Hiring Checklist for New Employers
The good news is that business is booming. The bad news is there’s only one of you. It’s time to take the plunge and hire some help. There are many good sources of information about finding the right people, writing job descriptions, interviewing candidates, and managing people once they are on board. While those are all important issues, understanding your regulatory requirements as an employer is crucial to the success of your business. This guide lays out ten easy steps for new employers to follow to ensure compliance with key federal and state regulations.
Step 1: Obtain an Employer Identification Number (EIN)
Before hiring employees, you need to get an employment identification number (EIN) form the U.S. Internal Revenue Service. The EIN is often referred to as an Employer Tax ID or as Form SS-4. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. To obtain an EIN, you can apply online or contact the IRS directly.
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Step 2: Set up Records for Withholding Taxes
The IRS states that you must keep records of employment taxes for at least four years. Also, keep good records for your business to help you monitor the progress of your business, prepare your financial statements, identify source of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.
Federal Income Tax Withholding (Form W-4)
Every employee must provide an employer with a signed withholding exemption certificate (Form W-4) on or before the date of employment. The employer must then submit Form W-4 to the IRS. For specific information on employer responsibilities regarding withholding of federal taxes, read the IRS’ Employer’s Tax Guide.
Federal Wage and Tax Statement (Form W-2)
On an annual basis, employers must report to the federal government wages paid and taxes withheld for each employee. This report is filed using Form W-2, Wage and Tax Statement. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation.
Employers must send Copy A of Forms W-2 (Wage and Tax Statement) to the Social Security Administration (SSA) by the last day of February (or last day of March if you file electronically) to report the wages and taxes of your employees for the previous calendar year. In addition, employers should send copies of Form W-2 to their employees by January 31 of the year following the reporting period.
Visit the Social Security Administration’s Employer W-2 Filing Instructions and Information for further guidance and assistance.
State Taxes
Depending on the state where your employees are located, you may be required to withhold state income taxes. Visit your state tax agency for further information.
Step 3: Employee Eligibility Verification (Form I-9)
Federal law requires employers to verify an employee’s eligibility to work in the United States. Within three days of hire employers must complete an Employment Eligibility Verification Form, commonly referred to as an I-9 form, and by examining acceptable forms of documentation supplied by the employee, confirm the employee’s citizenship or eligibility to work in the United States. Employers can only request documentation specified on the I-9 form. Employers who ask for other types of documentation not listed on the I-9 form may be subject to discrimination lawsuits.
Employers do not file the I-9 with the federal government. Rather, an employer is required to keep an I-9 form on file for 3 years after the date of hire or 1 year after the date the employee’s employment is terminated, whichever is later. The U.S. Immigration and Customs Enforcement (ICE) agency conducts routine workplace audits to ensure that employers are properly completing and retaining I-9 forms, and that employee information on I-9 forms matches government records.
- Download Form I-9 (Employment Eligibility Verification)
All U.S. employers are responsible for completion and retention of Form I-9 for each individual they hire for employment in the United States, including citizens and non-citizens. - Instructions for Completing the I-9: Handbook for Employers
A comprehensive guide to completing Form I-9, Employment Eligibility Verification. - Small Business Guide to Immigration Regulations
Provides a summary of immigration laws most important to small business owners, including information about completing the I-9 form.
Employers can use information taken from the Form I-9 to verify electronically the employment eligibility of newly hired employees through E-Verify. To get started register with E-Verify to virtually eliminate Social Security mismatch letters, improve the accuracy of wage and tax reporting, protect jobs for authorized workers, and help maintain a legal workforce.
Step 4: Register with Your States New Hire Reporting Program
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 requires all employers to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date.
Visit the New Hires Reporting Requirements page to learn how to register with your state’s New Hire Reporting System.
Step 5: Obtain Workers’ Compensation Insurance
Businesses with employees are required to carry Workers’ Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers’ Compensation Insurance program. Visit your state’s Workers’ Compensation Office more information on your state’s program
Step 6: Unemployment Insurance Tax Registration
Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes, you must register your business with your state’s workforce agency. The State Taxes page includes links to your state’s agency.
Step 7: Obtain Disability Insurance (If Required)
Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury. Currently, if your employees are located in any of the following states, you are required to purchase disability insurance:
- California – Employment Development Department
- Hawaii – Unemployment Insurance Division
- New Jersey – Dept of Labor and Workforce Development
- New York – New York State Workers’ Compensation Board
- Puerto Rico – Departamento del Trabajo y Recursos Humanos / Department of Labor and Human Resources
- Rhode Island – Rhode Island Dept of Labor and Training
Step 8: Post Required Notices
Employers are required by state and federal laws to prominently display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws. These posters available from free from federal and state labor agencies. Visit the Workplace Posters page for specific federal and state posters you’ll need for your business.
Step 9: File Your Taxes
If you are new employer, there are new federal and state tax filing requirements that apply to you.
Generally, each quarter, employers who pay wages subject to income tax withholding, social security, and Medicare taxes must file IRS Form 941, Employer’s Quarterly Tax Return. Small businesses an annual income tax liability of $1,000 or less may file IRS Form 944, Employer’s Annual Federal Tax Return instead of Form 941.
You must also file IRS Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, if you paid wages of $1,500 or more in any calendar quarter or you had one or more employees work for you in any 20 or more different weeks of the year.
New and existing employers should consult IRS’ Employer’s Tax Guide to understand all their federal tax filing requirements.
Visit your state tax agency for specific tax filing requirements for employers.
Step 10: Get Organized and Keep Yourself Informed
Being a good employer doesn’t stop with fulfilling your various tax and reporting obligations. Maintaining a healthy and fair workplace, providing benefits, and keeping employees informed about your company’s policies are key to your business’ success. Here are some additional steps you should take after you’ve hired your employees:
- Set up Record Keeping
In addition to requirements for keeping payroll records of your employees for tax purposes, certain federal employment laws also require you to keep records about your employees. You may be subject to state recordkeeping requirements as well. Therefore, it’s good practice to set up a sound, organized system for maintaining all personnel records. The following sites provide more information about federal reporting requirements:
- Tax Recordkeeping Guidance
Resources and tools aimed at helping employers maintain their tax records.
- Labor Recordkeeping Requirements
Employment laws such as the Occupational Safety and Health (OSH) Act, the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA), have certain record keeping and/or reporting requirements.
- Adopt Workplace Safety Practices
The Occupational Safety and Health Administration’s (OSHA) Quick Start tool provides a clear, step-by-step guide that helps you identify many of the major OSHA requirements and guidance materials that may apply to your workplace.
- Understand Employee Benefit Plans
If you will be providing benefits to your employees, you should become familiar with the uniform minimum standards required by federal law to ensure that employee benefit plans are established and maintained in a fair and financially sound manner. See the U.S. Department of Labor’s Employment Law Guide’s chapter on Employee Benefit Plans for more information.
- Learn Management Best Practices
While you aren’t legally required to be a good manager, it sure helps when trying to recruit and retain good employees. The U.S. Small Business Administration’s Guide to Managing Employees provides sound guidance on hiring, motivating, and directing employees.
- Apply Standards that Protect Employee Rights
Complying with standards for employee rights in regards to equal opportunity and fair labor standards is a requirement. Following statutes and regulations for minimum wage, overtime, and child labor will help to avoid error and a lawsuit. See the Employment Law Guide’s chapter on Laws, Regulations and Technical Assistance Services for information and FirstStep Employment Law Advisor for advice on federal requirements. Also, visit the Equal Employment Opportunity Commission (EEOC) and Fair Labor Standards Act (FLSA).
From the website “Business.Gov, The Official Business Link to the U.S. Government”.
Dianne Shaddock
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