Any new or small business owner eventually gets to the point of needing to hire employees. There are so many requirements in tax law and employment law that it can be scary and intimidating for employers. The IRS has provided some information that can help employers prepare to hire workers. Becoming familiar with the following forms and reporting requirements is the first step that needs to be taken before hiring employees.
Key Points
- Every new employer needs what is called an Employer Identification Number (EIN), also known as Form SS-4 or the Employer Tax ID. You can get this by filling out an EIN form through the IRS. The EIN is used to report information about employees to state agencies and for reporting taxes and other documents to the IRS.
- Employers are required to keep employment tax records for at least four years. Records of financial transactions are to be kept for the purposes of tracking business results, financial statement preparation, identifying sources of expenses and providing required information for preparation of tax returns.
- One of the employment tax records is the Federal Income Tax Withholding (Form W-4). This is a withholding exemption certificate (Form W-4) that employees are required to sign before they begin employment and then the employer forwards to the IRS.
- Form W-2 is the Federal Wage and Tax Statement which is used to report compensation, wages and taxes to the federal government for each employee annually.
- Copy A of Form W-2 must be sent to the Social Security Administration (SSA) to report wages and taxes paid to employees for the prior year. Employers are also required to send copies of the W-2 form to employees no later than January 31 of the following year.
- State Withholding Taxes vary from state to state so visit your local agency to find out your state’s specific withholding requirements.
- Employee Eligibility Verification (Form I-9) is used to verify if an employee is a citizen and eligible to work in the United States. Employers are required to complete Form I-9 within three days of hiring a new employee. It is not required to file I-9s with the government but employers should keep the I-9 forms on record for three years or one year after an employee leaves the organization. Employer audits are done by the US Immigration and Customs Enforcement (ICE) agency to ensure accuracy and compliance with filling out the I-9 form.
- Employers are required to register all newly hired and rehired employees to the state’s New Hire Reporting System within 20 days of employment.
- Employers are required to carry Worker’s Compensation Insurance on employees. Insurance can be obtained from the state’s worker’s compensation programs, commercial carrier or as a self-insured plan.
- Most employers are required to register their business with the state’s workforce agency and to pay unemployment insurance taxes on employees.
- Disability Insurance is required by some states. This insurance covers some wage replacement for sickness and injuries that are not work related.
- There are required notices of state and federal laws that employers are required to display informing employees of their rights and labor law responsibilities of the employer. These notices are available at state and federal agencies.
- Employers are required to file IRS Form 941 for social security, Medicare and income tax withholding quarterly.
- There are other federal Employment Laws that require employers to keep employee records and/or reporting requirements. Employment Laws to keep track of: Occupational Safety and Health Act (OSHA), Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA).
All of this record keeping and reporting requirements may seem a little overwhelming but once an internal system for maintaining files and reporting requirements is set up, annual file audits should help keep your organization compliant. Some useful websites for more information are irs.gov, dol.gov.
photo by: David Reber’s Hammer Photography
