A Small Business’ Guide to New Hire Paperwork
Congratulations! You’re planning on hiring a new employee, which means you’re just a short ways away from having someone carry some of the weight as you grow your small business.
Bringing someone new on is no small feat, however. You not only face a few ethereal hiring challenges, but also the very mundane but necessary task of compiling paperwork and staying in line with federal and other regulations.
Not sure where to start? Here’s a quick rundown of the new hire paperwork you’ll need.
Before You Hire
IRS Employer Registration: One thing you’ll need to tackle before you even start putting up LinkedIn ads is registering with the IRS as an employer, then entering the IRS’ Electronic Federal Tax Payment System (EFTPS). To register with the IRS, you’ll need to apply for an Employer Identification Number (EIN), which you can learn more about (and do) at IRS.gov. After that, you’ll want to enroll in the Electronic Federal Tax Payment System (EFTPS), which allows you to electronically pay any withholding taxes due the IRS.
State Registration: Employers also must fill out some paperwork at the state level. For instance, you must report all new hires to a state new-hire notification system. (The U.S. Department of Health & Human Services has a list of all 50 state sites here.) You’ll also need pay into state worker’s compensation. (You can find a guide for all 50 states at the U.S. Department of Labor site.) And if your state collects income taxes, you’ll also need to register with that particular state’s tax administration agency.
Job Application: While resumes and cover letters will tell you about applicants’ skills and motivations, you still need them to fill out a job application form to provide basic, standardized data. If you’re not sure how to put together an application yourself, you can find several templates online.
Forms for Your Employee
W-4: This is a federal tax form that helps employers withhold the proper amount of federal tax from the paycheck. You can always find the current-year’s W-4 form on the IRS’ website. This is particularly helpful in the event of significant tax changes such as the 2017 Tax Cuts and Jobs Act, which may spur current employees to change their withholding.
I-9: Employees also must prove that they are eligible to work within the U.S. New hires must fill out U.S. Citizenship and Immigration Services (USCIS) Form I-9 and provide proper documentation, such as a driver’s license, voter registration card or state ID card. You won’t send this information to USCIS, but you still must fill it out – USCIS might ask for it in the future, say, if it’s investigating one of your employees.
Job Application: Think of having employees fill out a job application as a means of self-defense. Most of the information in the application can be independently verified, which means you can easily see whether an applicant is lying up front to you. References allow you to further check out employees’ claims in other documents, such as resumes and cover letters.
Background Checks: Background checks aren’t free, so small businesses might avoid these early on. But depending on the nature of your business, you might want to consider a background check on things such as consumer credit, driving records, drug use, education and sex offender status, among others. Depending on the type of background check, the new hire might have to fill out a consent form.
Direct Deposit: Direct Deposit is a system that allows businesses to forgo paper checks and instead simply deposit funds directly into a worker’s bank account. You can make your own form, or use templates like this, or this.
W-2: Every year, you’ll need to send out a W-2 form, which details prior-year taxes to employees, no later than Jan. 31. The IRS provides forms and instructions on its website.
Once your company hits a certain size, other forms might come into play. That includes the Equal Opportunity Data Form, which companies of 100-plus workers (or 50-plus if they deal with federal contracts) must have filled out. And depending on what kind of hire you’re making, you may need to use other paperwork – for instance, if you hire a freelancer, you would send them a 1099-MISC to detail their prior-year taxes.
New-hire paperwork might be a pain, but it’s there for everyone’s protection, and it keeps you compliant with federal and state agencies. So it’s vital that you get it right. If you’re about to expand your business by hiring new workers, get in touch with McManamon & Co. Our business consulting and accounting experts can make sure you’re set up so that each hire is as painless as possible.
Give us a call at440.892.9088 or contact us online, and we’ll give you the rundown on everything you need to prepare.
Tags: accounting, consulting, McManamon, new hire, small business | Posted in accounting, Consulting, McManamon & Co., small business, small business taxes