Hiring your first employee is an exciting time for your company. Your daily duties have expanded and you need to hire someone to take over some of the responsibility. Before you interview and find the person you want to bring into your company, you need to understand the legal requirements for hiring and maintaining employees.
The first step to hiring your first employee is to apply for an EIN or Employer Identification Number. You can get an EIN by filling out Form SS-4 and sending it to the IRS. The EIN is necessary to report future information to the IRS, and is required for certain state documents.
The IRS requires you to record employee wages and taxes for at least the first four years. As an employer, you will withhold their income, Social Security, and Medicare taxes. The three main sources of documentation you will need to accomplish this are the W-4, W-2, and state forms. The W-4 is used to withhold federal income taxes and the W-2 is used to withhold federal Social Security and Medicare taxes. Employers must fill out these forms for every employee that earns a wage or any other form of compensation. The last documentation will come from your state and can differ depending on your state’s tax regulations. Many companies can make this process easier by using a payroll service. MyCorporation actually hosts an in-house payroll provider as a part of Paychex. Visit our website to learn more about the benefits of going on payroll.
Within three days of hiring, you and your employee are required to file Form I-9 to prove your employee’s eligibility to work in the United States. Unlike most documents, you do not actually need to submit Form I-9 into any government office. Instead, you will keep the document on file for the first 3 years of employment in case their citizenship comes into question.
All states require employers to report new hires or rehires. This is a part of the New Hires Reporting Requirement. Each state may have slightly different requirements, so it is best to check on your state’s website before any submission. After the requirements are taken care of, you will submit any necessary paperwork to the corresponding New Hire Reporting Center no later than twenty days after hiring.
Every U.S. business is required to have workers’ compensation insurance in case an employee receives an injury on the job. You can obtain this kind of insurance through a third party provider or through your state’s workers’ compensation program.
If you have ever had a job, you will remember the posters that employers are required to post in office. These posters lay out the employees’ rights as protected by the federal government and are required for every business with a physical office or space.
Form 940 and Form 941
As an employer, you are required to file these two forms as part of your annual and quarterly tax obligations. Form 940 is the Employer’s Annual Federal Unemployment (FUTA) Tax Return and should be filed on an annual basis. Form 941 is Employer’s Quarterly Federal Tax Return and, as the title says, should be filed on a quarterly basis.
With all the regulations and tax obligations, hiring your first employee may seem daunting. But remember, once you have all the initial paperwork finished, there are only a few tax obligations you need to fulfill on a quarterly and annual basis. All of these tedious tax requirements are used to protect your company and future employee. So remember that, regardless of the amount of tax obligations, every form and requirement is to your benefit.
Want to start your business and start hiring employees, give us a call at 1 (877) 692-6772 or visit us online at mycorporation.com.