Hiring Your First W-2 Employee: The Financial Checklist

Going from solo to employer is one of the biggest financial shifts a home service business goes through. It's not complicated, but it is exacting — the IRS, your state, and your insurance carrier all have specific things they want from you, and missing any of them is expensive.

Before the first day

• Get a federal EIN if you don't already have one (free, takes ten minutes at irs.gov).
• Register as an employer with your state tax agency and unemployment insurance.
• Set up a payroll system — Gusto, QuickBooks Payroll, and ADP are all solid.
• Buy workers' comp coverage. Required in almost every state, including Nevada.
• Decide on benefits, if any (health, retirement, PTO) — and make sure payroll is configured to handle them.

The paperwork on day one

• Form W-4 — federal withholding election.
• Form I-9 — work eligibility verification (required within 3 business days).
• State withholding form (not applicable in Nevada, but relevant if you hire across state lines).
• Direct deposit authorization.
• Offer letter, signed and dated.

Withholding and payroll taxes

Every pay period, you're withholding federal income tax, Social Security, and Medicare from the employee — and matching the Social Security and Medicare portions yourself. You're also paying federal and state unemployment tax on top. The total employer cost for a W-2 is roughly 8–12% above the stated wage, before benefits.

Ongoing compliance

• File and pay payroll taxes on the correct schedule (usually monthly or semi-weekly).
• File Form 941 quarterly, Form 940 annually, and W-2s by January 31.
• Keep accurate time records — especially for hourly employees.
• Review workers' comp coverage as payroll grows; premiums adjust.

The financial picture

Your first hire usually doesn't pay for themselves immediately — plan for a 3–6 month ramp before they're producing enough billable work to cover their fully-loaded cost. Budget for that gap before you make the hire, and the transition is manageable. Skip that step and a good hire can still sink the business by running you out of cash.