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Employer Tax and Reporting Requirements

Employee Discrimination

Once you've started interviewing candidates for your available jobs keep in mind that it is illegal to discriminate based on age, sexual orientation, marital status, religious affiliation, or race. You may not ask job applicants if they have a disability or the nature of their disability; however, you may ask questions to determine whether they are able to fulfill the job duties. For more information, visit the U.S. Department of Labor and the Equal Employment website.

Obtain your Employer Identification Number from the IRS

Before you hire any employees you'll need to register with the US Internal Revenue Service for an Employer Identification Number (EIN). You will use this number when you report and pay taxes to the IRS and the State of California. 

Verify your employee's eligibility to work

As an employer, you are required to verify an employee's citizenship and eligibility to work in the United States using the Employment Eligibility Verification Form I-9 (also known as the Immigration Service Form). Your employees will need to complete and sign Section I of this form on or before their first day of work, and provide you with documentation to verify their identity and employment authorization in order for you to complete Section II. This form does not need to be mailed in, but you'll need to be prepared to show it upon request. Keep all of your employees' I-9s on file for three years after they've been hired, or one year after the employee left, whichever is later. 

Request a W-4 from your employees

You will need a signed Withholding Release Form (W-4) from all of your employees on or before their first day of work so that you can withhold the correct amount of federal income taxes from their paychecks. On the W-4, they should indicate the allowances they are claiming for tax purposes. If the number of allowances changes for the following tax year, ask employees to fill out a new W-4 form. For more detailed information, check out the IRS Employer's Tax Guide.

The IRS requires that you keep records of employment taxes for a minimum of four years. It pays off to set up a good system for record keeping. Records will come in handy not only for employment taxes, but for other business purposes as well.

State Payroll Taxes

Be sure to register as an employer with the State of California's Employment Development Department within 15 days of paying more than $100 in wages a calendar quarter. If you are a household employer, register once you have paid cash wages of $750 in a calendar quarter. Registering as an employer means that you will need to start paying state payroll taxes, including the Unemployment Insurance Tax, State Disability Insurance, Employment Training Tax, and other withholdings. After you have registered for your State Employment Identification Number, you should receive information about how to pay your payroll taxes. Typically, you will need to pay payroll taxes every three months.

Workers' Compensation Insurance

As an employer, you are required by law to provide workers' compensation insurance to provide wage replacement and medical benefits in the case of any on-the-job injuries. 

You may obtain workers' compensation insurance through a commercial broker-agent, directly with a licensed insurance company, or through the State Compensation Insurance Fund (State Fund). You may also self-insure if you have a net worth of $5 million, net income of $500,000 per year, and obtain approval from the state.

File your W-2 with the Social Security Administration

Use Form W-2 (the Federal Wage and Tax Statement) to report wages paid and taxes withheld for each of your employees for the prior calendar year. 

You should send a copy of the Form W-2 to each of your employees by January 31st of each year and send Copy-A of the W-2 to the Social Security Administration by the last day of February. For more information, visit the Social Security Administration website.

Required Workplace Notices

To ensure that employees know their rights, employers are required to post several workplace-related posters at their job site. The State of California Department of Industrial Relations has a list of the postings on their website. Other agencies may have additional requirements that you should be informed of when you register with them.

Workplace Safety and On-the-Job Injuries

All employers must immediately report serious occupational injuries, illnesses, or the death of an employee to the State of California Department of Industrial Relations. If your business has 10 or more employees, there are additional requirements to keep records of any occupational injuries and illnesses. Learn more about the specific record-keeping requirements for your business in addition to other resources that support workplace safety for you and your team.