Hiring your first employee in the United States triggers a chain of registrations, forms and deposits, and each one has its own clock. This US employer compliance checklist walks through the federal steps in the order you meet them, with the Illinois registrations that sit beside them. It applies whether the employer is a corner business in Aurora or a US subsidiary of a company in Mumbai or Calgary, and it uses the rates and rules in IRS Publication 15 for 2026.
Who counts as an employer
If you pay someone for work and control how, when and where it is done, that person is generally an employee, and you owe withholding and employer taxes. Part-time and short-term workers are treated like full-time employees for income tax withholding, Social Security, Medicare and FUTA purposes. Contractors are different: you report payments to them on Form 1099-NEC instead. For payments made after 2025, the filing threshold rose from $600 to $2,000 in a calendar year under P.L. 119-21.
US employer compliance checklist, step by step
- Get an EIN. You need one to withhold taxes. A founder without an SSN follows the process in our EIN and bank account guide.
- Register with Illinois. The Department of Revenue handles income tax withholding, and unemployment insurance is registered with the Department of Employment Security. The IDOR says registration through MyTax Illinois takes about one to two business days. Details are in Illinois employer registrations.
- Collect Form W-4 and Form I-9. Ask each new employee for the 2026 Form W-4. You must also verify work authorization on Form I-9, using the current edition on the USCIS site.
- Report the new hire. Every state has a new hire registry. Illinois timing and the filing method are in our Illinois payroll guide.
- Withhold on each paycheck. Federal income tax by Form W-4 and the Pub. 15-T tables, plus the employee share of Social Security and Medicare.
- Deposit the taxes. Your deposit schedule is monthly if you reported $50,000 or less in the lookback period, semiweekly if more. For 2026 the lookback runs from July 1, 2024 to June 30, 2025. A next-day deposit rule applies once $100,000 or more accumulates.
- File Form 941 each quarter. It is due by the last day of the month after the quarter ends, or by the 10th day of the second month if you deposited all taxes on time. The usual dates are April 30, July 31, October 31 and January 31.
- File Form 940 and issue Forms W-2. FUTA is reported annually, and each employee gets a Form W-2 with Form W-3 sent to the Social Security Administration.
- Keep the records. See the retention table below.
Which forms does a new employee complete?
| Form | Who completes it | What it does |
|---|---|---|
| Form W-4 | Employee | Sets federal income tax withholding |
| Form I-9 | Employee and employer | Verifies identity and work authorization; not filed with USCIS or ICE |
| State withholding form | Employee | State income tax withholding (Illinois uses its own form) |
| New hire report | Employer | Sent to the state registry |
For Form I-9, USCIS lists the 01/20/25 edition as current, and says an earlier 08/01/23 edition is valid until its expiration date of 05/31/2027. Check the edition date at the bottom of the page. You may also use E-Verify, an online system, to confirm eligibility, and the Social Security Number Verification Service to check that a name matches an SSN.
Payroll tax rates and thresholds for 2026
| Tax | Who pays | 2026 rate or limit |
|---|---|---|
| Social Security | Employer and employee | 6.2% each on wages up to $184,500 |
| Medicare | Employer and employee | 1.45% each, no wage cap |
| FUTA | Employer only | 6.0% on the first $7,000 per employee; credit up to 5.4% leaves 0.6% |
| Information return threshold | Payer | $2,000 for Form 1099-NEC payments after 2025 |
The FUTA credit assumes you paid state unemployment tax in full and on time. Illinois sets its own unemployment wage base and rates; see the Illinois payroll guide.
Deadlines and penalties
- Form 941: quarterly, usually the last day of the month after the quarter. The third-quarter 2026 date, October 31, falls on a Saturday, so the due date generally moves to Monday, November 2, 2026.
- Form 940: once a year; deposit FUTA during the year if the undeposited amount exceeds $500.
- Trust fund recovery penalty: if withheld income, Social Security and Medicare taxes are not paid over, the IRS can assess a penalty against responsible people personally. This is one of the most serious employer risks.
- Late deposits carry their own penalties under the deposit rules in Pub. 15.
Our federal tax calendar lists the dates month by month.
Employees who live outside the US or are not US citizens
- Wages for work done in the US: nonresident alien employees are subject to Social Security and Medicare as a citizen would be, with a few exceptions. Withholding for nonresident aliens follows Notice 1392 instead of the normal Form W-4 instructions, and they cannot claim exemption on Form W-4.
- Treaty exemption: a nonresident alien may claim a treaty exemption on Form 8233. Exempt wages are then reported on Form 1042-S rather than in box 1 of Form W-2.
- Work done entirely outside the US: pay to a nonresident alien for services performed outside the United States is not wages and is not subject to US withholding, so a remote worker in Pune or Toronto is usually a different case from a worker in Aurora.
- Social security agreements: the US has totalization agreements with many countries that can remove dual coverage; ask for a certificate of coverage. See our guide for foreign workers.
A worked example
A Canadian-owned Illinois subsidiary hires its first employee in Aurora at US$60,000 a year. Hypothetical figures: Social Security is 6.2% x $60,000 = $3,720 and Medicare is 1.45% x $60,000 = $870, so $4,590 from the employee and the same $4,590 from the employer. FUTA at the net 0.6% on the first $7,000 is $42 if the state credit applies in full. The company deposits all withheld and employer taxes on its schedule, files Form 941 each quarter, and issues the employee a Form W-2 in January. Federal and Illinois income tax withholding are extra and depend on the employee's forms.
Mistakes to avoid
- Starting work before the Form I-9 is completed, or storing it with the wrong retention date.
- Treating a worker as a contractor when the relationship looks like employment.
- Missing the state registrations and finding out when a notice arrives.
- Using an old Form I-9 edition after its expiration date.
- Paying wages in cash outside payroll, which breaks the audit trail.
How we can help
Our firm runs payroll set-up, quarterly and annual returns, and the registrations that go with them for employers in Aurora, Naperville and across Illinois, including US subsidiaries of Indian and Canadian companies. We coordinate with your Canadian CPA or Indian Chartered Accountant where staff move between countries. See payroll and employer compliance, bookkeeping and accounting and business formation and registrations. Immigration questions belong with an immigration professional.
Frequently asked questions
Do I need to run payroll if I pay myself as an owner?
It depends on the entity. Sole proprietors and most LLC owners do not take wages and pay self-employment tax instead, while a corporation's working owners are generally employees. Ask us before deciding.
How long do I keep Forms I-9?
USCIS says to retain each form for three years after the date of hire or one year after employment ends, whichever is later, and to make it available for inspection by authorized officials.
How long do I keep payroll records?
The IRS says to keep all employment tax records for at least 4 years.
Is E-Verify required?
Pub. 15 describes E-Verify as an option employers may use. It can be required in some situations, so check your own.
Can I hire a worker in India or Canada through my US company?
Yes, but the pay for work done abroad is not US wages, and the foreign country will have its own payroll and registration rules. We coordinate with your foreign advisor.
Official sources
- IRS: Publication 15 (2026), Employer's Tax Guide
- IRS: Employment tax due dates
- USCIS: Form I-9, Employment Eligibility Verification
- E-Verify
- Illinois Department of Revenue: Business registration
- IRS: Publication 515
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.