Your new employee, Anna, starts today. Your onboarding package includes a Form W-4, the Employee’s Withholding Allowance Certificate, which you’ll collect from her and use to ensure she has the correct federal income tax withheld from her paycheck. If your business is located in a state with a state income tax, you will also provide her with the appropriate state withholding form.
You also give her a Form I-9, Employment Eligibility Verification. This form, and the accompanying documents Anna provides, is used by the federal government to verify her identity and employment authorization.
Those are the basic forms your new employee is required to fill out. So you’re done, right?
You, the employer, must also report Anna as a new hire to your state and the federal government.
What Exactly is “New Hire” Reporting?
New hire reporting was established in 1996 by the federal government as part of welfare reform. Under this Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) employers are required to report newly hired and re-hired employees within 20 days of their hire or re-hire date to the federal government as well as designated state agencies. All employers are required to report new hires, including public, private, not-for-profit and government organizations. While federal law does not require reporting of independent contractors, many states do.
Why Report New Hires?
State agencies use new hire reporting is to ensure laws are enforced and benefits are paid out correctly. They use new hire information to:
- locate non-custodial parents and establish child support orders
- check on workers compensation claims and benefit payments
- prevent erroneous receipt of public assistance
- find fraudulent recipients of unemployment insurance
According to the Department of Health and Human Services (DHHS), approximately 30% of child support cases involve parents who do not live in the same state as their children. By matching new hire data at a national level, the Office of Child Support Enforcement under DHHS can work with states to find parents, establish a child support order, or enforce an existing order.
What Information Should Be Reported?
States may have different timeframe and reporting requirements, but the federal government requires this basic information:
- Federal Employer Identification Number
- Employer’s name
- Employer’s address
- Employee’s full name
- Employee’s address
- Employee’s Social Security number
- Employee’s date of hire
While federal law gives you three options for reporting new hire information— electronic, mail and magnetic tape—your state may provide additional alternatives including website, fax, email and phone input. Failure to report new hires can result in your state imposing a fine up to $25 per employee not reported. States can also impose fines up to $500 per employee for conspiracies between employer and employee to avoid reporting.
As a courtesy to our clients, Corporate Payroll Services provides new hire reporting automatically at no additional charge. Please ensure that you include a valid Social Security number and address for each newly hired or rehired employee.