Employers need to get three tax documents from new employees before they start work.
Form W-4, Employee’s Withholding Allowance Certificate
All employees must complete this form. This will document the employee's name, address, social security number and the amount of federal income tax they want to have withheld. The employer does not forward this document to the IRS. They merely keep it on file.
Form CT-W4, Employee’s Withholding Certificate
In Connecticut, new employees are required to complete CT-W4. The purpose of this form is to document the correct amount of state income tax to withhold. For new and rehired employees, the employer must fax this form to the State of Connecticut Labor Department within 20 days of the date of hire. The purpose of this is to assist with the enforcement of child support obligations.
Form I-9, Employment Eligibility Verification
The purpose of this form is to document that each new employee is authorized to work in the United States. Employees must provide documentation that establishes their identity and employment authorization. To establish their identity, an employee must provide a drivers license or a passport. Various other documents to be used include a school ID card with a photograph or a voter's registration card. To establish if the employee is authorized to work, a Social Security Card or Birth Certificate can be used. Like the W-4 Form, the I-9 is not sent to the government, it is merely retained on file. This form must be retained for three years after the date of hire, or one year after employment ends, whichever is later.
There are many other non-tax procedures that need to be taken when bringing on new employees. A completed application, reference checks and perhaps drug, background, and credit checks should be considered.
ACTION ITEM: Employers need to make sure they have obtained a properly completed W-4, State Withholding Certificate and I-9 on all new employees.
Thomas F. Scanlon, CPA, CFP®