Virginia payroll setup for your first hire

One start file. Virginia Tax is not VEC.

Virginia takes state income tax from paychecks. Virginia Tax collects that withholding. VEC collects state unemployment tax. That tax is often called SUTA, state unemployment tax, or SUI, state unemployment insurance. You can open those two accounts on one start file. You still file them on two systems.

Virginia Tax’s registration page starts that file on iReg, the online business registration. The paper file is the Registration Application (Form R-1). The withholding guide says you may also register with VEC at the same time you register online. After that, withholding reports go to Virginia Tax. Unemployment reports go to ESS. ESS is Employer Self Service, the VEC portal. It is also called iFile. A Virginia Tax login is not a VEC account number. A payroll login is not either account.

When you owe unemployment: $1,500 in a quarter, or one person in 20 weeks

Code of Virginia § 60.2-210 is the regular-shop test. You are an employer if you pay $1,500 or more in a calendar quarter. You are also an employer if you have one or more people in 20 different weeks in a calendar year. The weeks do not have to be consecutive. The people do not have to be the same. One of those two tests is enough. VEC’s employer FAQ restates both tests. It also says you are liable if you are already liable for federal unemployment tax. If you acquire a business that is already liable, you are liable.

This is not California’s $100-in-a-quarter test. It is not Michigan’s $1,000-in-a-calendar-year test. Michigan adds a year total. Virginia uses the quarter total. Do not copy California onto Virginia. Do not copy Michigan’s year test onto Virginia either. The start file can be shared. The later portals are not.

Other tests sit on that FAQ. Agricultural, domestic, and 501(c)(3) nonprofit shops use other thresholds. Domestic service uses $1,000 in a quarter. A 501(c)(3) shop with fewer than four people in 20 weeks is exempt from unemployment tax. Churches are always exempt from unemployment reporting. This scorecard is the regular-business path.

Register unemployment on iReg or the Report to Determine Liability. File the quarterly reports on the last day of the following month.

VEC decides liability from the facts you send. VEC’s employer page says you must register if you have employees in Virginia so VEC can decide whether you owe unemployment tax. Register online. VEC’s FAQ sends that job to iFile/iReg. Complete the Report to Determine Liability (FC-27). There is no 15-day California clock on that page. File when the facts show you are an employer. The quarterly reports follow that liability.

After VEC issues the account number, hold that number and the tax rate on the VEC notice. Use that number on reports and payments. Do not substitute a federal EIN. VEC’s FAQ sets the new-employer base rate at 2.5 percent, plus add-ons, until you are eligible for a calculated rate. Base rates later run from 0.1 percent to 6.2 percent. Use the rate on your VEC notice, not a number from a software page. Taxes are due only on the taxable wage base. That FAQ sets the wage base at the first $8,000 each worker earns in a year. Confirm the figure on your notice.

That same FAQ is the filing clock. Quarterly tax and payroll reports are due April 30, July 31, October 31, and January 31. That is the last day of the following month, not the 25th. File the Employer’s Quarterly Tax Report (FC-20) and the Employer’s Quarterly Payroll Report (FC-21) on eForm, ESS, or Web Upload. VEC’s eForm page is one of those doors. A late report can bring a $100 penalty. A quarterly wage report is not the new-hire report.

VEC’s Employer Self Service page is the later portal. Starting August 1, 2026, employers sign in to the new ESS portal with ID.me. After July 31, 2026, a VEC account number no longer opens iFile for withholding or sales tax. Use the federal EIN for those Virginia Tax jobs.

Register withholding on iReg. A federal W-4 is not enough.

Virginia withholds state income tax from paychecks. The Income Tax Withholding Guide for Employers says you must have a withholding account if you have a person earning income while in Virginia. Register before you begin withholding. Register on iReg or mail Form R-1. Virginia Tax’s withholding FAQ says a federal W-4 is not enough. Each worker must complete a Virginia certificate.

Collect a signed Virginia Employee’s Withholding Exemption Certificate from each worker. That paper is Form VA-4. If no VA-4 is filed, withhold as if the person claimed no exemptions. File the Employer’s Return of Virginia Income Tax Withheld on the schedule Virginia Tax assigns. Quarterly, monthly, and seasonal filers use Form VA-5. Semi-weekly filers use the voucher (VA-15) and the quarterly reconciliation (VA-16). The annual summary is the Employer’s Annual Summary of Virginia Income Tax Withheld (VA-6), due January 31. Frequency depends on expected withholding: less than $300 a quarter files quarterly; $300 to $2,999 files monthly; $3,000 or more files semi-weekly. A Virginia Tax withholding account is not a VEC unemployment account. Do not reuse a prior owner’s number.

New hire is a 20-day report. Independent contractors count. A quarterly wage report does not satisfy it.

The new-hire report is a list of who you just hired. It is not a box on the Employer’s Quarterly Tax Report. Code of Virginia § 63.2-1946 requires the report within 20 days of employment. A rehired person is someone who was gone for at least 60 consecutive days. The same section requires a report of each new independent contractor within 20 days of the start of the contract. The form sits with the Virginia New Hire Reporting Center. DCSE is the Division of Child Support Enforcement. The Center sits with DCSE. It does not sit with VEC.

File at va-newhire.com. DSS’s new-hire page and the Center’s FAQ restate that 20-day clock. Employers who send reports electronically send two monthly files, not less than 12 nor more than 16 days apart, when they have people to report. A quarterly FC-20 or FC-21 does not satisfy that clock.

Workplace injury insurance starts at three regular employees

This is not a first-hire policy for every shop. It is also not Michigan’s three-employee-or-35-hour test. It is not New Jersey’s first-worker rule. Virginia uses one regular-shop path. Virginia calls this workers’ compensation.

VWC’s insurance-information page is the agency rule. An employer who regularly employs more than two part-time or full-time people must carry coverage. VWC’s employer page restates that as more than two people regularly employed in Virginia. Part-time, seasonal, and temporary people count. Executive officers count. Code of Virginia § 65.2-101 is the statute. A private shop with fewer than three people in the same Virginia business is outside that duty unless it elects coverage. Underground coal mines do not use that exemption. Farm labor uses a different count on that same section.

If you hire subcontractors to do the same trade or to finish your contract, their people count toward the three. VWC’s contractor page and § 65.2-302 are that statutory-employer rule. For shops required to carry coverage, VWC says there are no waivers and no exceptions.

VWC’s insurance department does not sell insurance. Virginia has no state fund. Buy a policy from a licensed private carrier, qualify as self-insured, join a licensed group self-insurance association, or use a registered professional employer organization. Ordinary first-hire shops do not self-insure. A payroll login is not a policy.

How Gusto and Patriot describe Virginia

Confirm the live withholding number on Virginia Tax. Confirm the unemployment account and rate on ESS. Confirm workplace injury insurance with a carrier or on VWC’s insurance-information page.

Gusto’s Virginia help article says Middesk (Gusto’s business-verification company) may register state income-tax withholding and state unemployment insurance (SUI). Confirm the live numbers on Virginia Tax and ESS. Confirm the rate on the VEC notice. Gusto also says one online registration can open the Virginia Tax account number and the VEC account number at the same time. It names the Employer’s Quarterly Tax Report (FC-20), the Employer’s Quarterly Payroll Report (FC-21), Form VA-5, Form VA-16, Form VA-6, and a Virginia new-hire report. It says you still give Gusto third-party access on ESS. Read Gusto’s Virginia article and Gusto’s forms list. See Gusto on the directory.

Patriot’s tax table says Full Service files Virginia Unemployment Insurance (SUI or SUTA) on Form VEC-FC-20. It files Virginia income-tax withholding on Form VA-5. Patriot’s registration article tells you to open those accounts on Virginia Tax Online Services for Businesses. It does not claim Patriot opens those accounts. Use the rate on your VEC notice, not a number from a software page. The same article says workplace injury insurance is due at two employees through a private provider or a state-operated fund. VWC’s page does not use a two-employee first-hire rule. It uses the more-than-two test. It does not name a state fund. Read Patriot’s article and Patriot’s registration article. See Patriot on the directory.

What still sits on the employer

• Decide that the $1,500-quarter test, or the 20-week test, has been met. Household, agricultural, and 501(c)(3) shops use other tests.
• Complete iReg or Form R-1 so Virginia Tax and VEC can open withholding and unemployment.
• Hold the VEC account number. Do not substitute a federal EIN for that number.
• Enter the tax rate from the VEC notice, not a marketing figure.
• File the Employer’s Quarterly Tax Report and the Employer’s Quarterly Payroll Report on ESS, eForm, or Web Upload by April 30, July 31, October 31, and January 31 after liability begins.
• Register withholding on iReg or Form R-1. Collect VA-4. A federal W-4 is not enough. File Form VA-5 on the schedule Virginia Tax assigns. File VA-16 if you are semi-weekly. File the annual VA-6 by January 31.
• File the Virginia new-hire report within 20 days of hire, rehire, or a new independent-contractor contract. A quarterly FC-20 does not satisfy that clock.
• Buy workplace injury insurance when you regularly employ more than two people. Subcontractor people count. Executive officers count. A sole shop under three may elect coverage. Payroll software does not issue that policy.
• Do not copy another state’s clock onto Virginia. Virginia can share a start file. Virginia does not finish on one portal. Virginia does not use California’s $100-quarter test. Virginia does not use Michigan’s $1,000-year unemployment test. Virginia does not use Michigan’s 35-hour workplace-injury path. Virginia does not use New Jersey’s first-worker workplace-injury rule.

Also forming a company in Virginia? Process Score compares registered agents there.