Hiring Workers
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Hiring Workers
When hiring a worker you assume tax and legal obligations. For example, social security and Medicare taxes must be withheld from each employee's gross pay, employment tax returns must be filed timely, and employment taxes must be paid to the government.
As an employer, your first responsibility after determining a worker's legal status to work in the United States, is to properly classify the worker as either an employee or independent contractor.
A statutory employee is a specific type of employee defined by law for social security, Medicare, and FUTA tax purposes.
A statutory nonemployee is defined by law and is treated as self-employed for federal tax purposes, including income, social security, and Medicare taxes.
Federal law requires employers to report basic information on new and rehired employees within 20 days of hire to the state where the new employees work. Some states require it sooner.
Workers' compensation insurance covers employee's fro work-related injuries. Benefits include medical expense payments and short-term compensation to an employees unable to work due to a work-related injury.
An employer must withhold the following federal taxes from each employee's gross pay:
- Federal income taxes (unless the employee chooses exempt status on Form W-4).
- Social Security Tax
The following forms are required to be completed by both the employer and the newly hired employee:
- Form W-4
- Form I-9
- State withholding Form
- Not required in states that do not have a personal income tax.
- Check with your state.
Form W-2, Wage and Tax Statement:
When to file:
- Employees:
- Paper returns and electronically filed returns must be received by employees by January 31 of the following year.
- Social Security Administration:
- Paper returns:
- File Copy A of Form W-2 (and the accompanying transmittal Form W-3) by February 28 (or the 29th during a leap year.
- Electronically filed returns:
- File by March 31.
- Paper returns:
E-Verify is an Internet-based system operated by U.S. Citizenship and Immigration Services (USCIS) in partnership with the Social Security Administration (SSA).
The key characteristic for determining a persons worker status is, control. An independent contractor controls the means and methods of carrying out her work, sets his own work schedule and also provides the necessary equipment. An employee is subject to his employer's policies and procedures and has little control over the operations of the business.
Backup withholding is federal income tax withheld from payments made to certain nonemployees. The backup withholding rate for 2021 is 24%. Note that P.L. 115-97 lowered the backup withholding rate from 28% to 24% for tax years beginning after 2017 and before 2026. ("P.L." stands for Public Law.)