Your Small Business Tax Checklist for a New Hire

ping pong office

Congrats on your new hire! Bringing a new face into the office and culture is always an exciting time as it presents so many opportunities for the future. Hopefully your new employee will be with you for quite some time and bring a whole new perspective on your business. 

In the meantime, you have to worry about onboarding. There’s plenty to do and forgetting even just one step out could be a huge problem, both for the new employee and your business. To help you out, here'ss a checklist of forms you must fill out.


If this is your first hire, make sure you have your Employee Identification Number (EIN) from the US Internal Revenue Service. This number is also known as an Employer Tax ID or as Form SS-4 and is necessary for reporting taxes and other documents to the IRS. State governments might also ask for this number so it’s important to get it ASAP. 

Form W-4

This is the typical form that everyone thinks of when they get a new job. This form is for calculating the amount of money to withhold from each check the new hire gets. They fill out the number of dependents, marital status, and additional withholding amounts. You take this information and figure out how much you withhold every check to send to the federal government. State Income Withholding Depending on the state you operate out of you likely have state taxes to consider. This typically comes with a separate form much like the W-4. Here the employee fills out much of the same info. Every state’s process is different, so make sure to contact your state’s Department of Revenue or equivalent to find out exactly how the process works. 

Form I-9

This form is for verifying that your new employee is actually eligible to work in the United States. It proves that either they are a natural born or naturalized citizen or otherwise have permission to work in the country. Make sure to be thorough with this form, especially if the employee isn’t a natural born citizen, because the consequences could be dire if the government thinks you’re hiding an immigration issue. Your state or industry may also require that you E-Verify that your employee is eligible to work in the U.S. Be sure not to forget this vital step! 

Workers’ Compensation Insurance

Every business with employees must carry workers’ compensation insurance coverage. This covers the employee in the case of an emergency like a box falling on their head or any other injury on the job. Each state will have its own version of this insurance and you should contact your state’s Workers’ Compensation Insurance program for more information. Post Notices Another thing you should do to fulfill your ultimate obligations is to post required notices around the workplace. For example, you should post information about the Compensation Insurance in the break room or some other place where employees are likely to see it. There are also notices about federal and state taxes as well as rights and employer responsibilities under labor laws. Recordkeeping One last important tax task to consider is federal and some state employment laws require you to keep accurate records. 

If this is your first employee and you’re used to playing hard and fast with your record-keeping, it’s time to take it seriously. The more accurate and detail-oriented your records are the better off you’ll be anyway as knowing where every single cent is and has gone will help you grow your business. This may seem overwhelming, but it’s worth it to go through the hiring process right the very first time. Your second hire will be easier, and your third hire will be even easier still until eventually you’ve built your empire. If you have questions, always be sure to contact a good accountant who will be happy to help.

Good luck with your new hire! 

So You Hired a Contractor? Now What?

girl on cell phone

Before (s)he Starts Work

Sign a Contract – A contract breaks down expectations on both parties, clearly states payments and milestones, and legally protects both parties should the relationship hit a snag. Your contractor may send you a contract. If she doesn’t, you should send her one. Even if you’re in a hurry to get started, a service like DocuSign can make this process very quick. Or if you’ve hired your freelancer through a marketplace like oDesk or eLance, rest assured that your contractor has already signed a contract with that service. Of course, even with those services, you may desire extra legal protection if your project is sensitive or out of the ordinary in some way. 

Fill out Form W-9 – If you pay your contractor more than $600 in the calendar year, you are required to send her a form 1099-MISC during tax time. (More about this later!) 

Download form W-9 from the IRS website, have your contractor fill it out, and keep it on file for tax time.

After the Work is complete

Give Feedback Where Appropriate – Your contractor is constantly honing her skills, so be sure to give her honest feedback about her work and the process of working with her. Professionals appreciate honest feedback. If the feedback is at all negative, of course, use your discretion and couch it in polite terms. 

Give a Testimonial – If you loved your contractor’s work, offer to give her a testimonial. She’ll be able to use this in your marketing materials and on her website so find more clients and stay in business for a long time to come. 

Give a Referral – Even better than a testimonial is a referral. If a contractor did a great job for you, she’ll likely do a great job for your friends. Don’t keep her to yourself! 

At Tax Time

Send Form 1099-MISC – As mentioned above, if you paid your contractor more than $600 within the calendar year, you must send her a form 1099-MISC at the end of the year. If you kept her form W-9 on file, you’ll have everything you need to send this document. Be sure to get it to her by the deadline, January 31st. Be sure to be timely. Failure to do so can lead to fines and penalties.