While many companies seek to hire new employees every day, many do not take the proper steps to protect themselves and their businesses. Employers need to become familiar with the hiring process, the required documents for their area and any associated taxes required to be withheld or paid by the business or the employee.
To learn more about hiring employees, review this list of 13 items that must be addressed:
1. Employer Identification Number (EIN) Each new hire must be associated with an employer identification number for their tax returns and IRS documents. You can apply for this EIN number by visiting www.irs.gov.
2. Labor Department Your business must become registered with your state’s unemployment insurance tax agency. To learn more about how to register, visit. www.workforcesecurity.gov.
3. Worker’s Compensation Insurance To protect your business, apply and obtain worker’s compensation insurance. While many states require this insurance, in the event that it is not, seek an agency that can provide you and your business with this protection.
4. Payroll While your business can address its payroll manually, many businesses prefer to select an automated system as there are factors such as IRS payments, social security and Medicare payments that your business must make on behalf of your employees unless they are hired as independent contractors and paid on a 1099. You can learn more about which taxes must be paid for your employees by visiting www.irs.gov.
5. Employee Tax Forms Employees should complete a W 4 form stating the amount of taxes that they wish to have withheld from each of their paychecks. You can locate this form by visiting www.irs.gov.
6. Employment Eligibility Your company will be responsible for validating each one of your employee’s work eligibility and you must keep proof on file for each new hire for 3 years. The form that must be filled out by each new employee validating their work eligibility within the US is called an I 9.
7. State Reporting New hires must be reported to your state’s hire reporting agency. One of the primary reasons for this is to address any claims for child support. You can locate your state’s agency by visiting www.acf.hhs.gov.
8. Notices Required to Post Within your business, you must post several posters for employees to view. You can locate the required posters for your business by visiting www.dol.gov/elaws/posters.htm.
9. File IRS Forms Annually IRS Form 940 must be filed each year for your business, reporting any unemployment tax paid.
10. Workplace Safety As an employer, you are responsible for adhering to the requirements set out by the Occupational Safety and Health Act (OSHA). Most importantly, your workplace must be safe from hazards and you must keep accurate records of any accidents that occur on your property and during work hours. You can learn more about these requirements by visiting www.osha.gov.
11. Employee Handbook While this is not a required step, it is highly recommended. An employee handbook can outline your employment policies, can have your employment contract and can include the required forms to ensure that all steps are met when hiring an employee.
12. Personnel Files As there are many forms that are required to keep on hand, most businesses set up and regularly maintain personnel files. Each personnel file should contain relevant hire paperwork, tax forms, evaluations and any other pertinent information.
13. Employee Benefits It is not required for your business to provide benefits. But, if you do decide to offer benefits, be sure to establish enrollment procedures for all eligible employees.
Salim Omar, author of Straight Talk About Small Business Success In New Jersey specializes in providing accounting and tax services to small business owners and professional practices in NJ. Salim's articles are featured in various national magazines including Accounting Today, The CPA Journal, Chiropractic Economics, Wealth Manager and The Two River Times. You may request a free copy of Salim's new special report titled "How To Drastically Reduce Your Taxes By As Much As 62% This Year Alone And Put Thousands Back In Your Pocket" at http://www.OmarGroupCPA.com
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