Texas New Employer Payroll Setup
Everything that has to happen before your first employee's first paycheck — and the three things Texas doesn't make you do.
To hire your first employee in Texas you need a federal EIN, registration with the Texas Workforce Commission for unemployment tax, a new hire reporting process, and a decision about workers' compensation. There is no state income tax withholding in Texas, so there's no state withholding account to set up.
Setup usually takes a few days of elapsed time and very little of yours. We do the whole thing for clients who hand us payroll.
Three Things Texas Doesn't Make You Do
Texas payroll is genuinely simpler than most states. Knowing which parts are missing saves you from looking for accounts that don't exist.
No state income tax withholding
Texas has no state personal income tax, so there's no state withholding account, no state W-4 equivalent, and nothing withheld at the state level. Federal withholding still applies in full. This is the single biggest simplification Texas offers an employer.
No mandatory workers' compensation
Texas is the only state where private employers generally aren't required to carry it. That's a genuine choice rather than a default — non-subscribers lose certain legal defenses and have to notify TWC and their employees, so it's worth deciding deliberately with your insurance agent.
No state disability insurance
Several states require employers to fund short-term disability or paid family leave programs through payroll. Texas doesn't. If you've run payroll in California, New York or New Jersey, those line items simply aren't here.
What Actually Has to Happen Before the First Check
Eight steps. For clients who hand us payroll, we do most of them and tell you about the rest.
Get your federal EIN
The Employer Identification Number is the federal tax ID every employer needs. It's issued by the IRS, it's free, and it's usually the fastest step in the whole process.
We handle itRegister with the Texas Workforce Commission
TWC administers unemployment insurance tax in Texas. New employers must register for a tax account within ten days of becoming a liable employer. The registration establishes your account and your assigned tax rate.
We handle itSet up your state unemployment tax account
Your SUTA rate as a new employer is assigned by TWC and is reassessed periodically based on your own experience. This is an employer-paid tax — nothing comes out of the employee's check for it.
We handle itDecide on workers' compensation
Texas is the only state where private employers generally aren't required to carry workers' compensation. Opting out is legal and it has real consequences: non-subscribers give up certain legal defenses and must notify both TWC and their employees.
Your decision, we fileSet up new hire reporting
Texas employers report each new hire and rehire within 20 calendar days of the date the employee starts earning wages. If you're reporting for the first time, that includes everyone hired in the last 90 days. It's a small recurring obligation that's easy to forget during a busy stretch, so we build it into onboarding rather than leaving it to memory.
We handle it, ongoingClassify the worker correctly
W-2 employee or 1099 contractor isn't a preference, it's determined by the nature of the working relationship. Getting it wrong is one of the more expensive mistakes available to a new employer, and it's far cheaper to settle before the first check than after an audit.
We advise, you decideChoose a pay schedule and set up the system
Weekly, biweekly, semimonthly or monthly — each has cash flow and administrative consequences. We configure the payroll system, set up pay types and deductions, and connect it to your books so payroll posts correctly instead of arriving as a lump sum to sort out later.
We handle itRun the first payroll and file on schedule
Federal deposits, quarterly Form 941, annual Form 940, TWC quarterly reports, and W-2s at year end. The filings don't stop once setup is done, which is the part most owners underestimate.
We handle it, ongoingWhat We Do and What Only You Can Do
Most of this is paperwork we're set up to handle. A few decisions are genuinely yours.
We handle
- EIN application
- Texas Workforce Commission registration
- State unemployment tax account setup
- Payroll system configuration and pay types
- New hire reporting, on every hire
- Federal deposits and Form 941 and 940 filings
- TWC quarterly wage reports
- W-2s and 1099-NECs at year end
- Posting payroll correctly into your books
You sign where a signature is required. Everything else happens without you in the loop.
You decide
- Whether to carry workers' compensation
- What you're paying, and salaried or hourly
- Pay frequency
- Whether a role is an employee or a contractor
- What benefits, if any, you're offering
- Your PTO and holiday policy
We'll tell you what each choice costs and what it commits you to. The classification question in particular is one we'll push back on if the answer looks wrong — it's cheaper to argue about it now.
Hiring Your First Employee in Texas
What owners ask us in the week before they make an offer.
Do Texas employers withhold state income tax?
No. Texas has no state personal income tax, so there is nothing to withhold at the state level and no state withholding account to register for. Federal income tax, Social Security and Medicare withholding all still apply exactly as they would anywhere else. If you're moving from a state with income tax, this is the line item that disappears.
Is workers' compensation required in Texas?
Generally no, for private employers — Texas is the only state that works this way. But opting out isn't free of consequence: employers who don't carry it (called non-subscribers) give up certain legal defenses if an employee is injured, and they have to notify both the Texas Workforce Commission and their employees. Some contracts and clients also require coverage regardless. Talk to your insurance agent before deciding.
How long does payroll setup take?
Usually a few business days of elapsed time, most of which is waiting on account confirmations rather than doing anything. The EIN is typically same-day. State registration takes longer. The thing that actually causes delay is starting the process the week someone is supposed to begin — if you know a hire is coming, tell us a couple of weeks out and none of it is urgent.
Can I just pay someone as a 1099 contractor instead?
Only if the relationship genuinely is a contractor relationship, which comes down to how much control you have over how and when the work is done — not what the two of you agree to call it. Misclassification is one of the more expensive findings in a payroll audit, and the liability sits with the employer. If someone works your hours at your direction using your tools, they're very likely an employee.
What does payroll cost on top of the wage?
Employer-side payroll taxes — the employer half of Social Security and Medicare, federal unemployment, and Texas state unemployment — mean your real cost runs above gross wages. The state unemployment rate is assigned by TWC and changes over time, so the exact figure depends on your account. Budgeting meaningfully above the wage itself is the right instinct, and we'll give you the actual number for your situation.
We have a remote employee in another state. Does that change things?
Yes, and more than people expect. An employee working from another state generally creates registration and withholding obligations in that state, including states that do have income tax. One remote hire can mean a new state payroll account, new filings and a new deadline calendar. We handle multi-state payroll, but it's worth knowing before the offer rather than after.
I've been paying someone already without setting any of this up. Now what?
It's fixable, and you're not the first. The work is registering the accounts, catching up the filings and deposits that should have been made, and correcting how those payments were recorded in your books. Penalties are possible and they grow with time, which is the one argument for dealing with it this month rather than next. We'll tell you what we find before we quote.
Do you handle payroll ongoing, or just the setup?
Both, and ongoing is the point. Setup is a one-time project; the filings, deposits, quarterly reports and year-end forms are the part that has to keep happening on schedule forever. We run payroll, make the filings, and post it all into your books so payroll expense is right without anyone reconciling it by hand. Payroll services →
On accuracy: payroll deadlines, tax rates and wage bases change, so this page describes the structure of Texas payroll setup rather than quoting current rates. The deadlines stated here were verified against the issuing agencies in October 2026 — the Texas Workforce Commission for unemployment tax registration, and the Texas Office of the Attorney General for new hire reporting. For federal requirements, the IRS is the source. If you're our client, we track all of it for you.
To be clear about scope: Bulverde Business Solutions provides bookkeeping, payroll, and financial operations services from Bulverde, Texas, serving the Hill Country, San Antonio, and clients across Texas. We are not a CPA firm or a law firm. We do not provide tax, legal, or investment advice. Worker classification, entity structure and workers' compensation decisions carry legal consequences; we'll tell you what we see and we'll coordinate with your CPA or attorney on the call itself.
Hiring Your First Employee?
Tell us when they start and we'll have payroll set up and running before the first check — EIN, state accounts, filings and all.
Set Up My Payroll → Or call us directly at (830) 666-0417.
