As a small business owner, you likely need to hire employees to help support your business. Depending on the stage your business is in, you may need only a handful of employees, or you may need a whole team.
However, when you decide to hire an employee, you must fulfill a series of reporting requirements for both the federal government and your state. In this article, we’ll discuss the forms you are required to fill out.
Federal Government Reporting Requirements
The federal government requires new hires to provide you with a W-4 and an I-9. Form W-4 is used for tax purposes and establishes the withholding that you must adhere to during the individual’s employment.
W-4 forms show the person’s name as well as identifying information, such as their Social Security number. The number of exemptions they’re allowed to claim for federal tax purposes is also indicated.
An I-9 is used to establish that the employee has the right to work in the United States. To comply with I-9 requirements, the employee must provide HR officers or company management with copies of their identification, such as a U.S. passport or driver’s license. Other types of identification are allowed for I-9 reporting requirements as well.
State Government Reporting Requirements
The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 requires all companies to report their new hires to the state. Generally, reporting must be completed within 20 days, but some states have a shorter timeline.
You’ll need to check with your state’s requirements when you have a new hire. You can do this easily via your state’s official website.
In some cases, the W-4 can be used to meet state reporting requirements. Sometimes, a state may require you to design your own form that meets its rules. Again, you’ll need to check with your state for confirmation of its reporting requirements.
What Is the Purpose of PRWORA?
PRWORA assists states with enforcing laws and benefits. Some of its functions include:
Speeding up the child support income withholding process
Collecting child support from parents who change jobs often
Locating parents who don’t support their children
Detecting fraudulent collecting of unemployment insurance
Preventing the collection of unlawful welfare assistance
Eliminating false workers’ compensation claims
PRWORA is especially helpful for locating parents who move out of state in an effort to avoid paying child support. Since the PRWORA database is shared across states and nationally, it can be beneficial when locating absent parents and ensuring that they comply with child support orders.
How Should New Hires Be Reported Under PRWORA?
Each state has different reporting requirements for PRWORA. In some cases, you may be able to fulfill your reporting requirements by using Form W-4, while other states may require separate forms or processes.
You can submit your new hire information using mail, magnetic tapes, or electronically. Some states may provide additional options like email or website reporting. Check the submission reporting requirements for your state for additional details.
Remember that if you hire an employee who is based in another state, you must comply with that state’s new hire reporting requirements.
What Information Must Be Provided to Meet New Hire Reporting Requirements?
At a minimum, you’ll need to provide the following information when reporting new hires. The items include:
The company’s Federal Employer Identification Number (EIN)
Employee’s full name
Employee’s Social Security number
Date of hire
Companies that have more than one location will need to report the address where payroll is handled as well as the work address of the new hire.
Are There Additional Requirements for Companies That Hire Employees in Remote Roles?
If you open your hiring up to employees who work remotely, you’ll either need to comply with the new hire reporting requirements for each state or choose a single state that you use to report all new hires.
To choose a single state for reporting purposes, your company will need to register with the Department of Health and Human Services (HHS) as a multistate employer. This is a more complex process with specific reporting requirements, including filing regular reports twice a month.
If you choose to select a single state, all new hires will be required to be reported within that state, regardless of where they actually reside.
Are There Fines for Not Reporting New Hires?
Yes. If you do not report a new hire within the reporting period, your company may be fined up to $25 for each employee not reported. There are also laws in place to prevent conspiracy to avoid reporting. If a conspiracy is found to exist, your company may be fined up to $500 per employee.
Need Help Running the Administrative Functions of Your Business?
There are a variety of rules that small businesses must adhere to when hiring employees and administering salaries and benefits. For regular tips on making sure that your business remains in compliance, sign up to receive news and resources exclusively from Symply.