Hiring your first employee in a NEMT company: payroll accounts, new hire filings, and the first paycheck

The order matters more than the paperwork

Adding a first W-2 driver is mostly a one-time setup, and the costly mistakes come from doing it out of order: a driver on the road before workers’ comp is bound, a paycheck cut before there is an account to deposit the taxes into, a Form I-9 finished a week after the start date. Work through it in this sequence:

1. Open the federal and state tax accounts.
2. Settle workers’ compensation and get the driver credentialed with your insurer and brokers.
3. Collect the day-one forms.
4. Send the state its new hire report inside the 20-day federal limit.
5. Run the first payroll and put the deposits and returns on a calendar.

If you are still deciding whether the driver should be an employee at all, settle that first with our guide to classifying drivers as employees or contractors. Everything below assumes a W-2 employee. Recruiting and screening are covered in how to hire NEMT drivers.

Step 1: Open the tax accounts

The EIN. The IRS says a business generally needs an employer identification number to hire employees. Applying on irs.gov is free, and an approved application gets its number immediately online, so never pay a website to get one for you. A single-member LLC filing under the owner’s Social Security number until now still needs an EIN of its own for payroll. Publication 15 treats an eligible single-owner disregarded entity as a separate entity for employment taxes, so the LLC reports wages under its own name and EIN.

Electronic deposits. Paper checks are out: the IRS requires every federal tax deposit to be made electronically, and EFTPS is the usual route (Direct Pay and the IRS business tax account also work). A new employer that indicated a federal tax obligation when it requested its EIN is pre-enrolled in EFTPS and receives a PIN by mail to activate the account.

State accounts. Register with your state’s unemployment insurance agency, and with its revenue department if the state taxes income, before the first paycheck. The SBA lists workers’ compensation, unemployment insurance taxes, and temporary disability insurance as the state employment costs most businesses face, and it names California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico as places where disability pay is required.

The state account also controls your federal unemployment bill. FUTA is 6.0% of the first $7,000 you pay each employee in a year. Paying state unemployment tax fully and by its due dates earns up to a 5.4% credit, which leaves 0.6%, unless your state is a credit reduction state. One driver crosses the FUTA line quickly: it applies once you pay $1,500 in wages in a calendar quarter, or have an employee on any part of a day in 20 different weeks of the year.

Step 2: Workers’ comp and driver credentials

Workers’ compensation thresholds are set state by state. California requires coverage once a business has one or more employees. Tennessee’s line outside construction is five employees, and it counts minors, working family members, and part-time employees toward the five. Our workers’ comp guide for NEMT companies covers more states and how premiums are figured.

Your broker contracts can require coverage where state law does not. MTM’s provider agreement, for example, calls for workers’ compensation in whatever amounts the state of service sets by statute. A provider without that coverage on its drivers has to send state documentation backing the exemption.

The new driver also has to clear the Medicaid floor before carrying a member. Under section 1902(a)(87) of the Social Security Act, the state must be able to confirm that each paid NEMT driver is licensed and has no federal health care program exclusion. Your company also needs a written way to handle a driver’s violation of state drug law, plus a way to give the Medicaid program every driver’s driving record, including traffic violations. Brokers add rules of their own. MTM’s agreement makes 21 the minimum age for drivers and attendants, requires them to “read, write and communicate effectively in English,” and asks for a current, legible copy of every driver’s license during credentialing. Use the driver file checklist to build the file, and confirm with your commercial auto insurer that the new driver is covered before the first trip. Our page on getting drivers approved by your insurer covers what underwriters look at.

Step 3: The day-one forms

• Form W-4. The driver gives you a signed 2026 Form W-4 at the start, and it takes effect with the first wage payment. If you never receive one, the IRS tells you to withhold as if the employee is single.
• Name and Social Security number. Record both exactly as they will appear on the W-2. Do not accept an ITIN in place of a Social Security number; ITINs are nine digits and start with a 9.
• Form I-9, Section 1. The employee completes it at the time of hire, which federal rules define as the first day the driver works for pay.
• Form I-9, Section 2. By the third business day after the start date, you examine the original documents the driver brings and fill in Section 2.

The I-9 has its own retention rule: it stays on file three years from the start date or one year past the driver’s last day, whichever comes later. Whether you also run new hires through E-Verify turns on your state law and your contracts; see E-Verify for NEMT companies.

Step 4: The new hire report

Each new or rehired employee goes on a report to the state where that person works. Federal law sets the outer limit at 20 days after the hire date, and some states set a shorter one. The report carries seven items:

• The employee’s identity: name, home address, and Social Security number.
• The date of hire, meaning the first day the employee performs services for pay.
• Your business name, address, and federal EIN.

States forward the reports to the National Directory of New Hires, which child support agencies use to find parents who owe support and send income withholding orders. A driver you take back after a gap of 60 consecutive days or longer needs a fresh report. If your drivers work in more than one state, you can either report each one to the state where they work or register with HHS as a multistate employer and send every report, electronically, to one of the states where you have workers.

Step 5: The first paycheck and the deposits that follow

From each paycheck you withhold federal income tax according to the W-4, plus the employee’s share of Social Security (6.2%, stopping once 2026 wages pass $184,500) and Medicare (1.45%, with no wage cap). You pay a matching 6.2% and 1.45% yourself. The federal wage floor is $7.25 an hour, and a higher state or city minimum overrides it. Our driver overtime guide covers when overtime is owed.

Because your lookback period shows no payroll taxes, you are a monthly schedule depositor for your first calendar year, and you stay one until the lookback total passes $50,000. Each month’s payroll taxes must reach the IRS by the 15th of the month that follows. Late deposits carry a penalty of 2% when 1 to 5 days late, 5% when 6 to 15 days late, and 10% when 16 or more days late.

Example: one driver’s first month

Say a driver earns $800 gross every other week and is paid twice in May. Each paycheck carries $49.60 of Social Security from the driver and $49.60 from you, plus $11.60 of Medicare from each side, which is $122.40. Add the income tax withheld under the driver’s W-4, say $45 in this example, and each paycheck generates $167.40 to deposit. Both May paychecks, $334.80 in total, are due by June 15. FUTA on this driver can reach at most $42 for the year at the 0.6% net rate, which stays under the $500 level that triggers a quarterly deposit, so it is paid with Form 940.

The first-year filing calendar

The recurring federal work comes down to a monthly deposit, a quarterly return, and two year-end filings. Any due date that falls on a Saturday, Sunday, or District of Columbia legal holiday rolls to the next business day. For example, the third-quarter 2026 Form 941 is due November 2, 2026 (October 31 is a Saturday), and the January 31 items for 2026 are due February 1, 2027.

Records to keep and notices to post

The federal wage law spells out the payroll record for each employee. Under 29 CFR 516.2 it includes:

• The name used for Social Security, home address with ZIP code, occupation, and a birth date for anyone under 19.
• The day and hour your workweek starts.
• Hours for each workday, plus the total for each workweek.
• In overtime weeks, the regular rate of pay and how it is figured.
• Straight-time pay, the overtime premium, what was added to or taken out of wages, total wages, and the date and period each payment covers.

Hold on to payroll records for 3 years or more. Time cards with each day’s starting and stopping times have a 2-year minimum. Publication 15 asks you to keep every employment tax record 4 years or longer, which is the longer rule to follow. You also have to post the federal minimum wage notice where employees can readily see it.

OSHA’s injury and illness log can usually wait. A company whose headcount stayed at 10 or below throughout the last calendar year skips it unless OSHA or the Bureau of Labor Statistics sends a written notice. Reporting is different, because it covers every employer: OSHA must be notified inside 8 hours of a work-related death, and inside 24 hours of an in-patient hospital admission, an amputation, or the loss of an eye. Traffic crashes on public roads are the exception, unless the crash was in a road construction zone.

Hours and credentials in HealthRide

Hours are the record the wage rules care about most. In HealthRide, each driver’s clock-ins and clock-outs from the driver app build a timecard, and the timecard reports export those hours, along with miles, for every driver. HealthRide also keeps every driver’s license and training expiration dates and sends a reminder before each one comes due, so your first employee’s renewals never sneak up on you.