Running payroll for construction workers in Idaho requires state tax registration, proper withholding, workers’ compensation coverage, and careful attention to worker classification. Get any of these wrong and you’re facing penalties, back taxes, or worse.

Start by registering with the Idaho State Tax Commission. You’ll need an Idaho withholding account to deduct state income tax from employee paychecks. Apply through their website or by mail using Form IBR-1. You’ll also need a federal EIN from the IRS if you don’t already have one. Idaho doesn’t have local income taxes like some states, so you’re only dealing with state and federal withholding.

Idaho requires income tax withholding on wages paid to employees working in the state. Use the Idaho withholding tables to calculate the correct amount based on each employee’s W-4 information. Deposit withholdings on the schedule assigned to your business, typically monthly or quarterly depending on your total tax liability.

Workers’ compensation insurance is required for most Idaho employers, and construction companies rarely qualify for exemptions. Idaho has a competitive state fund through the State Insurance Fund, but you can also purchase coverage from private insurers. Construction and trades carry higher rates due to the physical nature of the work, so factor this into your labor costs when bidding jobs.

Employee versus subcontractor classification trips up many construction companies. Idaho follows similar rules to the IRS. If you control when, where, and how someone works, they’re probably an employee even if you call them a subcontractor. Misclassifying employees to avoid payroll taxes and workers’ comp is common in construction, and it’s something the Idaho Department of Labor actively investigates. Getting caught means back taxes, penalties, and potential fraud charges.

Public works projects in Idaho trigger prevailing wage requirements. If you’re working on state or federally funded construction projects, you must pay workers at least the prevailing wage rate for their trade and locality. This also means certified payroll reporting, where you document wages paid and submit detailed reports to the contracting agency. Miss this and you risk losing the contract and facing penalties.

Pay frequency matters too. Idaho law requires employers to pay employees at least monthly, with payment due within 15 days after the end of the pay period. Most construction companies pay weekly or bi-weekly to keep workers happy and reduce payroll calculation complexity.

Keep thorough records. Idaho requires you to maintain payroll records for at least four years. For construction, you’ll want records of hours worked, wages paid, tax withholdings, and job assignments. If you’re doing any prevailing wage work, those records need to meet federal requirements too.

The complexity of construction payroll is why many contractors outsource it. Between tracking hours across job sites, managing workers’ comp classifications for different trades, and handling certified payroll for public projects, there’s plenty of room for error. A small business tax preparation firm familiar with contractor payroll can set up compliant systems from the start and handle the ongoing filings so you can focus on running crews instead of paperwork.