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When you hire a new employee, your next step is to complete the required forms, including Form W-4 and Form I-9.
You have gone through the hiring process, made a job offer and the candidate accepts it. Now what? The next step in adding an employee to your business is to complete the critical new employee forms that are necessary to satisfy the federal and state paperwork requirements imposed on employers.
The federal Withholding Allowance Certificate, Form W-4, must be completed so that you know how much federal income tax to withhold from your new employee's wages.
The importance of having each employee file a Form W-4 cannot be overstated, so make its completion a priority.
Taking stock of your payroll withholding obligations will help you understand how Form W-4 should be completed and how you should use it in doing payroll.
You may find yourself in a situation where an employee doesn't file the form. To cover your bases, if for some reason an employee does not file Form W-4, you must withhold tax as if the employee had claimed no exemptions.
In addition, you should be aware that if a married employee does not claim his married status on Form W-4, the employer must withhold on the basis of the "single employee" withholding tables. Since the withholding rates for single employees are higher than those for married workers and since the amount of tax withheld from a given wage payment decreases as the number of exemptions claimed increases, it is important that you ask all employees to file a certificate.
State use of Form W-4. Form W-4 has another important function: in many states, a copy must be sent to a state agency as part of the required information about new hires.
Federal law requires all employers, even those with just one employee, to report all new hires to the appropriate state agency. In turn, these state agencies must turn over the information to a national directory of new hires, maintained by the Department of Health and Human Services. The information will be used primarily for two purposes:
What does this mean to you as an employer? Fortunately, the process isn't very burdensome. The information that you must submit is information that each new employee must submit when completing Form W-4.
Specifically, you must report each employee's name, address, Social Security number, and your business's name, address, and federal employer identification number. You must also include the date of hire, which is the date an employee first performs services for pay. The easiest way to do this is to use a copy of the Federal W-4.
Under the federal law, reports must be submitted to the appropriate state agency within 20 calendar days of the date of hire, although some states may require shorter reporting windows.
Reports must be sent by
Where do employers file the reports? In many states that had programs in place before the federal law was enacted, reports were filed with the agency that administers the state unemployment compensation program or the agency that has responsibility for child support enforcement. Since
Under the Immigration Reform and Control Act of 1986, all employers are required to verify the identity and the eligibility to work in the United States of all employees hired after November 6, 1986, using the Immigration and Naturalization Service Form I-9, "Employment Eligibility Verification Form."
Once completed, the form is not sent to the government, but you must keep it in your files in case an INS inspector ever wants to see it.
Provided the employee has the right documents, completing the form shouldn't take more than a minute or two. The form must be completed on the day of hire, or within three business days of hire. Employers and employees may sign the forms electronically and retain them in an electronic format.
The purpose of Form I-9 is to establish an employee's identity and his or her eligibility to work in the United States. Certain documents establish both an employee's identity and his or her eligibility to work in the U.S. (List A). Other documents establish identity (List B) or eligibility to work (List C).
Employees must provide a document from List
List A. The following documents are sufficient to establish both identity and eligibility to work:
If an employee can't provide one of the preceding documents, he or she must present a document establishing identity (List B) and another document establishing eligibility to work (List C).
List B. The following documents are acceptable proof of identity for individuals who are 18 years old or older:
For those under 18 years of age:
List C. The following documents are acceptable proof of eligibility to work:
What if the employee doesn't have the necessary documents? If a new employee is unable to produce the required documents within three business days of hiring, the employee must present:
This procedure is not applicable to an alien who indicates that he or she does not have work authorization at the time of hiring.
Storing I-9s. After you've completed the form, you must retain it for the duration of the employment. If an employee is terminated, be sure to retain the Form I-9 for three years from the date of hire or one year after termination, whichever is later. You don't have to keep copies of the documents the new employee showed you, though we recommend that you do. If you keep copies of those documents, they must be kept with the Form I-9s.
While there is no official electronic signature or recordkeeping standard for Form I-9, you may store your Form I-9s by using generally accepted standards for the electronic storage of records. The electronic system you use should provide easy access to inspectors, and you should be able to reproduce legible and readable hard copies of the electronically stored Form I-9s.
State employment agency certification. Referrals from state employment agencies may have certificates that fulfill the I-9 requirements. If you have a state employment agency referral who has a certification, you have to retain that certification instead of the I-9.
E-Verify. E-Verify is an online program operated jointly by the Department of Homeland Security and the Social Security Administration, which allows participating employers to check the work status of new hires online by comparing information from an employee's Form I-9 against Social Security Administration and Department of Homeland Security databases. E-Verify is free and is voluntary for most employers. Federal government contractors and subcontractors are required to use the E-Verify system. In addition, some states require employers to verify eligibility for employment through E-Verify.
As part of health care reform, beginning January 1, 2014, health care coverage is available for individuals and employees of small businesses through state health insurance exchanges (also known as the Health Insurance Marketplace). Open enrollment for health insurance coverage through the exchanges begins October 1, 2013.
The Patient Protection and Affordable Care Act (ACA) amended the federal Fair Labor Standards Act (FLSA) to require covered employers to provide current employees and new hires with written notice of the existence of the exchanges and various other information pertaining to health care coverage through this option.
Generally, employers with one or more employees involved in interstate commerce and with $500,000 or more in annual sales are subject to the FLSA.
For detailed information regarding which employers are covered by the FLSA, see the article, “Complying With Wage and Hour Law: The Fair Labor Standards Act.”
Also, the DOL provides a compliance assistance tool you can use to determine the applicability of the FLSA to your business.
Employers required to provide insurance exchange notices to employees must do so for both full- and part-time employees. And if you offer a group health plan, notice is not limited to employees enrolled in the plan or eligible to enroll—the notice is required for employees not enrolled in the group health plan or ineligible to enroll as well.
Employers are also required to provide the notice to each new employee at the time of hiring, within 14 days of an employee’s start date.
Who doesn’t get the notice? You aren’t required to provide a notice to dependents or other individuals who are eligible (or who may become eligible) for coverage under your group plan, but who are not employees.
Notice is required even if you don’t offer health care coverage. All covered employers must provide employees with notice of their health care insurance options, regardless of whether health insurance is an employee benefit offered by your business.
Properly delivering notices. You can use first-class mail to deliver the notice to employees or deliver it electronically (as long as the DOL’s electronic disclosure safe harbor requirements are met).
Whatever method of delivery you choose, the notice must be provided free of charge.
When does this requirement take effect? Employers must provide individuals employed as of September 30, 2013, with the notice by October 1, 2013. Beginning October 1, 2013, employers are required to provide the notice to new hires.
Penalty for noncompliance. On September 11, 2013, the Department of Labor issued guidance that there is no penalty or fine imposed under the law for failing to provide the notice to employees by October 1, 2013.
Notice must include certain information. To satisfy the notice requirement, the following must be provided in a written format, in language that an average employee can understand:
Model notices available. To be certain that you meet the notice format and content requirements, you can use a model notice provided by the DOL for employers. Two model notices are provided—one version for employers who offer a health care plan to some or all employees and one for employers not offering a health care plan.
You can modify the model notices to meet your business’s needs as long as the required content is included.
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