Payroll With No State Withholding
Texas employers do not withhold state income tax, so a Texas paycheque has fewer deductions than one in most states. The work that remains is federal withholding and FICA, state unemployment tax through the Texas Workforce Commission, new hire reporting, and the timing rules of the Texas Payday Law. BOMCAS runs payroll for Texas employers remotely and keeps each piece reconciled.
Registering With the Texas Workforce Commission
Most employers become liable for Texas unemployment tax once they pay $1,500 in wages in a calendar quarter or employ someone for some part of a day in 20 different weeks in a year. Different tests apply to agricultural and household employers. After registering, the employer receives a TWC account number and must file quarterly wage reports electronically, including for quarters with no wages.
Unemployment Tax Rates
The tax applies to the first $9,000 of wages paid to each employee in a calendar year. For 2026, new employers start at 2.70 percent, and experience-rated employers range from 0.32 percent to 6.32 percent. A new employer keeps its entry rate until it has enough chargeable quarters to receive an interim rate and then an experience rate. Reports and payments are due by the last day of the month after each quarter ends: April 30, July 31, October 31 and January 31.
New Hire Reporting
Employers report each new or rehired employee to the Attorney General's Texas Employer New Hire Reporting program within 20 calendar days of the date the employee starts earning wages. The information is used for child support enforcement, and a missed report can mean a missed income withholding order.
The Texas Payday Law
- Employees who are not exempt from federal overtime must be paid at least twice a month, and exempt employees at least once a month.
- Paydays must be posted at the workplace.
- An employee who is discharged must receive final pay within six calendar days.
- An employee who quits must be paid by the next regular payday.
- Deductions other than those required by law need the employee's written authorization for a lawful purpose.
Texas follows the federal minimum wage of $7.25 an hour and the federal overtime rules.
Workers' Compensation
Texas is the only state where most private employers may choose not to carry workers' compensation insurance. Employers that opt out, known as nonsubscribers, must notify their employees and file an annual notice with the state, and they lose certain legal defences if an employee sues over a workplace injury. Many public contracts and construction jobs require coverage. Payroll records by job class support either a policy audit or a nonsubscriber benefit plan.
Employees or Contractors
Texas businesses often pay crews, drivers and helpers as independent contractors. The Texas Workforce Commission applies its own direction-and-control test, and a worker it treats as an employee brings back unemployment tax, penalties and interest, usually discovered when a former worker files a claim. The federal tests are separate but similar. Before a business adds 1099 workers, we review how they are engaged, and when someone has been misclassified we help correct the payroll going forward.
Household Employers
Families who pay a nanny, housekeeper or caregiver $1,000 or more in a calendar quarter become liable for Texas unemployment tax, and federal Social Security and Medicare apply once cash wages reach the annual federal threshold. We register the household, run the pay, file the TWC quarterly reports and prepare Schedule H and the W-2.
Federal Payroll
Every pay run includes federal income tax withholding, Social Security and Medicare, and federal unemployment tax. We make the deposits, file Forms 941 and 940, and prepare W-2s and 1099s by January 31. Recent federal law created deductions for qualified tips and overtime for 2025 through 2028, and employers must report qualifying amounts separately, which matters for restaurants, hospitality and hourly crews.
Tips and Overtime
Restaurants, bars and hotels that report tips need them recorded each pay period so FICA is correct and the employer can claim the federal credit for Social Security and Medicare paid on tips above minimum wage. Overtime is due after 40 hours in a workweek under federal law; Texas adds no daily overtime rule. Under the 2025 federal changes, employers report qualified tips and the overtime premium separately so employees can claim the new deductions.
Employees in Other States
Remote workers and crews in Louisiana, Oklahoma, Arkansas or New Mexico can create withholding and unemployment registration in those states. We register the business where needed and track wages by state.
What You Get Each Pay Period
- Pay calculations, direct deposit and pay stubs.
- Federal deposits on the required schedule.
- TWC quarterly wage reports and payments.
- New hire reports.
- Payroll journal entries for the ledger.
Texas Payroll Questions
Do Texas employers withhold state income tax?
No. Texas has no personal income tax. Employers still withhold federal taxes and pay Texas unemployment tax.
What is the Texas unemployment tax rate for a new employer?
2.70 percent for 2026, on the first $9,000 of each employee's wages.
When is final pay due in Texas?
Within six calendar days for a discharged employee, and by the next regular payday for one who quits.
Do I have to carry workers' compensation in Texas?
Most private employers may opt out, but they must notify employees and the state, and contracts often require coverage.
Talk to BOMCAS About Payroll in Texas
Payroll posts to the ledger through our bookkeeping, and wages and benefits feed the compensation deduction on the franchise tax report. Owner salary against distributions is a planning decision, missed TWC quarters or federal deposits are fixed through late filing, employees can have their personal returns prepared, restaurants keep their sales tax current, and employers with staff from Canada should read about cross-border payroll questions. For a summary of how Texas taxes businesses and residents, see the Texas accounting and tax overview or our United States services.
Tell us what you need help with and we will reply with next steps. Contact BOMCAS, use the contact form below, call 780-667-5250 or email info@bomcas.ca. You can also go back to the Texas overview. This page is general information, not advice for a particular situation.