Sample checklist for processing a new employee:
Step 1: Determine if the new employee is classified as an employee or an independent contractor for employment tax purposes.
- Determine if the worker is classified as an "employee" by the IRS.
- Use the 20-factor "Right to Control" test to assess the worker’s status if it does not fall within statutory rules.
- Review Sec. 530 of the Revenue Act of 1978 to see if the worker falls within the "safe harbor" rules, which do not allow the IRS to challenge the status of workers as independent contractors.
Step 2: Have the new hire fill out Form W-4.
Step 3: Comply with new-hire reporting requirements.
- For each new hire, the following must be submitted to the appropriate state agency:
- the newly hired employee’s name, address, social security number; and
- the employer’s name, address, and federal EIN number.
Additional information may be required based on state law.
- New-hire information may be submitted via first class mail, by fax, electronically, or using magnetic media. Methods of data transmission differ by state. If sent by mail, new-hire reports must be submitted within 20 days of the date of hire. Reports submitted electronically or magnetically must be submitted twice a month, and not fewer than 12 days or more than 16 days apart.
Step 4: Comply with employment verification requirements.
- Have employees fill out their portion of Form I-9 when they begin work.
- Check documents establishing employees’ identities and eligibility to work.
- Complete the employer portion of Form I-9.
- Retain I-9 Forms for at least three years or until one year after an employee leaves employment, whichever is later.
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The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.