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Before Payroll Part 4: Employee Payroll Documents

Last week I helped you get your payroll account applications set up for your business. Today I want to review the employee payroll documents you will need to have your employees fill out in order to process payroll correctly and be in compliance with regulations. The forms that you are required to keep on file are the IRS W-4 Form, the USCIS I-9 Form, and State W-4 Form. Optional documents that are recommended as applicable include the Job Offer Letter, Employee Information Form, Direct Deposit Authorization Form, Training Documentation, Wage Garnishments and Child Support Withholdings, Additions and Withholdings Authorizations. I recommend keeping each of these documents in a folder for each employee. I will review each in brief along with a link for where you can find this document.

Required

IRS W-4 Form

This is the standard form from the IRS that most know about. It can be found from the IRS’s website at http://www.irs.gov/pub/irs-pdf/fw4.pdf. The purpose of this form is to determine the wage withholdings for Federal Income Tax for the individual. The instructions on the pdf are pretty clear, so I will just say that the lower the withholding number, the more will be withheld from the employee’s check. Keep in mind that this form is typically updated on an annual basis and you should have all employees fill out an updated W-4 at the beginning of each year. These forms should be kept on file with the employer.

USCIS I-9 Form

This form is the Employment Eligibility Verification form from the U.S. Citizenship and Immigration Services under the Department of Homeland Security. This form can be found here: http://www.uscis.gov/files/form/i-9.pdf. The purpose of this form is to provide documentation that the employee is authorized to work in the United States. This form and the accompanying documents should be kept on file with the employer. It is the employer’s responsibility to only hire authorized workers, and the potential employee’s responsibility to provide adequate documentation for such as defined by the I-9 Form.

State W-4 Form

Some states provide their own W-4 forms for State Income Tax Withholding. You can check with your state or search for your state’s name and W-4 in your search engine and see what shows up. This site was pretty informative for whether or not you need a State W-4 for your state. If nothing comes up, it is likely that you will just use the information on the W-4 for the state withholding deductions.

Recommended

Job Offer Letter

I would recommend that if you are hiring an employee, prepare a job offer letter when they accept a working arrangement to include the date of hire, position, pay rate, and any conditions of employment (such as a 90 day probationary period, etc).

Employee Information Form

The Employee Information Form is a summary of the employment information for each employee. This sheet should be in the front of the employee’s folder for easy reference. An example of this form that I use over at Crossroads Accounting is here. Any changes or updates to pay rates or other information should be reflected on an update to this form.

Direct Deposit Authorization Form

If you plan on running direct deposit for your employees, you will need to have the employee fill out a Direct Deposit Authorization Form. This form will provide you or your payroll service with the information needed to set up direct deposit and should be kept on file as the employee’s authorization to do so. An example of this form that I use over at Crossroads Accounting is here.

Training Documentation

During the employee’s training period, you should document the various training activities and document these. At the end of the training period, have the employee sign and date to verify that they have received training and that they feel competent to perform the required tasks. The reason for this is that unemployment insurance payments can be provided to the employee even if they quit if they can prove that they did not receive adequate training. It also supports future corrective action and termination if the employees are not performing to required standards as trained.

Wage Garnishments and Child Support Withholdings

When you hire a new employee, you are required to send off a New Hire Reporting form to the State (to be discussed in an upcoming post). This form notifies the State to send any applicable wage garnishments and child support withholdings. It is important for you to retain these documents on file and process the applicable payments in a timely manner.

Additions and Deductions Authorizations

Finally, any additions or deductions to the employee’s paychecks should be adequately documented, including advance check stubs, health plan deductions, expense reimbursements, etc. Keeping these on file will provide support for W-2 filings at the end of the year or for corrections as needed.

 

So this is what I recommend to keep on file and how to organize your employee file. Please let me know if you have any questions or trouble with these documents.

Keep Reaching!

Mark

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