Employer Requirements

You’re almost there! The final step in setting up your business is to determine the federal and state employer requirements.

Federal Requirements

• Tax withholdings: View the IRS Employer’s Tax Guide for full requirements.
• Tax records: The IRS requires businesses to retain records of employment taxes for at least 4 years. Learn more about the types of records small businesses are required to keep.
• Employee Eligibility Verification (Form I-9): Federal law requires employers to verify the employment eligibility for all employees hired after November 6, 1986. You can download Form I-9 and learn more about the process in the Instructions for Completing the I-9; Handbook for Employers. Proof of an employee’s eligibility to work must be obtained within 3 days of hire. This must be completed for citizens and non-citizens. For help navigating the I-9 form for non-citizens, you can consult the Small Business Guide to Immigration Regulations.
• Federal Income Tax Withholding (Form W-4): The W-4 form, which outlines tax withholdings, must be completed by every employee prior to or on their start dates. As the employer, you are responsible for submitting the W-4 to the IRS for verification.
• Federal Wage and Tax Statement (Form W-2): Employers are required to report annual tax withholdings for each employee to the IRS. This is done using the W-2 form, which must be completed annually for each employee by January 31 for the preceding year. Copy A must be sent to the Social Security Administration (SSA). For full instructions on what you need to do, you can view the SSA’s Employer W-2 Filing Instructions and Information.
• Form W-9: If you do business with a freelancer or independent third party, you must obtain a W-9. This is used for third parties who are responsible for filing their own taxes with the IRS.

Insurance Requirements for California

• Paid Family Leave (PFL)
• State Disability Insurance (SDI): Employers are responsible for deducting the tax for state disability insurance from employee wages and reporting them to the state.
• Unemployment Insurance: Businesses are required to pay unemployment insurance for eligible employees.
• Workers’ Compensation Insurance: The Department of Industrial Relations can provide employers with more information on Workers’ Compensation insurance requirements, and you can easily get answers to some frequently asked questions.