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New hires require compliance with INS, IRS
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All optometrists who are employers must comply with Immigration Law for every employee whom he or she has hired. Immigration and Naturalization Services (INS) enforces these laws, prohibiting the hiring of aliens who do not have government authorization to work in the United States.
As I talk with optometrists from around the country, I have found that many have not yet complied with INS rules. Every new employee must complete INS Form I-9, “Employment Eligibility Verification.” This one-page form is designed to ensure that the employee can legally work in the United States and has proof of his or her identity. For further information about this particular INS law, you can call your nearest regional office of the INS to obtain a free copy of the publication, “Handbook for Employers: Instructions for Completing Form I-9.”
In Section one of Form I-9, the new employee attests that he or she is a citizen or national of the United States, a lawful permanent resident alien or an alien with work authorization. Only employees in one of these categories can legally work in the United States.
Section two of Form I-9 requires you to review specific employee documents, such as the driver’s license, social security card, passport or naturalization certificate as proof of the employee’s identity and employment eligibility. Be sure to photocopy these documents and place them in your employee’s file along with Form I-9.
According to the INS, employers must examine employee documents that “reasonably” appear to be genuine and to correspond with the person presenting them. To do otherwise could be construed by the INS as unfair and illegal discrimination against the new employee.
The INS has the authority, at anytime, to inspect all the I-9 forms, plus photocopied authentication documents in the employee’s file. If you can’t produce this information, or if the I-9 form is incomplete, then the INS is empowered to fine you up to $1,000 per employee.
New hire reporting form
The “New Hire Reporting Form” is a relatively new form that is required by many, if not all, state departments of labor. Within 20 days or less of hiring a new employee, depending on your state’s law, you must file a New Hire Reporting Form with a designated state agency. You should contact your state’s department of labor to find out if it requires this form and, if so, how to obtain the form.
The information on this new form becomes part of the “National Directory of New Hires” used primarily to locate parents so that child support orders can be enforced. This information is also used by various government agencies to prevent improper payment of workers’ compensation, unemployment benefits or public assistance benefits.
Tax compliance issues
As an employer, one of your tasks is to collect taxes. Unfortunately, the federal, state and local government treat you as an unpaid revenue agent whose job is to withhold income, social security and Medicare taxes from employee paychecks and to send these monies to the Internal Revenue Service (IRS) and to the state and local income tax agencies.
Before hiring your first employee, be sure to obtain an “Employer Identification Number” (EIN) from the IRS. This EIN is required for partnerships, limited liability companies, subchapter S corporations and C corporations. Technically, if you are a sole proprietor and have no employees, you can use your personal social security number instead of an EIN. However, it’s good business practice for the sole proprietor to obtain an EIN to clearly differentiate between “personal” and “business” financial affairs. To receive your EIN, call the IRS “forms distribution center” at (800) 829-3676 and request “IRS Form SS-4.”
Once you’ve hired an employee, he or she must fill out “IRS Form W-4,” the “Employee’s Withholding Allowance Certificate.” (You can also receive blank W-4’s by calling the IRS toll-free number above.)
The IRS requires that you keep the W-4 in the employee’s file unless one of the following exceptions apply:
- The employee has claimed more than 10 “withholding allowances.”
- The employee earns more than $200 per week and claims total exemption from withholding.
If your employee’s W-4 falls into one of these two categories, then you must send the signed W-4 form to the IRS and keep a copy in the employee’s file.
The IRS offers three free publications that I have found helpful in establishing compliant tax procedures for your optometric practice. “Circular E, Employers Tax Guide,” containing payroll tax withholding tables, is updated periodically and is automatically mailed to every practice that has an EIN.
IRS Publication 334, “Tax Guide for Small Business,” and IRS Publication 583, “Taxpayers Starting a Business,” cover a wide variety of tax issues and are available by calling the IRS forms distribution center.
Your particular state and municipality may also require you to withhold payroll taxes. Contact your state’s income tax division and city treasurer’s department for detailed information.
Simplifying your payroll taxes
If you desire to handle payroll and tax computations via computer, look for the software programs “QuickPay,” “OneWrite” and “Peachtree.” If you feel overwhelmed by the requirements for calculating payroll taxes, when they are due and where to send them, you can hire a payroll service company or bank to do this work. A reputable payroll tax company that offers tax notification service will calculate the correct amount due, produce the checks to pay the employees and taxing entities and notify you when the taxes are due.
One advantage of choosing a payroll service rather than a bank is that the bank will withhold taxes from your account when the payroll is calculated, even though the taxes are not yet due. This means that the bank, not you, gets to use your money for a while. If your company offers tax notification, it will prepare the payroll tax checks and tell you when they must be paid. Depending on how often you must make payments, this system may give you the use of your money for an extra month or longer.
At the end of each quarter, the payroll company will produce your quarterly payroll tax returns and will show you how to file them properly. At year’s end, this company will also prepare W-2 forms and federal, state and municipal transmittal tax forms.
Payroll services can be cost-effective, even for smaller practices. When shopping around for this service, avoid companies that charge “set-up” fees (a cost ostensibly for placing your information into its computer). Also, avoid payroll services that charge extra fees to prepare quarterly and annual tax returns.
- INS Form I-9 must be placed in employee’s file, indefinitely.
- New hire reporting form must be filed indefinitely.
- Place IRS Form W-4 in file. (If the employee claims 10 allowances or earns more than $200 per week and claims exemption from withholding, the W-4 must also be sent to the IRS.)
For Your Information:
- Dr. Davis has drafted job application forms that comply with federal (EEOC) and Americans with Disabilities Act (ADA) laws. For more information on using this application form in your practice, mail your inquiry c/o Frank Davis, OD, MDiv, JD, 50 N. State St., Westerville, OH 43081.
- Frank M. Davis, OD, MDiv, JD, is a cum laude graduate of the Capital University Law School. He practices optometry and comanages refractive surgery patients. He may be contacted at 50 North State St., Westerville, OH 43081; (614) 882-7786; fax: (614) 882-1012; e-mail: Astudent35@aol.com. Dr. Davis’ articles are intended to be informational in nature and do not purport to offer legal advice. Laws and legal principles can vary by location.