When you hire your first employee, their first day on the job, they are expecting a new hire packet with a number of documents in order to be recognized as an employee, to receive pay, and to secure employee benefits. But what kind of forms do new employees typically have to fill out?
Are you an employee or a contractor?
Typically when we say “employee” we mean one very specific thing – someone who is hired by a company as a W-2 employee, who receives benefits and has tax withheld from their paycheck. However, in the increasing popularity of the gig market, many people consider contractors employees even though they are 1099 hires with no benefits and no tax withholding. Whether you are hiring a contractor or employee determines what paperwork the IRS needs for reporting.
New hire forms for employees
If you’re hiring a W-2 employee with tax withholding, you’ll need to be sure they fill out three specific documents.
- W-4: This federal form is critical and has to be completed before an employee can begin work. The W-4 determines tax withholding and asks for a social security number, marital status, and other critical information impacting tax calculations.
- I-9: The I-9 form is also known as the Employment Eligibility Verification. It verifies an employee’s eligibility to work in the United States. It’s up to the employer to confirm a new employee and to make sure he or she meets all the minimum requirements.
- State Withholding Information: If your state has an income tax, your employee may have to fill out a state-specific withholding form similar to the W-4.
New hire forms for contractors
1099 contractors only need one document, technically to qualify – but ideally, you should have both:
- W-9: This form primarily provides employers with the information for populating a 1099-MISC when reporting your income to the IRS at the end of the year. If an employer pays a contractor more than $600, they are obligated to report any salary or wages paid, so they don’t have to withhold taxes. This form usually asks for a name, address, taxpayer identification number (social security number) and signature.
- A Contract: An ironclad contract protects both you and your employee. A good contract should outline their status as a freelancer/contractor and relieve you, the employer, of any obligations regarding tax and benefits, but it should also discuss specifically the employee’s duties, responsibilities and deliverables. The contract should include the length of the contract, agreed-upon pay, pay date(s), milestones, and precise outlines of project scope, as well as details of how any disputes shall be resolved and the expected outcome of the resolution.
Direct deposit forms
Direct deposit forms make it easy to pay employees by depositing their paycheck automatically and electronically to their bank account when payroll is processed, versus having to receive a paper check, which requires postage. These forms should ask for the name of your employee’s bank, routing number, account number, and the name of the account.
If you offer a benefits program, your new hire paperwork packet should include information on what benefits are available and what options the employee has for choosing a benefits package, if any. Benefits paperwork should also ask for information on any family members who may be enrolled or eligible for benefits under the company plan.
You may also want to have new employees sign non-disclosure agreements depending on the nature of their work. These agreements protect your company from former employees going to work for competitors or sharing industry secrets. Be sure to have a lawyer draft, or at least review, this agreement to be sure it abides by all federal and state employment laws.
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MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.