If you’ve decided to hire employees, you’ll need employee payroll forms. But which do you need?
Payroll Forms are the forms you have your employees fill out upon hire. These forms are to prove eligibility for employment, to set up their employee payroll taxes and to set up their employee benefits. This is the next step in learning how to do payroll.
Employment Application Form
The first payroll form you need is an Employee Application Form. This form can be purchased or downloaded, and contains an employee’s personal information, employment information, and references.
Available at the IRS website, the IRS Form W-4 tells you how much federal withholding tax the employee wants taken out of their pay. This employee payroll tax is based on wage and number of exemptions. On this form your employee will mark Single or Married, and then fill in the number of exemptions they have.
For example, most Single people enter S for Single, and 0 for no exemptions, or 1 for one exemption. Single-0 is the highest level of withholding. Single-1 would be a little less tax withheld. If they are unmarried with children, the number of exemptions would increase by number of children. Beware when you see Single-8. Question that. Keep this form in your employee’s file.
Form I-9, Employment Eligibility Verification
This payroll form is available at the website for the U.S. Citizenship and Immigration Services. This form is required to show proof that the employee is authorized to work in the U.S. Make sure you read this form before handing it to someone to fill out. The employee fills out the first section and signs, then you fill in your company info and sign.
You will need copies of documentation, such as a driver’s license and social security card along with the completed form. There is a complete list of acceptable identification with the form. This form is not to mail anywhere, keep it in your files. There is a penalty if they come knocking and you don’t have the form.
State Withholding Forms
This employee payroll form will vary by state. In Ohio, we use a Form IT-4, Employee’s Withholding Exemption Certificate. Go online for your state, and find the area on the site for Employers. You should find a comparable form that the employee will fill out and tell you how much state tax to withhold.
Actually, they enter how many exemptions they want to claim. You will be looking on a tax table provided by your state under that number of exemptions to find out how much tax to withhold. More on this later.
You should also find Withholding Tax Tables on that website, too. Print out a copy.
Benefits Application Forms
Your benefit providers, such as your medical or dental insurance provider, disability insurance provider, life insurance provider, or the firm that handles your 401k-retirement plan, will give these payroll forms to you. If you don’t have any of these benefits yet, don’t worry about it until you do.
If you engage a firm to provide these benefits, and they talk to you about a Sec. 125 cafeteria plan, say for disability or sick pay benefits or a medical savings plan, think twice about it. A cafeteria plan is a benefits plan that is set up with the IRS to be a pre-tax deduction for your employees.
It requires a year-end tax return, and has to be monitored by someone who knows what they’re doing, which means you pay fees to a firm to handle this. Some people feel these plans are great for the employee. But you need to weigh the costs of setting up and maintaining the plan against the small tax benefits to the employees.
Since you’re collecting all these forms for each employee, now is the time to set up employee files.
Payroll Forms to keep in your Employee Files
This is an important step in learning how to do payroll. These files are very important, both from a tax standpoint, and a legal standpoint.
- employment application form
- payroll tax withholding forms
- employee benefit application forms
- non-compete agreements
- testing results
Keep these files up to date.
Regarding benefits, you may want to print out information on your company and keep these in a folder to give new employees. Things like:
- vacation/sick pay rules
- hours of operation
- medical/dental/life insurance information
- 401k pension plan info
- any disability insurance
- credit union affiliation
Give your employees one of these packets when you hire them. Sort of a ‘welcome to the firm’ packet.
In the next blog post in this series of how to do payroll, I’ll talk about actually calculating some payroll.