Written by Marc R Barnes EA
February 28, 2013
Hiring and managing employees are important steps in business growth. Whether you've decided to hire yourself as an employee of your corporation, or if you simply need to add people to your growing business, we can help. We've broken this section down into 2 areas:

  • Hiring Employees
  • Processing Payroll

1. Hiring Employees

The first thing your business should do before hiring an employee or employees is to know exactly why you need them. Many business owners simply become overwhelmed and need to hire an employee to handle the overload. The better approach is to imagine your business in 1 to 3 years and create an organizational chart, job titles and job descriptions to match your vision. Then, you can slowly "fill-out" your organizational chart with employees until your company reaches operating perfection!

Review the following steps:

The Job Description

This organizational chart approach requires you to create a detailed job description for each position in your company that includes:
  • an overview of the position and responsibilities
  • who is responsible for supervision of that position
  • what is required on a daily, weekly, monthly and even quarterly or yearly basis
  • what constitutes successfully doing the job (job goals)
  • exact procedures for doing the job

Legal Requirements for Hiring

There are numerous Federal, State and Local rules regarding hiring employees, and most large companies maintain in-house legal counsel and human resource departments to deal with these rules. But, if you are a small company, these are unaffordable luxuries. Therefore, here are some simple common-sense guidelines for hiring employees:
  • Do not discriminate based on race, color, gender, religion, handicap status, etc.
  • Respect the applicant's right to privacy: marital situation, economic background, personal life, etc.
  • Don't imply things you can't deliver: job security, benefits, etc.
  • Observe all laws relating to minimum wage, hiring young or immigrant workers.
  • Follow the IRS guidelines for hiring independent contractors.
  • Follow all IRS and State new hiring requirements (discussed below)

Before Hiring the Employee

Before hiring an employee your business must do the following:
  • Obtain a Federal Employer Identification Number (FEIN)
  • Register with your State Labor or Employer Division
  • Obtain Worker's Compensation Insurance (if required)
  • Post an "Employee Poster" as required by Federal and most State Governments

After Hiring the Employee

The following forms must be filed for every new employee:
  • Federal W-4 Form
  • Arizona A-4 Form
  • Federal I-9 Form (verifies the legal status of the employee)
  • State New Hire Reporting Form

These forms and any other employee paperwork must be kept by the employer in an "employee file" for at least 4 years.

2. Processing Payroll

Okay, so you've hired the employee, registered with the appropriate agencies, obtained the necessary ID #'s and complied with the necessary regulations. The next step is processing payroll.

There are basically 3 things your business needs to know:
  • How much you are paying your employee(s).
  • How much you need to take out of each paycheck for the various Federal, State and Local Taxes.
  • A running total of how much you've paid your employees, how much has been taken out and for which reason (i.e. how much was for social security taxes, how much for state unemployment, etc.).

This is important because you will need to know these totals to file quarterly and annual tax forms.

So here's the overall process:
  • Pay your employee(s) (either weekly, bi-weekly, bi-monthly or however).
  • Withhold the proper amount from each paycheck, keep track of the totals.
  • Deposit the total Federal Taxes (Income, Social Security and Medicare) owed to the IRS (according to your deposit schedule).
  • If applicable, deposit income or other State taxes to your State's taxing authority (according to your deposit schedule).
  • File IRS form 941, Arizona form A1-QRT and DES form UC-018 summarizing what you have deposited monthly for the previous quarter. Annually file the IRS Form 940 and W-2's.

Are You Confused About Payroll Yet?

Are you confused or overwhelmed by the whole payroll process? You should be. The government has taken a relatively simple process and made it positively complex. However, there is a solution that we recommend for every small business, hire Copper Canyon Tax and Accounting Services to manage your payroll. Put our 15 years of payroll experience to work for you. You can focus on your business and we'll focus on the numbers, regulations and reporting.

Copper Canyon Tax and Accounting Services is a full service provider of business accounting,
business income tax, personal income tax, and payroll in Tucson, Arizona.