Tax Liability as a Business Owner: Avoiding Issues with the IRS When Hiring Employees

Posted on in IRS Issues

tax liability, Cook County business tax and IRS defense attorneyWhatever the nature of your business, as an owner you are presented with a number of responsibilities and obligations that must be continually met in order to maintain a successful, profitable operation. Properly managing your business tax responsibilities is one surefire way to ensure you stay on track and out of trouble with the IRS.

Keeping your tax record in check is one task that you cannot afford to drop the ball on, especially when it comes to properly reporting information about the employees who work for you. Obeying basic IRS guidelines can help your business avoid financial penalties and other consequences that can damage your company’s well being.

New Hire Checklist

Minimizing your chances of liability issues with the IRS begins with securing certain information the moment you bring a new staff member on board. You will need to continually stay on top of this information and maintain the records over time, as new employees come and go, and keep it readily available to report to the IRS when necessary. 

Every business owner must do the following when hiring new employees:

  • Verify employment eligibility - Any employee you hire must be legally eligible to work in the United States. You will need to verify and document this by having each new employee fill out an I-9 Form. The main purpose of this form is to verify the employee’s identity and to confirm that he or she is authorized to work for you. The employee will need to provide acceptable, identifying documents to you along with the signed form, and you must then examine the information to determine if it is genuine.
  • Keep a W-4 form on file for each employee - Another important form you must have on file for each of your employees is a W-4. Also referred to as an employee’s withholding allowance certificate, this form will tell you how much income tax must be withheld from an employee’s wages. This signed form should be effective starting with the employee’s first wage payment, and will remain in effect until the he or she provides you with a new one.  
  • Obtain social security numbers - You will need to use Form W-2 to record each employee's social security number (SSN), including resident and nonresident alien employees. An ITIN number is not acceptable; make sure the number the employee gives you is in fact an SSN number, and request a photocopy of his or her social security card if possible.

Staying on top of employee information for business tax purposes is possible when you are organized, thorough, and well educated on how to properly document the information. If you are a business owner experiencing some confusion regarding new hire processes and the tax liabilities that come with them, contact a competent Cook County business tax and IRS defense attorney today. Call the Law Offices of Eric G. Zelazny at 708-888-2299 for a personal consultation.

Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/hiring-employees 

https://www.uscis.gov/i-9

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