Documents Employers Request to Hire New Employees

• Social Security card
• Fill out I9 Withholding Certificate
• Fill out W-4 for federal tax
• Fill out W-4 State for state tax
• Fill local tax form if applicable
• Employers must protect employee name and SS#.

Methods of Paying Employees

• Pay via check, direct deposit, cash, paycards

Withholding Taxes

• All employees must pay federal income and employment taxes on wages
• Depending on the state, state taxes must be paid by employer, some states don't have state tax, only 41 states do
• Local taxes must be paid if applicable.
• Employment taxes = (FICA) Medicare and Social Security tax
• FICA taxes = paid by employee and employer
• SS Tax = 6.20% put in employee's federal account to pay employee when they retire
• Money is used for retirement, disability survivors
• Self-employed must pay, as well both parts

• Medicare tax - 1.45% - provides retired employees health insurance when they become 65.
• Employer pays equal share of SS tax and Medicare tax
• Largest health insurance program
• Covers over 39million Americans
• Provides health insurance to people age 65 and over, those who have permanent kidney failure, people with certain disabilities

Unemployment Insurance Tax

• A joint federal-state system handles the unemployment insurance for employees who lose their jobs
• Payments are made to eligible workers if they qualify
• In most states, only the EMPLOYERs pay the federal (FUTA) and state (SUI) unemployment  tax that support unemployment.
• Some states require employees to pay portion of unemployment tax - Alaska, New Jersey, Pennsylvania
• Each payment is based on a maximum wage base and each state has a different percent to be paid and a different wage base

Disability Insurance Tax

• This tax exists only in CA, New Jersey, NY, RI, PR and Hawaii.
• CA and NJ have a Paid Family Leave program that is paid by employee contributions

Independent Contractor

• Employer decides if new hire is an employee or independent contractor
• Employers must withhold all applicable taxes and match the FICA tax on an employee, but NOT for an independent contractor
• An independent contractor MUST have a TIN number to be classed as an Independent contracto
• Independent contractors must pay both employee and employer FICA tax on their own behalf
• Employer determines classificiatoin using the Common Law test

Independent Contractor

• If the IC provides the employer with a TIN number the only obligation for the employer is to provide the IC a 1099-MISC when paying the IC $600 or more during a calendar year
• A copy of the 1099-MISC must be sent to the IRS by the employer
• If a ATIN number is provided by the IC, the employer is not obligated to withhold taxes from payments made to IC

Common Law Test for determining Whether a Worker is an Employee

• Required to comply with employer's instructions about when, where and how to work
• Works exclusively for the employer
• Hired by employer
• Subject to dismissal; can quit without liability
• Has a continuing relationship with the employer
• Work done personally
• Performs services under the company's name
• Paid a salary;reimbursed for expenses; participates in company's fringe benefits programs
• Funished tools, equipment, materials and training
• If an outside salesperson: company provides leads, sets terms and conditions of the sale, assigns a territory, and controls the sales process.

Common Law Test for Independent Contractor

• Sets own hours, determines own sequence of work
• Can work for multiple employers; services available to the public
• Is self-employed
• A contract governs how the relationship can be severed
• Works by the job
• Permitted to employ assistants
• Performs services under the worker's business name
• Payment by job, opportunity   for profit an loss
• Funishes own tools, equipment and training, substantial investment by the worker
• Controls sales process and terms

In applying for common law test, the IRS must consider three categories:  behavioral control, financial control, and relationship of the parties

Purpose of the Form SS-8

• To receive an IRS ruling on what type of worker classification,  employers can fill out a Form SS-8
• Form SS-8 = Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
• This form contains questions designed to determine the classification (employee or IC)
• If waiting for IRS determination, treat worker as an employee
• If IRS rules worker is an IC, the employer is NOT entitled to a refund of any employment taxes paid