Small Business Basics: Hiring Employees

small business basics


Running a small business brings with it unique challenges:successfully managing your time, cultivating (and keeping) client relationships, and managing the growth of your business. If your business is growing to the point where it’s difficult to meet client demands, it might be time to hire an employee or two.

Here are five key things you will need to know about hiring employees.

Obtain an Employee Identification Number (EIN)

Your EIN will not only identify your business to the IRS, but will also allow you to pay taxes on behalf of the business and to deal with other business-related matters.

An EIN also reduces your risk of identity theft. You’ll need to complete form SS-4. Follow all instructions carefully and submit it to the address specified on the form. Processing will be delayed if any of the provided information is missing or inaccurate.

Register with your state labor board

Before you hire your first employee, you will need to register with your state’s labor board. Doing so will ensure your business is complying with state and federal labor laws.

Verify employee eligibility

While screening employment candidates can be time-consuming for a new business owner, it’s an important step to ensure that your business is complying with employment eligibility regulations:

  • Your employees are generally required to be legal residents of the U.S. or U.S. citizen, have a social security number, and be of legal age to work in your industry.
  • If you own a nightclub that will serve alcohol for example, your employees must be at least 21.
  • You will need to complete an I-9 form for every employee within three days of their hire date. The I-9 also specifies which documents are required to verify a person’s eligibility to work in the United States.

Establish tax withholding records

Each of your employees will be required to complete a W-4 form on or before their employment date. Many businesses choose to include this form in their new hire paperwork, also known as onboarding documents in some industries.

For more specific information, you can refer to the IRS Employer’s Tax Guide or consult a tax professional.

State employee tax requirements vary by state. The Small Business Administration has an excellent resource for state-by-state tax requirements.

Additionally, at the end of each year you are required to furnish a W2 form to each employee that received hourly wages, salaries or other compensation from your business.

Register with your state’s New Hire reporting program and obtain worker’s compensation coverage

You are required to report any new hires (or re-hires) to your state’s New Hire program within 20 days of the hire or re-hire date.

Lastly, business who have employees need to purchase and maintain a Worker’s Compensation policy. You may purchase a policy though a commercial carrier or you can self-insure through your state’s Worker’s Compensation insurance program.

Managing a growing small business means not only additional client and customer demand for your product or services, but it also means you may have to hire employees to meet the increased demand. By following the steps above, you can ensure your business complies with IRS and state tax board regulations.


Can The IRS Levy My Accounts Receivable? Tips For Small Business Owners

If you own a small business, there is plenty to worry about: payroll, production, meeting client and customer expectations, and meeting your financial commitments. If you also owe back taxes, you run the risk of the IRS levying your accounts receivable unless you take prompt action.

Last Resort

If you have received correspondence from the IRS and have either not responded to their notices or have not taken any action in clearing your tax debt, the IRS has the authority to levy your accounts receivable in order to recover the outstanding tax debt.

This just doesn’t apply to an outstanding business tax obligation; if you have an outstanding tax debt for your personal taxes, your accounts receivable is an asset that can be levied by the IRS.

Levying assets is the last resort for the IRS. If you haven’t responded to any prior communications or notices from the IRS, including a Notice for Demand of Payment and Final Notice of Intent to Levy, the IRS sees no alternative but to levy your assets, including any business assets.

What Will Happen Next

Once the IRS has begun to levy your accounts receivable, your clients and customers will receive a notice instructing them to re-direct their payments to the IRS rather than paying your company.

This is not only embarrassing for you, the business owner, but it can create problems in the future. Even after your tax debt has been cleared, clients and customers may mistakenly continue to mail their payments intended for your business to the IRS.

How To Avoid This Scenario

By now, you’re reading this thinking, “This could end badly.” Not so fast. There are ways you can avoid an IRS levy of your personal and business assets.

  • Since your accounts receivable is an asset, be diligent in managing your personal and business tax debt. The minute you realize your tax debt is more than you can handle, enlist in a qualified tax professional who can help you negotiate with the IRS. Don’t wait.
  • If you do receive a notice from the IRS regarding your tax debt, don’t ignore it. Instead, reply quickly to the address or phone number provided on the notice.
  • File your business and personal returns on time to avoid penalties.
  • You may want to consider filing an estimated business tax return each quarter. Your tax pro can help you decide if this is a viable option.

Facing an IRS levy of your accounts receivable is a nightmare that you would never want to face. After all, running a small business is stressful enough without having to worry about the IRS seizing your hard-earned accounts receivable.

By understanding the consequences of not responding to IRS notices regarding business and/or personal tax debt and taking a proactive approach in responding to any IRS correspondence, you’ll be less vulnerable to an IRS levy.

First and foremost, get in touch with a licensed tax professional who can advise you of your rights and responsibilities should you be facing delinquent personal or business taxes. Don’t delay. We have fully licensed and qualified Enrolled Agents and tax attorneys who can help you navigate the tax debt process.

Get started today by clicking on the white “Start Chat” button at the top right-hand corner of any of our webpages. We’re here to help.