As an employer, one of your most important responsibilities when hiring new employees is to complete and secure necessary forms and records. The following are key steps involved in the new hire process:
1. Complete Form I-9
Federal law requires employers to verify that each new employee is legally eligible to work in the United States. Within 3 business days of the date employment begins, employers must complete Form I-9, Employment Eligibility Verification, using original documents presented by the employee that show his or her identity and employment authorization. Employers may not begin the Form I-9 process until an individual accepts an offer of employment.
Employers do not need to submit Forms I-9 to the federal government, but are required to keep them on file for 3 years after the date of hire or one year after the date of the employee's termination, whichever is later. In addition, an employer must be able to present Forms I-9 to government officials for inspection within 3 days of the date on which the forms are requested.
2. Form W-4 Request
To know how much income tax to withhold from employees' wages, you should have a Form W-4, Employee's Withholding Allowance Certificate, on file for each employee. Ask all new employees to give you a signed Form W-4 when they start work, and make the form effective with the first wage payment.
If employees claim exemption from income tax withholding, they must indicate this on their W-4. The amount of income tax withholding must be based on filing status and withholding allowances as indicated on the form. If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances.
A Form W-4 remains in effect until the employee gives you a new one. If employees claim exemption from income tax withholding, they must give you a new Form W-4 each year. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on, or after the 30th day, from the date you received the replacement Form W-4. For exceptions and invalid Forms W-4, refer to IRS Publication 15, Employer's Tax Guide.
In addition to Form W-4, be sure to have your new employee complete any tax forms that may be required under state law.
3. Comply with New Hire Reporting Requirements
Federal law mandates that employers report any new employees to a designated state new hire registry within 20 days of the date of hire. Many states accept a copy of Form W-4 with employer information added. New hire reports are matched against child support records at the state and national levels to locate parents who owe child support (you can visit the Office of Child Support Enforcement for more information).
Note that states are given the option of establishing reporting time frames that may be shorter than 20 days. Employers must adhere to the reporting time frame of the state to which the employer reports. The U.S. Small Business Administration maintains a list of links to state agencies where employers can learn more about reporting new hires and the specific requirements they must meet.
4. Record the Employee's Social Security Number
Each year, employers send Copy A of Forms W-2 to the Social Security Administration, which matches the name and social security number (SSN) on each Form W-2 against its database of all SSNs issued. When the agency finds a match, it records the earnings information from the Form W-2 in the employee's earnings history.
The earnings history is the basis for determining an employee's future eligibility and benefit amount for social security's retirement, disability, and survivors programs. That is why it is critical that each employee's name and SSN, as shown on their social security card, match your payroll records and year-end Forms W-2.
IRS Publication 15 contains instructions for recording employees' names and SSNs. The tax guide states that after an employee is hired, the employer should ask to see his or her social security card. The employee may show the card if it is available. Employers may, but are not required to, photocopy the card if the employee provides it. Any employee without a social security card should apply for one.
Do not accept an ITIN in place of an SSN for employee identification or for work. An ITIN is only available to resident and nonresident aliens who are not eligible for U.S. employment and need identification for other tax purposes. You can identify an ITIN because it is a 9-digit number, beginning with the number "9" and is formatted like an SSN (NNN-NN-NNN). An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN.
For More Information
And don't forget to download our FREE Personnel Recordkeeping Guide—a great resource for keeping up-to-date with your federal recordkeeping obligations.