How to Run Payroll for One Employee (2026 Guide)

This article is for general information, not tax or legal advice. Payroll rates, wage bases, and filing deadlines change. Verify current figures with the IRS and your state agency, or talk to a payroll professional before you file.

You just hired one person. Maybe it is your first employee, maybe it is yourself as the only worker in an S corp. Either way, the search results push you toward $30 to $100 a month payroll software before you have even cut a single check.

You do not need that for one employee. Running payroll yourself is legal, and the only genuinely hard part is the withholding math, which a calculator handles in seconds. Here is the full workflow, from one-time setup to what you file with the government.

Can you really run payroll for one employee yourself?

Yes. There is no law that says you must use a payroll service. Plenty of sole proprietors and single-owner S corps run payroll by hand or with a calculator app, and the IRS does not treat a one-person operation any differently from a large one in terms of what is allowed.

The work splits into two buckets. There is one-time setup, which takes maybe ten to fifteen hours of paperwork and registrations. Then there is the recurring per-period work: calculate the check, pay the worker, set aside the taxes, and deposit them on schedule.

That recurring part is where time estimates vary. Done fully by hand with the IRS tables, expect two to three hours per pay run once you factor in the math and the record keeping. With a decimal-precise paycheck calculator doing the withholding, the same run drops to under thirty minutes.

The real catch is accuracy. The government does not care that you are small. Miss a deposit deadline or botch the withholding and the penalties match what a company with a full payroll department would pay. Cheap is easy. Getting it right is the part that takes care.

One-time setup: EIN, state registration, and new-hire paperwork

Before a single dollar moves, you need to be registered as an employer.

Start with an EIN, the federal Employer Identification Number. You apply on the IRS website, it is free, and you usually get the number on the spot. You cannot report or deposit employment taxes without one.

Next, register with your state. Most states need you to set up a withholding tax account and a state unemployment (SUTA) account separately. The process differs by state, so check your state department of revenue and labor websites. This is also where you learn your assigned SUTA rate.

Then collect the new-hire paperwork from your employee:

Form W-4, which tells you how much federal income tax to withhold.
Form I-9, to verify they are legally allowed to work in the United States.
Your state’s withholding form, if your state has its own (many do).
A direct deposit authorization, if you are paying electronically.

You also have to report the new hire to your state’s new-hire reporting program, usually within twenty days. Finally, pick a pay schedule and stick with it. Biweekly is the most common private-sector schedule in the U.S. according to the Bureau of Labor Statistics, but weekly, semimonthly, and monthly are all valid.

Calculating the paycheck each pay period

This is the heart of every pay run, and it is the same five-step sequence every time. Take the worker from gross pay down to the net amount that lands in their account.

Step 1: Gross pay. For hourly workers, multiply the rate by hours worked, then add overtime (time-and-a-half over 40 hours in a week under the FLSA), tips, or bonuses. For salaried workers, divide the annual salary by the number of pay periods.

Step 2: Pre-tax deductions. Subtract anything that comes out before tax, like traditional 401(k) contributions or pre-tax health premiums. Note that 401(k) deferrals reduce income tax but generally not FICA, while Section 125 health premiums usually reduce both.

Step 3: Federal income tax. Use the employee’s W-4 and the withholding methods in IRS Publication 15 (Circular E), updated each year for 2026. This is the step people dread, and it is the one a calculator removes entirely.

Step 4: FICA. Withhold 6.2% for Social Security on wages up to the 2026 wage base of $184,500, plus 1.45% for Medicare with no cap. For high earners, add the 0.9% Additional Medicare Tax on wages above $200,000.

Step 5: State and local tax. Apply your state income tax, plus any state-specific items like California SDI or New York PFL. Nine states have no income tax at all.

What is left after those four withholdings is net pay, the actual paycheck.

Here is a quick worked example. Say your employee earns $1,500 gross for a biweekly period, single, no pre-tax deductions, in a state with a flat 4% income tax. Social Security is $1,500 × 6.2% = $93. Medicare is $1,500 × 1.45% = $21.75. State tax is $60. Federal income tax from the 2026 tables might be roughly $95. Net pay lands around $1,230.25. The federal piece is the only number you cannot read straight off a rate chart, which is exactly why a tool like WorkLogs44 exists: it runs the full gross-to-net sequence for all 50 states plus DC, decimal-precise, and tracks year-to-date earnings so the wage base caps handle themselves.

Employer-side taxes you owe on top of wages

Withholding is money you take out of the employee’s check. Employer taxes are different: they come out of your pocket, on top of the wages you already paid.

There are three of them.

Employer FICA match. You match the employee’s Social Security and Medicare dollar for dollar: 6.2% plus 1.45%, for 7.65% total. So an $80,000 salary actually costs you about $86,120 once you add the match. For more detail, see our guide on the employer FICA match.

FUTA, the federal unemployment tax. This is 6.0% on the first $7,000 of each employee’s wages, but most employers get a credit that drops the effective rate to 0.6%, or $42 per employee per year.

SUTA, the state unemployment tax. Your state sets this rate and its own wage base, based partly on your industry and claims history. New employers get an assigned starting rate.

The point that trips up first-time employers: none of this is withheld from the worker. The 0.9% Additional Medicare Tax is the one exception that flows the other way; you withhold it from the employee but never match it. Everything else on the employer side is a true business cost, and all of it is tax-deductible.

Depositing and filing: EFTPS, Form 941, Form 940, and W-2

Cutting the check is only half the job. You also have to send the withheld taxes plus your employer share to the government, on time, and report it all.

Federal tax deposits must be made electronically through EFTPS, the Electronic Federal Tax Payment System. Enroll early, because activation takes a few days.

Your deposit frequency is set by a lookback period. If you reported $50,000 or less in employment taxes, you are a monthly depositor, due by the 15th of the following month. Above that, you deposit semiweekly. New employers default to monthly, which is almost always the case for a single-employee operation.

The filings follow a fixed calendar:

| Form | What it covers | Deadline | |---|---|---| | Form 941 | Quarterly federal income tax and FICA | Apr 30, Jul 31, Oct 31, Jan 31 | | Form 940 | Annual FUTA | Jan 31 (Feb 10 if all FUTA deposited on time) | | W-2 | Employee’s annual wage and tax statement | Jan 31 to the employee | | W-3 | Transmittal of W-2s to the SSA | Jan 31 to the Social Security Administration |

Do not forget your state filings, which run on their own schedule for state withholding and SUTA. And keep your records: the Department of Labor requires payroll records for three years and time cards for two under the FLSA.

Special case: running payroll for a one-person S corp

If you own an S corporation and work in it, you are not allowed to skip payroll and just take distributions. The IRS requires S-corp owner-employees to pay themselves reasonable compensation as W-2 wages first.

Why the rule exists: wages carry payroll tax, distributions do not. An owner who pays themselves $0 in salary and takes everything as a distribution is dodging Social Security and Medicare tax, and the IRS reclassifies those distributions as wages when it catches the pattern, with back taxes and penalties attached.

“Reasonable” means what you would pay someone else to do your job. Benchmark it against industry salary data for your role, region, and hours. A common red flag is a tiny salary next to a large distribution.

The mechanics are identical to everything above. You set up payroll, withhold from your own paycheck, match the employer FICA, and file the 941s, 940, and W-2. The only difference is that you are both the employer and the only employee, so the worked example in this guide is your example too.

Frequently Asked Questions

Do I need an EIN to run payroll for one employee?

Yes. An IRS Employer Identification Number is required before you can hire and pay any employee. It is free and issued online in minutes.

Can I do payroll for one employee myself without software?

Yes. It is legal and workable for one person. You handle the calculation, deposit taxes through EFTPS, and file the forms manually, or use a paycheck calculator for the withholding math.

What taxes do I withhold from one employee’s paycheck?

Federal income tax based on their W-4, Social Security at 6.2%, Medicare at 1.45%, and state or local income tax where it applies.

What payroll taxes does the employer pay for one employee?

The matching FICA share of 6.2% plus 1.45%, FUTA at 6.0% on the first $7,000 of wages (usually 0.6% after the state credit), and state SUTA. These are employer costs, not amounts withheld from the worker.

What forms do I file with one employee?

Form 941 each quarter, Form 940 once a year, and a W-2 to the employee plus a W-3 to the Social Security Administration at year-end.

Do I have to run payroll if I’m the only owner-employee of an S corp?

Yes. The IRS requires S-corp owner-employees to take reasonable compensation as W-2 wages before taking distributions.

Ready to skip the hardest part? Get WorkLogs44 and run an accurate gross-to-net paycheck for your one employee, employer taxes included, in under a minute.