Accounting FAQs: What Types of Paperwork Do I Need for New Employees?

Accounting blog: Accounting FAQs: What Types of Paperwork Do I Need for New Employees?

Accounting for Small Businesses with New Employees

Bringing on new employees is an awesome point in any business owner’s life.

It means your business is growing and you’re financially ready to expand internally.

Oftentimes, when businesses are looking to bring on a new employee (or multiple employees), they have many questions about what needs to be done next.

While exciting, bringing on new employees is also a scary time for a lot of business owners

Not only do you rely on your new employees to perform their duties, but they also depend on you as a means of income.

Making sure you have taken the appropriate steps to allow for a smooth and easy onboarding experience is a crucial step to starting your growth off on the right foot.

This article will help guide you through the steps to take and the paperwork to complete when you, as a small business owner, hire a new employee.

What sort of paperwork is required to bring on new employees?

The exact paperwork you need to have completed by a new employee will depend on both the state and industry in which you work.

Here are some of the most standard forms and paperwork that your small business should have available for new employees:

New Hire Paperwork #1: A Job Contract

This is something that is pretty standard companies of all sizes.

When you hire a new employee to work at your small business, they will most likely be expecting some sort of contract that outlines their position.

A job contract may include:

  • A scope of their work
  • Their department and job title
  • Their salary or hourly compensation
  • Details regarding their benefits
  • Information about conditions of termination

New Hire Paperwork #2: A W-4 or W-9

Generally, there are 2 types of workers: Employees or Independent Contractors.

It is very important that you do not misclassify the type of worker for your new hire.

An employee will be required to fill out form W-4.

Form W-9 (also known as an Employee’s Withholding Certificate) lets you (or your small business accountant) know how much federal income tax you should be withholding from the employee’s pay.

A contractor will be required to fill our Form W-9.

The IRS states that Form W-9 is used for the following examples:

  • Income paid to you.
  • Real estate transactions.
  • Mortgage interest you paid.
  • Acquisition or abandonment of secured property.
  • Cancellation of debt.
  • Contributions you made to an IRA

Employees receive a W-2 at the year-end to report their taxable income while Independent Contractors receive a 1099 form, and are responsible for their own employment taxes.

For reporting, as an employer/ business owner, it is important to make sure that your workers have completed either W-4 or W-9 tax form depending on the worker type.

In order to determine the worker type, there is an online assessment available on the Missouri State website or contact a local accounting firm for help.

There are certain conditions that must be met before an employee can be determined to be a legitimate 1099 Independent Contractor according to both IRS and State law.

New Hire Paperwork #3: State Tax Withholding Form

This is where things can get a little confusing.

In every state, employees are required to fill out a Federal W-4.

In most states, employees are required to fill out a State Tax Withholding Form (State W-4).

Here in Missouri, for instance, employees are required to complete a State Form W-4.

In your small business is located in one of the following states, your new employees are not required to complete a State W-4:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

New Hire Paperwork #4: Form I-9

Form I-9 is an IRS form that is used to verify the identity and citizenship of an employee.

U.S Citizenship and Immigration Services states:

All U.S. employers must properly complete Form I-9 for each individual they hire for employment in the United States. This includes citizens and noncitizens. Both employees and employers (or authorized representatives of the employer) must complete the form.

Getting Help with Paperwork for Your New Employees

As a small business owner, you likely have a million other things on your mind other than what paperwork you need to get from your new employee.

We recommend speaking with a local accounting firm so your can be prepared for your first/next hire.

That way, you can just inform your accountant whenever you are bringing on a new employee.

Or, at the very least, they can make sure you have the documents on hand and you can then give them to your employees when needed.

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