Completing Government Forms When Staffing Your Business
After you decide that you want to hire employees for your business, you must be ready to deal with a lot of government paperwork. Even before you sign your first employee, you need to start filing government forms related to hiring.
If you plan to hire staff, you must first apply for an Employer Identification Number, or EIN. Government entities use this number to track your employees and the money you pay them, as well as any taxes collected and paid on their behalf.
Before employees start working for you, they must fill out forms, including the W-4 (tax withholding form) and I-9 (citizenship verification form).
Employer Identification Number (EIN)
Every company must have an EIN to hire employees. If your company is incorporated, which means you’ve filed paperwork with the state and become a separate legal entity, you already have an EIN. Otherwise, to get an EIN you must complete and submit Form SS-4.
Luckily, the government offers four ways to submit the necessary information and obtain an EIN. The fastest way is to call the IRS’s Business & Specialty Tax Line at 800-829-4933 and complete the form by telephone. IRS officials assign your EIN over the telephone. You can also apply online at www.irs.gov, or you can download Form SS-4 and submit it by fax or by mail.
In addition to tracking pay and taxes, most state entities use the EIN number to track the payment of unemployment taxes and workers’ compensation taxes, both of which the employer must pay. Some states issue separate ID numbers, so be sure to check with your state tax office.
Every person you hire must fill out a W-4 form called the “Employee’s Withholding Allowance Certificate.” You’ve probably filled out a W-4 at least once in your life, if you’ve ever worked for someone else. You can download this form and make copies for your employees.
The W-4 form tells you, the employer, how much to take out of your employees’ paychecks in income taxes. On the W-4, employees indicate whether they’re married or single. They can also claim additional allowances if they have children or other major deductions that can reduce their tax bills. The amount of income taxes you need to take out of each employee’s check depends upon how many allowances he or she claimed on the W-4.
It’s a good idea to ask an employee to fill out a W-4 immediately, but you can allow him to take the form home if he wants to discuss allowances with his spouse or accountant. If an employee doesn’t complete a W-4, you must take income taxes out of his check based on the highest possible amount for that person.
An employee can always fill out a new W-4 to reflect life changes that impact the tax deduction. For example, if the employee was single when she started working for you and gets married a year later, she can fill out a new W-4 and claim her spouse, lowering the amount of taxes that must be deducted from her check. Another common life change that can reduce an employee’s tax deduction is the birth or adoption of a baby.
All employers in the United States must verify that any person they intend to hire is a U.S. citizen or has the right to work in the United States. As an employer, you verify this information by completing and keeping on file an I-9 form from the U.S. Citizenship and Immigration Services (USCIS).
The new hire fills out Section 1 of the form by providing information about his name and address, birth history, Social Security number, and U.S. Citizenship or work permit.
You then fill out Section 2, which requires you to check for and copy documents that establish identity and prove employment eligibility. For a new hire who’s a U.S. citizen, you make a copy of one picture ID (usually a driver’s license but maybe a military ID, student ID, or other state ID) and an ID that proves work eligibility, such as a Social Security card, birth certificate, or citizen ID card.
A U.S. passport can serve as both a picture ID and proof of employment eligibility. Instructions provided with the form list all acceptable documents you can use to verify work eligibility.
You can download the form and its instructions from the U.S. Citizenship and Immigration Services website.