Federal and State Payroll Laws

Robbi Gunter
October 24, 2008 — 2,079 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

The following are basic procedures for maintaining Federal and State payroll legislation. Following these procedures will help to sure that you stay on track correctly with your payroll obligations. Failure to comply with these laws can result in severe consequences.

Obtain your Federal Employee Identification Number or EIN. This allows you to hire and pay your employees and registers them for tax levies and deductions.

Use the W-4 form available on the IRS web site to calculate the payroll for your employees correctly. The IRS requires a W-4 for all new employees for the marital status and the number of tax allowances claimed. Based on the number of allowances claimed, employers can determine the amount of federal income tax to withhold. This can be revised at any time that an employee marries or has a child.

Keep a W-4 for each active employee and for 4 years after an employee leaves or is terminated. Do not send to the IRS unless notified to do so.

Use the I-9 form, also available on the IRS Web site, to verify your new employee's eligibility to work in the United States.

Report all new hires to the state in order to aid in the collection of child support and to monitor unemployment compensation, workers' compensation, and other public programs. In most states you can provide a copy of the employee's W-4 form to report the new hire to the state. If you do not, you may face a penalty.

Order labor law posters. If your business has one or more employees, it is governed by U.S. state and federal labor laws. In order to be compliant with the labor law regulations, even in a small office, labor law posters must be placed where employees can see information like the minimum wage and overtime pay standards.

Obtain State Laws. Contact each state for its individual labor and payroll laws. Non-compliance can mean fines and lawsuits.

About the Author

Robbi Gunter is a staff writer for Strong Business Credit, helping small business owners build the credit profile they need to start or expand a business.

Robbi Gunter