Hiring new employees is exciting, but it’s also filled with a lot of paperwork. From Form W-4 to Form 1-9 and all the forms in between, there’s a lot to record. But, there is one more to add to the list, and you don’t want to forget it: new hire reporting.
What is new hire reporting? Which employees should you report? How do you report new hires, and who do you report to? Keep reading to learn more about new hire reporting and your responsibilities.
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What is new hire reporting?
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) requires you to report all newly hired employees to your state. The state reports those new hires to the federal government. The Act also applies to any employees you rehire.
Federal law does not require you to report independent (aka 1099) contractors. However, some states do require you to report 1099 contractors. So, check with your state regarding reporting contractors.
New hire reporting applies to all private, public, government, and not-for-profit employers. The law does not exempt any business from reporting new hires.
Why do you need to report new hires?
When you report new hires to your state, the state uses the information to enforce laws and benefits.
States can use the new hire information for the following tasks:
- Accelerate the child support income withholding order process
- Collect child support from parents who frequently change jobs
- Locate non-custodial parents
- Detect fraudulent recipients of unemployment insurance
- Prevent and stop unlawful welfare assistance
- Stop false workers’ compensation claims
States also transmit the new hire information to the National Directory of New Hires. And, states have access to other state databases. Database access allows states to track down people who moved.
An estimated 30% of child support cases involve parents who live in a different state than their children. The national directory and the state database access allow state and federal agencies to track employee information.
How do you report new hires?
Report new hires to your state agency that handles the state’s new hire reporting program. Keep in mind that you must report new hires to the state where the employee works unless you are a multistate employer (and we’ll get to that later).
Federal law gives you three methods for submitting new hire information: mail, magnetic tapes, or electronically. Your state might provide more options for submitting new hire information, such as fax, email, phone, or website reporting.
You might be able to report new hire information using Form W-4, a state-designated form, or by designing your own new hire form. Check with your state for details.
When do you report new hires?
PRWORA sets the basic time frame for reporting a new hire employee. Federal law says you must report new employees within 20 days of hire.
States can mandate a shorter amount of time for new hire reporting. If your state has a shorter period for new hire reporting, make sure you follow your state law. And if your employee works in a different state, check the laws where the employee works.
Once you establish an employer/employee relationship and the employee earns wages, you must report a new hire. So, report all new hires, even if they work one day. And, report new hires even if you terminate them before you complete the new hire reporting.
What information do you need to provide?
New hire reporting requirements vary by state. However, PRWORA sets the minimum information you need to report for each new hire. The basics are:
- Federal Employer Identification Number (FEIN)
- Business name
- Business address*
- Employee’s full name (first, middle, last)
- Employee’s address
- Social Security number (SSN)
- Date of hire
*If your business has more than one physical work location, report both the payroll address (typically the business’s main address) and the work location’s address for the new hire. The work location allows the government to locate the employee, if necessary. The government sends any income withholding orders to the payroll address. If you can only provide one address, give the address where you want income withholding orders sent.
New hire paperwork requirements by state may include additional information. Check with your state to find out if you need to provide more details.
Consider adding a document to your new hire packet that lists the information you need to complete new hire paperwork with the state. Again, your state may allow you to submit your own form. A specific new hire registry form also allows you to keep track of all new hires you must report.
What if I hire multiple employees in multiple states?
With remote work on the rise, you may be in a situation where you hired multiple employees in different states. In the case of multiple states to report new hires to, you have a couple of options, including:
- Report new hires to the individual states where they work OR
- Select one new hire’s state and report all new hires to that one state
However, if you select one state to report all new hires to, you must:
- Register with the Department of Health and Human Services (HHS) as a multistate employer
- Choose a designated state for reporting
- Submit all new hires no more than twice a month (12-16 days apart) either electronically or by magnetic tape
HHS allows you to:
- Register online
- Submit by fax
- Mail the form
- Email the completed form
If you choose to register by fax, mail, or email, you must download and complete the form.
After you register as a multistate employer, report all new hires to your designated state. Do not report new employees to a different state. Check new hire reporting requirements by state before choosing the state. Why? Because some states may require more information than others.
What if I’ve never reported new hires?
If you have never reported a new hire, report all employees you hired within the last 180 days. After you submit those new hires, report all other employees within 20 days of their hire.
You may face penalties for not reporting new hires. Each state determines how much the penalty is. However, federal law says your state can fine you up to $25 per employee you did not report. Also, if you and your employees create a conspiracy to avoid reporting, your state can fine you up to $500 per employee.
States can also impose non-monetary civil penalties for noncompliance.
Do I have to report when I terminate an employee?
If you have to report new hires, do you have to report when you terminate an employee? Well, that depends on if the employee has a child support income withholding order. If so, report the employee’s termination to the agency that issued the income withholding notice. You should receive a withholding notice from the agency after you report the new hire.
Check with your state for all reporting information, including how quickly you need to report the terminated employee.
This article has been updated from its original publication date of April 13, 2012.This is not intended as legal advice; for more information, please click here.