Hiring your very first employee as a new business owner is both a necessary and exciting experience. It is an essential step for business growth. This article has provided you with a helpful guide to hiring your first employee in Arizona, with formal legal requirements.
Steps to Hiring Your First Employee in Arizona
Step 1 – Register as an Employer
Employers will first need to get a Federal Employer Identification Number (FEIN) – Form SS-4 from the Internal Revenue Service (IRS). The Withholding Account Number comes from the Arizona Department of Revenue. Similarly, the Unemployment Insurance Tax Account Number comes from Arizona’s Arizona Department of Employment Security.
Step 2 – Employee Eligibility Verification or EEV
Every new or fresh employee will need to fill out the I-9, Employment Eligibility Verification Form from U.S. Citizenship and Immigration Services. Moreover, the I-9 Form is necessary to verify the eligibility and citizenship of the employee to work in the United States.
It is necessary for the employee’s complete Section 1 by their first day of work. Further, it is a prerequisite for the employer to complete Section 2 by the end of the third business day after the employee starts.
Employers do not particularly submit the I-9 Form. However, they must keep the Form on file for three years after the hire date or one year after the employee’s termination set, whichever is forward or later.
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Step 3 – Employee Withholding Allowance Certificate or EWAC
Each employee has to provide their employer with a signed Withholding Allowance Certificate (Form W-4) on or before employment. The W-4 form determines how much will the federal tax withhold from the employee’s paycheck monthly or annually.
Furthermore, the employer does not typically submit the Form W-4 to the IRS department but is required to keep a copy with their files.
One can look over at the IRS’s Publication 15 – Employer Tax Guide for more relevant information on federal withholding of employee forms.
Step 4 – New Hire Reporting.
Employers are mainly required to report newly hired employees with the re-hired employees to the Arizona New Hire Reporting Center in 20 days of their actual hire date.
Step 5 – Payroll Taxes
After hiring employees, businesses have to fulfil the payroll taxes. Payroll taxes consist of the following:
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Federal Income Tax Withholding while hiring first amployee in Arizona
Employers withhold money from each employee’s paycheck to pay the employee’s federal income taxes based on the information provided in their W-4. The employer pays no part of the withholding tax but is responsible for collecting and remitting the withholding taxes. Then the employer files Federal income tax withholding reports using Form W-2, Wage and Tax Statement with the IRS. Additionally, IRS Form 941 is due quarterly and IRS Form 940 is filed annually to report any unemployment taxes owing.
State Income Tax Withholding
Like the federal income tax withholding, taxes come from an employee’s paycheck for state income taxes. Use Form A-4, Employee’s Withholding Election.
Social Security & Medicare
Social Security and Medicare taxes come under the Federal Insurance Contributions Act (FICA). The employer pays half of FICA, and the other half comes from the employee’s wages.
Unemployment Insurance while Hiring first employee in arizona
Employers pay state and federal unemployment taxes based on each employee’s salary percentage. This tax is famous as State Unemployment Taxes (SUTA) and Federal Unemployment Taxes (FUTA).
Step 6 – Workers’ Compensation Insurance
All businesses with employees (even a single part-time employee) must carry workers’ compensation insurance coverage. It is necessary to cover medical costs if employees get sick. Moreover, the Industrial Commission of Arizona administers the Worker’s Compensation Insurance.
Step 7 – Labor Law Posters and Required Notices while Hiring first employee in arizona
Arizona businesses must display Federal and State of Arizona labour law posters where employees can quickly view them. Further, these posters inform employees of their rights and employer responsibilities under labour laws.
Individuals can individually take Arizona labour law posters a print of from the Industrial Commission of Arizona’s website.
Step 8 – Stay Up-To-Date
It is essential to understand the differences between employees and independent contractors. Employers will sometimes improperly classify employees as independent contractors who have different rules on payroll taxes, minimum wage, overtime, and other labour laws. Additionally, an individual’s status as an employee or an independent contractor may be determined by filing IRS Form SS-8, Determination of Employee Work Status for Purposes of Federal Employment Taxes, and Income Tax Withholding.
There is a lot to note while hiring employees for a particular business. However, the obligations and responsibilities as an employer do not end there.
Concluding, labour laws are complex and ever-changing. As a result, the employer should be up to speed with the Arizona Department of Economic Security and the U.S. Department of Labor.
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