So you’re ready to take the next step and start staffing your practice by hiring your first employee.  Congratulations!  This is a big step and it’s reason to celebrate.  It’s also an important time to make sure you get a few tax-related items right to avoid problems down the road.

In this short post, we’ll cover a couple important activities that you’ll need to complete before your new employee even shows up for their first day of work – things that are required to keep your practice compliant with the IRS and other federal and state agencies.

TO DO #1: Apply for an Employer Identification Number (EIN).

If you’ve been working within another practice up to this point, your Social Security number has served as your unique identifier with the IRS. Now that you’ll officially be an employer now, you’ll need an Employer Identification Number (EIN). You can apply for one here.

The IRS’s EIN Assistant walks you through the process of applying for an Employer Identification Number (EIN).

Once you’ve completed the steps in the IRS’s EIN Assistant, you’ll receive your EIN right away, and can start using it to open a business bank account, apply for a business license, etc.

You’ll also need an EIN before you start paying your employee. It’s required on the Form W-4. If you’ve worked as an employee in the past, you’ve probably filled out this form. As an employer now, you should provide one to your new hire on the first day. When it’s completed, it will help you determine how much federal income tax to withhold every payday. If you’re not bringing in a full-time employee but, rather, an independent contractor, you won’t be responsible for withholding and paying income taxes for that individual. You’ll need to supply him or her with a Form W-9. 

Important Sidenote: Payroll processing is probably the most complex element of small business accounting. If you don’t have any experience with it, you’ll probably want to use an online payroll application. After you’re set up on one of these websites, you enter the hours worked every pay period. The site calculates tax withholding and payroll taxes due, then prints or direct deposits paychecks. Let us know if you want some guidance on this.

Don’t forget about state taxes if your state requires them, and any local obligations. The IRS maintains a page with links to each state’s website. You can get information about doing business in your geographical area, which includes taxation requirements.

TO DO #2: State New Hire Reporting.

You also have to be in contact with your state to report a new hire (same goes if you ever re-hire someone). The Small Business Administration (SBA) can be helpful here, as it is in many other aspects of managing a small business.

TO DO #3: Secure a Form I-9 Form (and needed verification) For Your New Employee.

New employees must also prove that they’re legally eligible to work in the United States. To do this, they complete a Form I-9 from the Department of Homeland Security. As their employer, you’re charged with verifying that the information provided is accurate by looking at one or a combination of documents (U.S. Passport, driver’s license, and birth certificate, etc.). By signing this form, you’re stating that you’ve done that.

You can also use the U.S. government’s E-Verify online tool to confirm eligibility.

All employees are required to fill out a Form I-9 on the first day of a new job.

Confused?  Need Help?  Here are a few resources.

• The Department of Labor has a great website for new employers. The FirstStep Employment Law Advisorhelps employers understand what DOL federal employment laws apply to them and what record keeping they’re required to do.
• The SBA also publishes a helpful online Guide to Hiring & Managing Employees.

Please consider STAC Bizness Solutions as a resource as well! Preparing for a complex new set of tax obligations will be a challenge. As a Greater Houston-based team focused exclusively on the needs of dental practices, we’re uniquely positioned to help you get your dental practice off to a great start!

We’d love to have an initial conversion to see how we may be able to support your practice. To learn more, visit us as www.stacbiz.com or call us at 844-424-9637.

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