New Hire Reporting

by

As an employer you are required to file a New Hire Report for all your newly hired employees to your state shortly after you have hired them.  This reporting requirement is part of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 signed into law by President Clinton.  This report helps the Office of Child Support Enforcement and the states match child support records with newly hired employees in order to locate parents who owe child support.

Who Should Be Reported?

All new employees should be reported, even if they only work one day.  All re-hired employees who return to work after being laid off, on leave without pay, or terminated.  Some states may even require new hire reporting of employees who are on leave with pay and then return back to work, such as teacher.  Household and domestic employees also need to be reported.  If you, the business owner, are an employee you also need to report yourself as a new hire.

Which Employees Are Exempt From This Law?

Employees who are exempt from federal income tax withholding.

Do I Report Independent Contractors?

There is no law at this time requiring you to report Independent Contractors, however, you can voluntarily report them.  The IRS provides guidelines on determining whether a worker is an Independent Contractor or employee.

What Do I Report?

You need to report your company information – FEIN, your State EIN, name and address.  The information you report for your employee will be their name, address, social security number, and date of hire.  Some states may require more information.

How Do I Report This Information?

There are different ways to report.  You can file electronically or report on a form by mail.  Most payroll programs have this report available as a form.  The form will pre-fill with the information after you have entered the reporting dates.  If you file electronically you can use the payroll program’s generated report for the information you need.

How Often Do I Report?

This is regulated by the states.  Check with your state.

How Do I Report Employees In More Than One State?

You can either report each employee to the state in which they are working, or to save time and money you can report all employees to one state.  You may be required to file a multi-state application form.  Check with your state.

For information on your state’s regulation visit State New Hire Reporting Websites.

Independent Contractor or Employee?

by

As a business owner you may hire individuals to help you with the running of the operations of your business.  Are the individuals working for you classified correctly? The IRS has rules on how a worker needs to be classified.  Misclassifying a worker can cause you, the employer, penalties.

The IRS has seven tips that an employer should know when classifying a worker.

  • There are three characteristics the IRS uses to determine whether a worker is an employee or independent.  They are:

Behavioral Control – do you, the business,  have the right to direct or control the     worker’s activity through training or instructions?

Financial Control – do you, the business, have the right to control the financial aspect of the worker’s financial status?

Type of Relationship – what do you, the business owner, and the worker perceive the relationship to be?

  • Your workers are most likely employees if you are controlling their activities, directing their activities and giving them deadlines on when the work needs to be completed.
  • If you are only controlling the result of the work, but not the means and methods or reaching the results, then they may be an independent contractor.
  • If you misclassify your workers you may be faced with high tax bills, along with failure to file penalties, late fees, etc.
  • If you are a worker, you could pay less taxes if you are being misclassified incorrectly as an independent contractor.  As an independent contractor you are subject to self-employment tax.  As an employee, the employer pays part of the social security and medicare tax.
  • If you are unsure of how to classify a worker you can request help from the IRS by filling Form SS-8.
  • You may qualify for relief under Section 530. which states that you are treating your workers as independent contractors because it is an industry standard for that worker, or you have relied upon advise from an attorney or accountant.  To qualify for this relief you will have to have mailed the required 1099 Misc. forms and treated all workers in the classification the same way.

More information can be found in the IRS Website by clicking on the Business link.