Payroll for Austin Employers
Austin start-ups and small firms often begin with a few founders and contractors, then add employees quickly after funding. Getting payroll set up before the first hire avoids corrections later. There is no state or city income tax withholding in Texas, but federal withholding, Social Security, Medicare, federal unemployment tax and Texas Workforce Commission reports apply. BOMCAS runs payroll for Austin businesses remotely.
TWC and federal basics are on the Texas payroll page. Here we cover first hires, founders, research credits and remote staff in Austin.
The First Employee
A new employer needs an EIN, a federal deposit account, a TWC account once liability starts, I-9 and W-4 forms for each hire and a new hire report to the Attorney General within 20 days. It also needs a pay schedule that follows the Texas Payday Law: non-exempt employees must be paid at least twice a month and exempt employees at least monthly. We set up the system and calendar before the first payday.
Founders and Equity
Founders who work in an S corporation must receive reasonable wages, while partners in an LLC taxed as a partnership do not receive W-2s. Stock options exercised, RSUs vested and restricted stock that becomes taxable are all payroll events, and the company has to withhold and deposit tax even when no cash changes hands. We coordinate with the cap table and stock plan records each period.
Research Credit Against Payroll Tax
A qualified small business can elect on its federal income tax return to use part of its research credit against payroll tax, up to $500,000 a year. The credit is claimed on Form 8974 with Form 941 beginning in the quarter after the return is filed. Pre-revenue companies in Austin often benefit, and missing the election on the income tax return can lose the opportunity for that year. We coordinate the two filings.
Distributed Teams
Many Austin companies have employees working from homes in other states. Those states generally require withholding, unemployment registration and sometimes paid leave or disability contributions. Foreign contractors or employees raise more issues, including local payroll in their countries. We handle U.S. state registrations and work with providers abroad for foreign payroll.
Contractors, Bands and Crew
Calling a developer, designer or production crew member a contractor does not make them one. Control over how the work is done, the worker's investment and the independence of their business all matter. Musicians paid for a gig are often independent contractors, while a studio assistant on fixed hours under direction is usually an employee. We review classifications and prepare 1099-NEC forms where appropriate.
TWC and Benefits
Employers become liable after $1,500 in wages in a quarter or 20 weeks with an employee. New employers generally start at 2.7 percent on the first $9,000 per worker, with quarterly reports. We also track health insurance, retirement contributions, paid leave and the taxable value of fringe benefits.
Every Pay Run
- Calculate salaries, hourly pay, bonuses and equity items.
- Make federal and state deposits.
- File Forms 941 and 940 and TWC reports.
- Claim the research payroll credit when elected.
- Prepare new hire and year-end reports.
Austin Payroll Questions
Can founders take only distributions?
Not in an S corporation. Shareholder-employees must receive reasonable wages for their work.
How does the research payroll credit work?
An eligible small business elects it on the income tax return, then claims it on Form 8974 with payroll returns starting the next quarter.
Are all developers contractors?
No. Classification depends on control and independence, not the job title or an agreement.
Do we need other state accounts for remote staff?
Usually yes. The employee's work state generally requires withholding and unemployment reporting.
Talk to BOMCAS About Payroll in Austin
Payroll entries belong in the books, the credit election starts on the company return, founder pay is part of planning, and missed deposits go through late filing. Staff can have personal returns prepared too, hospitality employers keep sales and mixed beverage tax current, and Canadian teams raise cross-border questions. The rest of our statewide coverage runs through business filings, personal filings, sales tax, bookkeeping, planning ahead, back tax work and Canada–U.S. matters, with the Texas overview as a starting point.
Tell us what you are working on in Austin and BOMCAS will reply with the next steps and the records needed for a quote. Send a note from the contact page or the form below, call 780-667-5250 or write to info@bomcas.ca. The Austin overview covers every Austin service. This is general information, not advice for a particular taxpayer.