You had an idea, received approval from the bank, filled out the necessary paperwork, and are ready to open your new business. Now, all you need to do is hire the people who will make your company thrive. Unfortunately, before you put the word out that you’re hiring, there are a few more hoops you need to jump through. Here are the 5 steps you need to complete before setting up that first interview.
Step 1: Obtain a Federal Employer Identification Number (FEIN)
First of all, you need to contact the US Internal Revenue Service (IRS) to get an FEIN. This is necessary to report taxes and other documents to the IRS on behalf of your company and provide information about your employees to state agencies. You can apply for an EIN online here, or by calling 1-800-829-4933.
Step 2: Set up Tax Records
Keeping organized records of your employment taxes is vital to owning your own business. Not only does the IRS mandate that all tax records be kept on file for at least four years, but you can also monitor the progress of your company and prepare your tax returns much easier if you implement a methodical system. There are three types of withholding taxes you’ll need:
1. Federal Income Tax Withholding (Form W-4)
Employees must present a signed Form W-4 to you before their first day on the job, which you will then submit to the IRS. This will tell you, their employer, exactly how much tax to withhold from the employee’s paycheck each pay period.
2. Federal Wage and Tax Statement (Form W-2)
Each year you will need to submit a Form W-2 to the IRS on behalf of each of your paid employees. This form reports the employee’s annual wages and the amount of taxes that have been withheld from his or her paycheck over the last year. This form can be submitted online here.
3. State Taxes
State income taxes vary by location. Be sure to research all applicable tax withholding requirements set by the state in which you and your employees are located.
Step 3: Verify Employee Eligibility Via Form I-9
Before hiring your first rockstar employee, or anybody thereafter, you need to make sure they are eligible to work in the United States. Form I-9 requires you to examine the necessary documents of each employee to verify that he or she is a citizen of the United States. You will have three days from the employee’s date of hire to complete Form I-9. This document does not need to be submitted to the IRS, but you are required to keep it on file for three years after the hire date or one year after the employee’s termination date, whichever comes later.
Step 4: Register with Your State’s New Hire Reporting Program
You will be required to report any newly hired or rehired employees to your state’s directory within 20 days of the hire date. Be sure to register with the correct New Hire Reporting System, as it varies between states.
Step 5: Obtain Worker’s Compensation Insurance
It is deemed necessary by the IRS that all employers have Worker’s Compensation Insurance in order to cover any accidents that may happen to an employee while on the job. You can choose to be covered on a self-insured basis, go through a commercial carrier, or utilize your state’s Worker’s Compensation Insurance program.
Once you have completed these steps, you are ready to get the ball rolling on the interview process! Keep in mind that there are other policies the IRS enforces even after your business is up and running. Stay up to date on relevant changes in employment regulations, and always renew your Labor Law posters each year. The easiest way to avoid lawsuits against your company is to stay organized and stay informed.
For more helpful business blogs, subscribe below