Reprinted from: http://www.irs.gov/businesses/small/
The good news is that business is booming. The bad news is there’s only one of you. Perhaps 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. In addition, you’ll need to understand your regulatory requirements as an employer because it is crucial to the success of your business. These 10 easy steps will help you ensure you are compliant with key federal and state regulations when hiring.
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 contact the IRS directly or apply online.
U.S. Internal Revenue Service
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.
The following describes the three types of withholding taxes:
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.
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 W-2 Form for each employee to whom they pay a salary, wage or other compensation.
Employers must send Copy A of Form W-2 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 Jan. 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.
Depending on the state where your employees are located, you may be required to withhold state income taxes. Visit the state and local tax page for more information.
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. This requires you to examine acceptable forms of documentation supplied by the employee to confirm the employee’s citizenship or eligibility to work in the U.S. 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 three years after the date of hire or one year after the date of the employee’s employment termination, 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.
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.
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.
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.
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.
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:
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 are available for free from federal and state labor agencies. Visit the Workplace Posters page for the specific federal and state posters you’ll need for your business.
If you are new employer, there are new federal and state tax filing requirements that apply to you.
New and existing employers should consult the IRS Employer’s Tax Guide to understand all their federal tax filing requirements.
Visit the state and local tax page for specific tax filing requirements for employers.
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: