If you're hiring your first employee, you'll need to file paperwork with various government agencies and pay taxes to them.
Congratulations on hiring your first employee! It's critical to get off to a good start as an employer by making sure you follow all of the new legal requirements. Being an employer comes with a slew of new responsibilities, ranging from tax forms to government registrations to insurance requirements and beyond. Our to-do list for new employers can be found below.
1. Obtain a tax identification number for your company.
When you hire employees, you must obtain an employer identification number (EIN) that you can use on your tax returns and other IRS documents. To obtain an EIN, fill out IRS Form SS-4. The IRS website, www.irs.gov, has the form available for download.
2. Register with the labor department in your state.
You'll have to pay state unemployment compensation taxes once you hire employees. These funds go to your state's unemployment compensation fund, which helps workers who have lost their jobs in the short term. A list of state unemployment insurance tax agencies can be found on the Department of Labor's website.
3. Get workers' compensation insurance.
Workers' compensation insurance should be in place to protect employees from on-the-job injuries. The vast majority of states require workers' compensation insurance, though some make exceptions for very small businesses.
4. Set up a payroll system to withhold taxes.
You need to withhold and submit a portion of each employee's income to the IRS, and pay social security and health insurance taxes to the IRS. For more information, see IRS Publication 15, Circular E, Tax Guide for Employers on the IRS website www.irs.gov. (You may also need to withhold taxes for your state. For more information, please contact your state tax authority; for links to each state authority, please visit the Association of Tax Administrators website www.taxadmin.org /State tax authority.)
5. Have each employee fill out IRS Form W-4, Withholding Allowance Certificate.
Employees will use Form W4 to tell you how many allowances they have applied for for tax purposes so that you can deduct the correct tax from their salary. (You do not need to submit a form to the IRS.) This form can be found at www.irs.gov. If an employee wants to change the allowance, you should ask the employee to fill out a new W4 form every year.
6. Fill out Form I-9, Employment Eligibility Verification for each new employee.
The United States Citizenship and Immigration Services (USCIS, formerly known as INS) requires employers to use this form to verify whether any employees they hire are eligible to work in the United States. (You do not need to submit this form to USCIS, but you must keep it on file for three years and provide it to immigration and customs officials called ICE for review.) You can obtain this form online at www.uscis.gov. Please note that these are completed The form should be stored in a separate I9 folder for all employees, not in each employee’s personnel file.
7. Report each new employee to your state's new hire reporting agency.
The New Employee Reporting Program requires employers to report information on all new employees for the purpose of identifying parents who owe child support. Each state has a different new hire review agency. To find the name and address of your state's new hire reporting agency, see the New Hiring State page on the Children and Families Administration website (www.acf.hhs.gov).
8. Post required notices.
Some government agencies require employers to publish notices of workers' rights to their employees. For more information on federally required posters, see the Department of Labor website at www.dol.gov/elaws/posters.htm. DOL's "Poster Advisor" will help you determine which posters to display in your workplace. In addition, you must comply with your state's department of labor poster requirements. A list of state labor departments is included on the website of the Federal Department of Labor
9. File IRS Form 940 each year.
You must complete IRS Form 940 to report your federal unemployment taxes for any year you paid $1,500 or more in a quarter or for any year an employee worked for you. for 20 or more weeks of the year. You can find the form at www.irs.gov
10. Adopt workplace safety measures.
Virtually all employers must comply with the requirements of the Occupational Safety and Health Act (OSHA) by providing, among other things, a hazard-free workplace, training employees to do their jobs safely, notify government administrators of serious workplace accidents, and keep details of safety records. For more information on these rules, see the Occupational Safety and Health Administration's website at www.osha.gov
11. Create an employee handbook.
Although not required, it is best to have a manual outlining your company’s employee policies and clearly stating that employment is free, unless the employee has signed a written employment contract.
12. Set up personnel files.
For each employee you hire, create a file to save work-related documents, such as application forms, job vacancies, IRS Form W4, performance evaluation, and employee benefit registration forms. Medical records should be kept in a separate confidential file and kept in a locked cabinet. The I9 form that records the employee's immigration status should also be kept in a separate file.
13. Set up employee benefits.
If your company has an employee benefit plan, such as health insurance or a 401(k) plan, you will need a registration process so that employees can register, name their dependents, and select options.
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