When you get hired for a job, your skills and qualifications are only one part of the picture for the new employer. However, employers have much broader responsibilities when hiring employees. A business must understand the safety, tax, privacy-related issues, and benefits when hiring. This applies to all employers, regardless of their size and number of staff. If you’re hiring employees, it’s time to hire an accountant Charlotte NC to make sure you understand the hiring requirements.
- Get an Employer Identification Number
All employers must have an Employer Identification Number, or “EIN,” which is a unique code used by the federal government to identify a business. Essentially, it is similar to a Social Security number, but it applies to entities rather than individuals. If you don’t already have an EIN, it’s easy to obtain one by calling the IRS or contacting them online. A simple way to request and apply for an EIN is to download an application form called SS-4. This form can then be completed and filed electronically.
- Register With the State Labor Department
Each state has a labor department. All employers within the state must pay certain taxes, including state unemployment taxes. Those taxes go towards a compensation fund that is maintained by the state. The compensation fund is a pool of funding that provides short-term financial support to workers when they lose their jobs. If you need assistance, a tax advisor Charlotte NC can point you to the Department of Labor’s website, which provides a list of unemployment insurance tax agencies for each state.
- Maintain Employee Records
Recordkeeping is an essential part of business. Records are required from many agencies, including the National Labor Relations Board, Department of Labor, Equal Employment Opportunity Commission, IRS, and Social Security Administration. An employee’s records must contain information used by these agencies, including the employee’s Social Security number and any information needed to collect and process state and federal taxes. It’s important to note that the records must be kept while the employee is employed at your company and for four years afterward. The documents must be available for federal agencies on demand.
- Ensure Employees are Eligible for Hiring
Before an employee starts working, the employer must verify that he or she is eligible to work in the United States. To confirm an employee’s eligibility, the employer must ensure that the employee completes Form I-9, Employment Eligibility Verification, which is a form administered by the U.S. Citizenship and Immigration Services (USCIS). I-9 forms can be downloaded online through the USCIS website. You can also obtain I-9 forms by visiting a USCIS office or by calling the agency.
- Register as an Employer
Every state requires an employer to register. This can be done through your state’s department of revenue. In the event that your state imposes an income tax, you’ll need to know how your employees can sign up for a withholding tax, which is usually accomplished by filing a state W-4 form or the equivalent. Once you’ve completed a W-4 for your employees, you’ll need to figure out how and when your state requires you to report and pay income tax withheld from your employees. Your state may also have requirements for reporting other kinds of taxes and taxes that are withheld, including state unemployment taxes, workers’ compensation, and disability insurance. If you’re not sure where to start, contact a CPA for small businesses for support and to make sure you meet all the state requirements. Keep in mind that when you register your company as an employer, you will need to register newly hired employees. This can be accomplished through the state’s new hire registration system. The purpose of this system is to determine which employees, if any, are responsible for paying collectible debts and child support. All employees must be registered in the system even if they don’t owe money to the government.
- Collect Social Security Numbers
Employers are also responsible for collecting their employees’ Social Security numbers. This step is required for all employees, including resident and non-resident aliens. The employer must gather each employee’s name and Social Security number in order to complete a Form W-2, which is called the “Wage and Tax Statement.” Note that you will need to get every employee’s Social Security number. An Individual Tax Identification Number, or “ITIN,” is not considered a valid substitute. ITINs are only provided to resident and non-resident aliens who are not eligible to work in the United States and therefore require alternative identification for tax reasons.
- Get a Form W-4
Employers are likely aware that a variety of forms are required when hiring employees. One essential form is the W-4. The W-4 is necessary due to a federal law stating that employers must withhold income tax from their employees’ wages. Each employee should complete a Form W-4 when he or she is hired. The W-4 helps determine how much income needs to be withheld for each employee. The volume of income withheld varies based on several factors, including the number of withholding allowances an employee claims and his or her filing status. If an employee doesn’t complete a Form W-4, the employer should withhold taxes on the assumption that the employee is a single filer and has no allowances. Additional taxes may be withheld for wages paid to non-resident aliens.
- Withhold Social Security and Medicare Taxes
Social Security and Medicare taxes must also be withheld in accordance with the Federal Insurance Contributions Act (FICA). FICA is a federal system designed for survivors, old-age, hospital, and disability insurance. Hospital insurance is funded through the Medicare tax, while Social Security taxes fund the other types of insurance. Social Security and Medicare taxes must be withheld from an employee’s wages. They must be paid by the employer as well. Note that all employees’ wages are subject to Social Security and Medicare taxes, even if they do not receive Social Security benefits. All employees must pay Medicare and Social Security taxes, independent of their age.
For employers, there is a lot to think about when bringing on new hires. From collecting each employee’s name and Social Security information to verifying that he or she is eligible to work in the United States, employers must complete substantial volumes of forms and documents to comply with state and federal regulations. For assistance with hiring new employees, be sure to contact Scott Boyar CPA. Scott Boyar is rated among the top accounting firms in Charlotte NC, and offers assistance with hiring new employees along with other aspects of business finance. For accurate bookkeeping services Charlotte and other business tax needs, don’t hesitate to reach out to Scott Boyar today.