The Small Business Administration (SBA) exists to help entrepreneurs navigate the sometimes challenging world of owning your own business. This is Part 1 of an article that was posted on their website.
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.
Steps for Hiring Employees
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 contact the IRS directly or apply online.
U.S. Internal Revenue Service
Phone: 1-800-829-4933
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.
The following describes the three types of withholding taxes:
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 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.
State Taxes
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.
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. 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.
Makes Form 1-9 available for easy access and use. All U.S. employers are responsible for completion and retention of Form I-9 for each individual they hire for employment in the U.S., including citizens and non-citizens.
Offers a comprehensive guide to completing Form I-9, Employment Eligibility Verification.
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.
To be continued…
Bruno P.C. 