Hiring your first employee? Prepare for paperwork

Taking on a first employee is rarely a snap decision. As a sole proprietor, you probably tried to hold it together as long as you could, working long hours – maybe even turning down work – to remain independent. You needed help, but you may have had reservations about so much of what comes after you first utter the words, “When can you start?”

You might have worried about whether you would hire the right person at the right time, and how you would fare as a manager. You knew from hearing your peers talk about dealing with employees that human resources issues in today’s workplace are far more complex than they were even a couple of decades ago. Every conversation about being an employer always seemed to contain the word “compliance.”

And when you’re dealing with the IRS and other agencies that set policies for employers, compliance = paperwork. You and your new hire will be doing a lot of it as you make the transition from being your own boss to being someone else’s.

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Familiar forms

HR manager considers documents needed to hire their first employee

You’ve probably been a full-time employee or an independent contractor before now, so you have some familiarity with the initial paperwork required from being on the receiving end. Now that you’re the administrator, though, you’re responsible for some additional requirements – and for making sure that your employee has completed everything.

First up: You’ll need an Employer Identification Number (EIN). The IRS and state agencies will require this number for tax filings and other paperwork. The fastest, easiest way to get yours is to apply online, here. You’ll be issued an EIN immediately after you supply the needed information to this automated EIN Assistant. If you’d rather, you can print the Form SS-4 (instructions are here) and submit it via fax or U.S. Mail.

Instituting a payroll process – including the regular remittance of payroll taxes – will be one of your biggest challenges as an employer. Before you can set up a system for this (hopefully, cloud-based), you’ll need to have your new hire complete a W-4 form from the IRS so that you’ll be able to withhold the correct amount of federal tax every payday. If the individual is an independent contractor, you’ll still have to report his or her income to the IRS, on a W-9 form.

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More forms

Depending on your company’s location, you may also have to withhold and submit state and local taxes. To find out what the precise requirements are for your area, click on your state’s link on this IRS web page.

Since 1996, employers have been required to report all new hires and re-hires to the directory maintained by their states within 20 days of the hire/re-hire date. The Small Business Administration (SBA) maintains a list of links to these state entities here. And you’ll need to procure unemployment insurance, through either a private carrier or your state’s program.

All new hires must prove that they are legally eligible to be employed in the United States by filling out a Form I-9. You, as the employer, are charged with verifying the information your employee has supplied by examining one or a combination of documents (U.S. Passport, driver’s license and birth certificate, etc.). So you, too, will complete and sign your portion of the I-9 and keep it on file.

You can also use E-Verify online tool, which compares the information supplied by the employee on the I-9 to multiple sources of information available to the U.S. Department of Homeland Security, and provides results within a few seconds.

You and your new hire must complete and sign the Form I-9 to document his or her legal eligibility to work in the United States.

The Department of Labor has developed a great resource for new employers called the FirstStep Employment Law Advisor. The information on this site covers only DOL-related laws. You’ll want to consult with your state and other federal agencies to make sure that you’re compliant elsewhere.

Of course, you’ll probably have your own paperwork to welcome your new hire – contracts or other agreements, maybe an employee handbook, product or service reference materials, etc. But handling those state and federal requirements upfront will let you focus on the less cut-and-dried elements of being a manager.

Stay compliant with payroll services

Hiring employees doesn’t have to be so stressful. Professional payroll services from Block Advisors can help you stay compliant and free up your schedule to focus on employee training and growing your business.

Millions of small business clients count on Block Advisors for affordable services including taxes, business formation, bookkeeping, payroll, and beneficial owner reporting . Reach out today to discover how Block Advisors can help your small business thrive.

This article is for informational purposes only. The content may not constitute the most up-to-date information and should not be construed as legal advice. 

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