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This is brought to you by Lodge & Co. – a business and tax advisory firm for small business and start-ups. Visit our web site at www.lodge-co.com and learn more about us and what we can do for you.
Over the next few days you and I are going to talk about starting a business. What is the process we need to go through and questions we need to ask, and the planning that needs to be done. We will go through the step by step process.
I am providing you with a lot of resources as you start looking at data that will affect your startup. You need to know where to go to find the information that you need.
When starting a new business there are many issues you need to consider and do, especially in hiring employees. Compliance takes a good portion of your time. That is why we suggest you hire an accounting firm that specifically works with small business and knows the accounting, tax and HR issues that businesses face. They can do it for you so you can focus on growing your business, they keep you in compliance.
EMPLOYEE'S AND HR ISSUES
Hire Your First Employee
If your business is booming, but you are struggling to keep up, perhaps it's time to hire some help.
The eight steps below can help you start the hiring process and ensure you are compliant with key federal and state regulations.
Step 1. Obtain an Employer Identification Number (EIN)
Before hiring your first employee, you need to get an employment identification number (EIN) from the U.S. Internal Revenue Service.
The EIN is often referred to as an Employer Tax ID or as Form SS-4. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. Apply for EIN online or contact the IRS at 1-800-829-4933.
Step 2. Set up Records for Withholding Taxes
According to the IRS, you must keep records of employment taxes for at least four years. Keeping good records can also help you monitor the progress of your business, prepare financial statements, identify sources of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.
Below are three types of withholding taxes you need for your business:
Employers must send Copy A of W-2 forms to the Social Security Administration by the last day of February to report wages and taxes of your employees for the previous calendar year. In addition, employers should send copies of W-2 forms to their employees by Jan. 31 of the year following the reporting period. Visit SSA.gov/employer for more information.
Step 3. Employee Eligibility Verification
Federal law requires employers to verify an employee's eligibility to work in the United States. Within three days of hire, employers must complete Form I-9, employment eligibility verification, which requires employers to examine documents to confirm the employee's citizenship or eligibility to work in the U.S. Employers can only request documentation specified on the I-9 form.
Employers do not need to submit the I-9 form with the federal government but are required to keep them on file for three years after the date of hire or one year after the date of the employee's termination, whichever is later.
Employers can use information taken from the Form I-9 to electronically verify the employment eligibility of newly hired employees by registering with E-Verify.
Visit the U.S. Immigration and Customs Enforcement agency’s I-9 website to download the form and find more information.
Step 4. Register with Your State's New Hire Reporting Program
All employers are required to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date. Visit the New Hires Reporting Requirements page to learn more and find links to your state's New Hire Reporting System.
Step 5. Obtain Workers' Compensation Insurance
All businesses with employees are required to carry workers' compensation insurance coverage through a commercial carrier, on a self-insured basis or through their state’s Workers' Compensation Insurance program.
Step 6. Post Required Notices
Employers are required to display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws. Visit the Workplace Posters page for specific federal and state posters you'll need for your business.
Step 7. File Your Taxes
Generally, employers who pay wages subject to income tax withholding, Social Security and Medicare taxes must file IRS Form 941, Employer's Quarterly Federal Tax Return. For more information, visit IRS.gov.
New and existing employers should consult the IRS Employer's Tax Guide to understand all their federal tax filing requirements.
Visit the state and local tax page for specific tax filing requirements for employers.
Step 8. Get Organized and Keep Yourself Informed
Being a good employer doesn't stop with fulfilling your various tax and reporting obligations. Maintaining a healthy and fair workplace, providing benefits and keeping employees informed about your company's policies are key to your business' success. Here are some additional steps you should take after you've hired your first employee:
Set up Recordkeeping
In addition to requirements for keeping payroll records of your employees for tax purposes, certain federal employment laws also require you to keep records about your employees. The following sites provide more information about federal reporting requirements:
Complying with standards for employee rights in regards to equal opportunity and fair labor standards is a requirement. Following statutes and regulations for minimum wage, overtime, and child labor will help you avoid error and a lawsuit. See the Department of Labor’s Employment Law Guide for up-to-date information on these statutes and regulations.
Also, visit the Equal Employment Opportunity Commission and Fair Labor Standards Act.