You must get each employee's name and SSN because you must enter them on Form W-2. (This requirement also applies to resident and nonresident alien employees.) You should ask your employee to show you his or her social security card. The employee is required to show the card if it is available. You may, but are not required to, photocopy the social security card if the employee provides it. If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty.
SSA issues three types of Social Security cards. The first type of card is the card most people have and has been issued since 1935. It shows the person's name and Social Security number, and it lets the person work without restriction. SSA issues it to U.S. citizens and people lawfully admitted to the United States with permanent work authorization.
The second type of card bears the legend 'NOT VALID FOR EMPLOYMENT.' SSA issues it to people from other countries lawfully admitted to the United States without work authorization from the Immigration and Naturalization Service (INS), but who need a number because of a federal law requiring a Social Security number, such as to get a federal benefit or to enlist in the U.S. military. The third type of card bears the legend, 'VALID FOR WORK ONLY WITH INS AUTHORIZATION.' SSA issues it to people lawfully admitted to the United States on a temporary basis with INS authorization to work.
An employee without a Social Security Card can obtain one by completing a Form SS-5, Application for a Social Security Card. The form can be acquired at your local Social Security Administration office or by calling 1-800-772-1213.
For more information go to the Social Security Administration Web site.
The I-9 provides the employer with proof of an employee's identity and right to work in the United States. All employees, citizens, and non-citizens hired after November 6, 1986 are required to complete a Form I-9. Both employer and employee must complete Form I–9, Employment Eligibility Verification. The form will be kept by the employer and made available for inspection by officials of the U.S. Immigration and Naturalization Service, the Department of Labor, and the Office of Special Counsel for Immigration Related Unfair Employment Practices. To obtain additional information, you may obtain the INS Handbook for Employers at your local INS office. Employers that knowingly hire illegal aliens can face severe civil penalties.
Photocopying and Retaining Form I-9. A blank I-9 may be reproduced provided both sides are copied. The Instructions must be available to all employees completing this form. Employers must retain completed I-9s for three (3) years after the date of hire or one (1) year after the date employment ends, whichever is later.
For more information go to the Immigration and Naturalization Service Web site. Back To Top
To qualify for Advance Earned Income Credit an employee must meet all three of the following: (1) have at least one qualifying child, (2) meet the current year income restrictions, and (3) expect to be able to claim the Earned Income Credit for the current year. You must notify employees who have no income tax withheld that they may be able to claim a tax refund because of the EIC. If the employee is eligible, he or she must also fill out a W-5. The W-5 expires each year on December 31. To be eligible for EIC the following year a new W-5 is required.
For additional information, consult the IRS Publication 15, Circular E or go to the Internal Revenue Service Web site at http://www.irs.gov.
Certain employees who do not have a qualifying child may be able to claim the EIC on their tax return. However, they cannot get advance EIC payments. Paying the advance EIC to employees. An advance EIC payment is not wages and is not subject to withholding of income, social security, or Medicare taxes. An advance EIC payment does not change the amount of income, social security, or Medicare taxes you withhold from the employee's wages. You add the EIC payment to the employee's net pay for the pay period. At the end of the year, you show the total advance EIC payments in box 9 on Form W-2. Do not include this amount as wages in box 1.
For more information go to the Internal Revenue Service Web Site.
State Withholding
In addition to the federal income tax, state governments can impose an additional income tax. Currently, all but nine states have state personal income taxes and require employers to deduct and withhold from employees’ wages to satisfy these obligations. The nine states that do not impose a state income tax include: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For more information about rates, forms, exemptions, and withholding, please contact the appropriate state income tax agency below.
Alabama Department of Revenue
Arizona Department of Revenue
Arkansas Department of Finance and Administration
California Employment Development Department
Colorado Department of Revenue
Connecticut Department of Revenue Services
Delaware Division of Revenue, Withholding Division
District of Columbia Department of Finance and Revenue
Georgia Department of Revenue Withholding Tax Unit
Hawaii Department of Taxation Taxpayers Services Branch
Idaho State Tax Commission Income Tax Division
Illinois Department of Revenue
Indiana Department of Revenue Compliance Division
Iowa Department of Revenue Kansas Department of Revenue Withholding Tax Unit Kentucky Revenue Cabinet Louisiana Department of Revenue and Taxation Maine Maine Revenue Services (formerly Bureau of Taxation) Income Tax Division Maryland Comptroller of the Treasury Revenue Administration Division Massachusetts Department of Revenue Michigan Department of the Treasury Sales, Use and Withholding Taxes Division Minnesota Department of Revenue Taxpayer Information Technical Support Mississippi State Tax Commission Income and Franchise Tax Division Missouri Department of Revenue Division of Taxation Withholding Tax Section Montana Department of Revenue Withholding Tax Bureau Nebraska Department of Revenue New Jersey Department of the Treasury Division of Taxation New Mexico Taxation and Revenue Department New York Department of Taxation and Finance New York State Income Tax Bureau North Carolina Department of Revenue North Dakota State Tax Commission Ohio Department of Taxation Oklahoma Oklahoma Tax Commission Withholding Tax Division Oregon Department of Revenue Pennsylvania Department of Revenue Bureau of Business Trust Fund Taxes Employer Tax Division Puerto Rico Department of the Treasury Bureau of Income Tax Rhode Island Department of Administration Division of Taxation South Carolina Department of Revenue and Taxation Utah State Tax Commission Withholding Tax Department Vermont Department of Taxes Virginia Department of Taxation Division of Income Tax Withholding West Virginia State Tax Commissioner Wisconsin Department of Revenue Income, Sales, Inheritance and Excise Tax Division Back To Top Local Withholding Local income tax can come from cities, counties and school districts. Since this is a broad area, you'll have to check with your individual localities to see if they have a local income tax. Contact your Local taxing agency for rates, forms, exemptions, and withholding regulations. Back To Top State Disability Insurance California, Hawaii, New Jersey, New York, Puerto Rico, and Rhode Island provide temporary disability benefits for employees disabled by a non-work related illness or injury through a tax supported state fund. A tax payment similar to the unemployment insurance tax may be required by both the employee and employer. Employers that have employees in any of these states should review the state laws carefully for their obligations regarding contribution, withholding, reporting, etc. For more information on Employer Taxes refer to The Payroll Source distributed by the American Payroll Association or Business of National Affairs' Web Site. Back To Top IRS Form W-4 Employee Withholding Allowance Certificate To know how much federal income tax to withhold from employees' wages, you should have a Form W-4, Employee's Withholding Allowance Certificate, on file for each employee. Ask all new employees to give you a signed Form W-4 when they start work. The amount of income tax to withhold must be based on marital status and withholding allowances. It also tells the employer if an employee is claiming exempt for withholding. Employees may not base their withholding amounts on a fixed dollar amount or percentage. However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. A W-4 form is invalid if it has been altered or unauthorized additions have been made to it. It also becomes invalid if the employee tells the employer the information is false. Make the form effective with the first wage payment. If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. A Form W-4 remains in effect until the employee gives you a new one. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date you received the replacement Form W-4. Send in Forms W-4 that meet either of the above conditions each quarter with Form 941. Complete boxes 8 and 10 on any Forms W-4 you send in. You may use box 9 to identify the office responsible for processing the employee's payroll information.
Kansas Department of Revenue Withholding Tax Unit
Kentucky Revenue Cabinet
Louisiana Department of Revenue and Taxation
Maine Maine Revenue Services (formerly Bureau of Taxation) Income Tax Division
Maryland Comptroller of the Treasury Revenue Administration Division
Massachusetts Department of Revenue
Michigan Department of the Treasury Sales, Use and Withholding Taxes Division
Minnesota Department of Revenue Taxpayer Information Technical Support
Mississippi State Tax Commission Income and Franchise Tax Division
Missouri Department of Revenue Division of Taxation Withholding Tax Section
Montana Department of Revenue Withholding Tax Bureau
Nebraska Department of Revenue
New Jersey Department of the Treasury Division of Taxation
New Mexico Taxation and Revenue Department
New York Department of Taxation and Finance New York State Income Tax Bureau
North Carolina Department of Revenue
North Dakota State Tax Commission
Ohio Department of Taxation
Oklahoma Oklahoma Tax Commission Withholding Tax Division
Oregon Department of Revenue
Pennsylvania Department of Revenue Bureau of Business Trust Fund Taxes Employer Tax Division
Puerto Rico Department of the Treasury Bureau of Income Tax
Rhode Island Department of Administration Division of Taxation
South Carolina Department of Revenue and Taxation
Utah State Tax Commission Withholding Tax Department
Vermont Department of Taxes
Virginia Department of Taxation Division of Income Tax Withholding
West Virginia State Tax Commissioner
Wisconsin Department of Revenue Income, Sales, Inheritance and Excise Tax Division
Local income tax can come from cities, counties and school districts. Since this is a broad area, you'll have to check with your individual localities to see if they have a local income tax. Contact your Local taxing agency for rates, forms, exemptions, and withholding regulations.
California, Hawaii, New Jersey, New York, Puerto Rico, and Rhode Island provide temporary disability benefits for employees disabled by a non-work related illness or injury through a tax supported state fund. A tax payment similar to the unemployment insurance tax may be required by both the employee and employer. Employers that have employees in any of these states should review the state laws carefully for their obligations regarding contribution, withholding, reporting, etc.
For more information on Employer Taxes refer to The Payroll Source distributed by the American Payroll Association or Business of National Affairs' Web Site.
To know how much federal income tax to withhold from employees' wages, you should have a Form W-4, Employee's Withholding Allowance Certificate, on file for each employee. Ask all new employees to give you a signed Form W-4 when they start work. The amount of income tax to withhold must be based on marital status and withholding allowances. It also tells the employer if an employee is claiming exempt for withholding. Employees may not base their withholding amounts on a fixed dollar amount or percentage. However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. A W-4 form is invalid if it has been altered or unauthorized additions have been made to it. It also becomes invalid if the employee tells the employer the information is false.
Make the form effective with the first wage payment. If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. A Form W-4 remains in effect until the employee gives you a new one. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date you received the replacement Form W-4.