by a few days, can trigger a federal penalty calculated as a percentage of the unpaid amount that increases the longer the deposit is late.

Classify Workers Correctly

Whether someone is an employee or an independent contractor determines which of these obligations apply at all; misclassifying an employee as a contractor to avoid payroll taxes, workers' comp, or minimum wage and overtime rules is one of the more common and costly employer compliance mistakes, and it's assessed under both IRS and Department of Labor tests that look at the actual working relationship, not just the label in a contract.

Keep a Calendar for Recurring Deadlines

Between state unemployment tax filings, federal payroll tax deposits and returns, new hire reports, and your business's own annual report with the state, an employer accumulates more recurring deadlines than a business with no employees. Tracking them on one calendar, rather than relying on separate reminders from each agency, reduces the chance of missing one.

Your First Employee Changes More Than Payroll

Hiring even one employee can trigger workers' compensation requirements, poster requirements, and new state tax registrations all at once; it's worth working through this checklist before, not after, that person's first day.

State Rules Vary More Than Federal Ones Here

Workers' compensation thresholds, state new-hire reporting deadlines, and state-specific posters differ by state in ways the federal baseline doesn't capture. Confirm your specific state's rules rather than assuming the federal requirement is the whole picture.

Worker Misclassification Carries Its Own Exposure

Treating someone who's functionally an employee as an independent contractor to avoid this checklist doesn't actually avoid the underlying obligations; it just adds back taxes, penalties and potentially unpaid overtime once the classification is corrected.

This Is Not Legal or Tax Advice

Employment law, payroll tax deposit schedules, and workers' compensation requirements are detailed and state-specific, and penalties for getting them wrong can be significant. Talk to a payroll provider or accountant about your specific deposit schedule, and an employment attorney about classification and leave-law questions.