Hiring your first employee

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You’ve established a business as a sole proprietor in Vermont. Even better – you’re growing and need to hire your first employee. Below are the steps you need to take to comply with Federal and State laws. 

A few things upfront. First, if you’re not registered as a corporation or LLC, we strongly recommend you consider changing your registration. Next, employers with more than ten employees have specific record-keeping requirements. If you are hiring a slew of employees at once (yay Vermont jobs!) check out the OSHA site.

1. Federal requirements – What you must do for yourself as an employer

a.   Obtain a Federal Employer Identification Number (EIN).  The EIN gives your business a unique identifier instead of your social security number.  You can apply for an EIN here.

b.   Enroll in the Electronic Federal Tax Payment System (EFTPS) to make Federal tax payments (social security, Medicare, Federal withholding).  Alternately, you can contact your bank to enroll in your bank’s service to make tax payments under the Electronics Federal Tax Payment system. 

c.   Complete and file Form 941 – Employer’s Quarterly Tax Return. This determines amounts you must deposit for social security, Medicare, and Federal withholding taxes. It also determines if you deposit on a semi-weekly or monthly basis.

Note: Form 944 is designed so the smallest employers (those whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less) will file and pay these taxes only once a year instead of every quarter.

d.   Complete and file an Employers Annual Federal Unemployment Tax (FUTA) return. The FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs, and cannot be deducted from employees’ wages.

e.   Complete and file Form W-2 Wage and Tax Statement and Form W-3 Transmittal of Wage and Tax Statement.  This can be done electronically.

Additional information is available at Publication 15 (Circular E) which defines employees, wages and supplemental wages. Also Publication 15-A provides supplemental information, and Publication 15-B provides a guide to taxability and non-taxability of fringe benefits.

2. Federal requirements – What you must do for employees

a.   Your employee must complete Form I-9 for Employee Eligibility Verification. 

b.   Your employee must fill out Form W-4 for income tax withholding. 

c.   Hold onto these forms for your records.

3. State requirements – Department of Taxes

There are two different accounts to set up with the Vermont Department of Taxes:

a.   Set up a Business Tax Account on the SoS Online Business Portal. This will register your business to withhold tax on employee paychecks. You may already have an account if you collect sales & use or meals & room taxes.

b.   Set up a myVTax account, which allows you to make online filings for all state taxes. 

c.   Calculate State withholding tax. Complete and file Form WHT-436 Quarterly Withholding Reconciliation or Form WHT-434 Annual Withholding Reconciliation on the appropriate due dates.

Note: All businesses should file Form WHT-436 with the State quarterly. Payment frequency to the State will mirror your Federal payment frequency; for example, if you are required to pay your Federal Withholding Tax semiweekly, you are required to pay the Vermont Withholding Tax semiweekly.

4. State requirements – Department of Labor

a.   Register with the Department of Labor to determine if you are liable for unemployment insurance contributions.

  • If so, register with the Vermont Internet Tax and Wage System to make Quarterly Wage and Contribution Reports.

            b.   Establish and maintain a worker’s compensation policy

  • You will need to get a worker’s compensation policy through a private insurer. Your insurer will notify the National Council on Compensation Insurance (NCCI), which will include you on an online database the State can refer to if complaints are received about your business.
  • If your business is structured as a corporation or an LLC, you may elect to exclude up to four corporate officers or LLC members.  In order to do so, you must file a Form 29 with the Vermont Department of Labor.
     

c.   Print out and post the mandatory posters from the Department of Labor website — and familiarize yourself with each one.

d.   Within 10 days of the employee starting work, fill out a New Hire Report.

5. Paying your first paycheck

a.   Calculate the employee’s wage due.

b.   Calculate Federal and State taxes to deduct from wage due. Refer to:

c.   Deduct taxes from wages due.

d.   Sign and issue the paycheck.

6. Mark your calendar

Bi-Weekly  

  • Deposit social security, Medicaid and Federal withholding taxes via EPTPS.
  • Pay State withholding taxes, if applicable.

Monthly

  • Vermont Department of Taxes returns must be postmarked or filed by the 25th of the reporting period (except by the 23rd in February).
  • Vermont Department of Labor Unemployment Insurance payments are due at the end of the month following the reporting period.

Quarterly

Annually

All returns are due by January 31st, including:

  • Federal FUTA returns
  • 1099-miscellaneous returns for payments over $600 to individuals (NOT employees)
  • Federal Form W-3 and Federal Form W-2, with a copy of the W-2 to each employee
  • State Form WHT-434 Annual Withholding Reconciliation

Businesses are encouraged to speak with an accountant and/or attorney to assure compliance. These folks can also help with best practices and policies for: the hiring process, personnel issues, recordkeeping and insurance. 

Questions on the information above can be referred to:

  • Secretary of State | Corporations Division | 802-828-2386 | sos.corporations.support@sec.state.vt.us
  • Department of Taxes | Business Division | 802-828-2551 | tax.business@vermont.gov
  • Department of Labor | Employer Services | 802-828-4344 | labor.uiandwages@vermont.gov
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Vermonter of the Month: Mohamed Basha

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This is a monthly series in which the Attorney General will feature a Vermonter doing exemplary work in their community. Have someone you think should be featured? Email AGO.CAP@vermont.gov.

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Mohamed Basha is the President, CEO and IT Person of TLC Homecare & Nursing. After moving from Chennai, India as a young child, he lived in New York City and New Orleans for a year. He finally settled in Vermont, where he grew up in Burlington.

Mohamed founded TLC in 2006 because he saw a need for a homecare provider who took a holistic approach in providing care and there was no other organization that offered supportive staffing services to local healthcare providers.

After numerous side jobs (such as working in the IT department of two small businesses, driving a taxi on weekends, and waiting/catering during the summer) Mohamed decided to pursue a Nursing Degree from Castleton State College. He also holds a B.A. in Health Science from Castleton and an Associate Degree in Liberal Studies from Community College of Vermont.

When Mohamed is not hard at work running TLC, he can be found spending time with his wife, Allyson, and two children, Nina and Zane. He also enjoys long walks in the summer and riding his motorcycle while enjoying the beauty that Vermont has to offer. He graciously took the time from his busy schedule to answer a few of our questions:

What inspires your work with TLC?

After graduating from nursing school, and working in various healthcare setting, I saw a dire need for home care providers to help seniors age in place.  I further saw a need for flexible staffing providers to help healthcare facilities staff their needs without burning out their own staff.


What impact has TLC had on your community? 

Currently we serve over 200 older adults throughout Vermont and in Upper Valley area.  Out of which, and I am proud to say this, we serve over 70 Veterans in this region.  Furthermore, we are quite active nationally and locally in helping the causes that affect majority of our seniors.  For over four years, we have sent TLC staff to Washington DC and Montpelier to advocate for the Alzheimer’s Association and raise awareness of its impact in our community.  We help raise money, through Golfing 4 Life and other activities, for Cancer Patient Support Services.  We assist with delivering Meals on Wheels at least once a month.  We also partake in various walks, runs, and fundraising events to give back to our community.

What have you learned from your work at TLC?

No two days are ever alike.  Every day brings a set of new challenges and I am always learning something new each day from my staff and the people that we serve.  Nevertheless, it is the stories from seniors who survived the Great Depression and World War II that comes to mind whenever I am asked this question.  Their ability to face adversity and overcome severe obstacles serves as a reminder that we can achieve anything we want if we are persistent and willing to work hard.

What advice do you have for others looking to impact their community?

Giving back to the community can be as little as picking up the trash around your neighborhood to spending countless hours volunteering for other organizations.  However, it is the intention and the willingness to want something better for others is what counts at the end of the day.  So do not be afraid to do even a small part, they all add up to making a bigger impact in our community.

Stay Safe Online

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October is National Cyber Security Awareness Month and next Tuesday is National Clean Your Virtual Desktop Day. Now is a good time to check-in on your computer use and internet safety. To the average computer user, the tasks required to be secure can be overwhelming. But, StaySafeOnline.org allows you to find all the information you need in one place.

You can search StaySafeOnline.org by area of interest. Learn how to:

With the site’s easy to follow tips and resources, your computer and internet experience can be safer. Having trouble with the above list?  Get started with the below tips:

Passwords – Make sure they are secure.  A combination of numbers, letters, and symbols is best.  Use a unique password for every account.

Antivirus Protection – Don’t use a machine (computer, mobile phone, etc.) that does not have virus protection.

Unsecured Wireless Networks – Use them cautiously.  Tapping into a free hotspot may be tempting when traveling, but depending on who is watching (and you never know who is), you could be putting your information at risk.  Never login to your personal accounts when using free wireless.  If you do, you might be giving all your information to a scammer.

Securing Your Internet – This task is simple.  If you have an online account with your internet provider, login to change the router’s name and the pre-set password.  Having trouble doing it on your own?  Just call the company for help.

Scams – For most, using the internet is virtually free.  So, many scams start online.  The Computer Tech Support scam can start with a pop-up message that claims your computer is at risk for viruses, advising of a phone number to call to rectify the issue.  Email scams often conform to a phishing scam, claiming to be a financial institution that says you need to reset your password.  Other forms of email scams include attachments or links that, when downloaded, infect your computer with viruses. Click here to sign up for our office’s scam alerts.

Failing to take precautions regarding computer and internet safety is like keeping your front door wide open to a neighborhood thief. Don’t do it.  Be smart about your computer use.  Take precautions to combat scammers before they target you.

Do you own a small business and have concerns about data security? Join us at Tech Jam on October 20th for information – details and registration can be found here.

Contributing Writer:  Crystal Baldwin

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How did they get that? Credit reporting and your personal information…

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In the wake of the massive breach of consumer information at Equifax, many people are asking how, and why, Equifax has so much information about so many of us. One of your first questions might be something like:

“I have never been a customer of Equifax; how can they have any of my personal information?”

Many consumers may never have even heard of Equifax before, let alone been a customer of their consumer services. So how could so many have been affected?Equifax is one of a few national companies that collect and report consumer credit information. These companies, often called “credit bureaus” or “credit reporting agencies”, get regular reports about your credit history from banks, financial institutions, landlords, utilities and even employers. The credit bureaus then put all of this information from different businesses about your use of credit together into a single file — your “credit report”. Some of the bureaus have developed a scoring system to rate how “safe”, or how “risky” your credit habits may be, compared to other consumers. Any time you apply for a loan, credit card, utility account, etc., the lender will get your credit report from one or more of these bureaus. Using the credit report, the lender will review your credit history to decide whether to open an account for you, and what interest rate they wish to charge (often based upon the perceived “risk”).

The credit bureaus also supply information to companies for marketing purposes. If you have ever received an invitation to apply for a credit card in the mail, or other kinds of solicitations like that, it is likely the sender got your mailing address from a credit bureau. Marketers buy mailing lists from the credit bureaus that are tailored to meet their desired customer characteristics. For example, a credit card company may wish to market a new travel credit card. They might contact the credit bureau to buy mailing lists of people who have other travel cards, airline accounts, etc., and who may meet certain age, income or other demographic criteria.

With so much of our personal, sensitive financial information at their disposal, you may wonder how these credit bureaus are regulated. There are some specific laws, both federal and state, that govern how credit bureaus should report, manage and protect your information. The federal Fair Credit Reporting Act (FCRA) sets out such standards as the rights of consumers to dispute items on their credit report, security requirements, and more. Vermont’s Consumer Protection Act includes a subchapter on Fair Credit Reporting that requires, among other protections, that a company get your consent before they can access your credit report. Both federal and Vermont state law require each of the credit bureaus to provide you with a free credit report each year (meaning you can get two from each bureau, each year). There are also specific laws that require companies to keep sensitive personal information as secure as possible, and to report to law enforcement and consumers quickly if they discover a breach of those security measures.

It is likely that policy-makers in the state legislatures, Congress and regulatory agencies will be reviewing the current laws and rules in place to protect consumer information, considering the scale of the breach at Equifax. If you have concerns or thoughts about the current law, you may wish to contact your legislators to discuss these issues and keep up to date on any proposed changes. Our office will be active in these areas, and will be working to keep Vermonters informed throughout. If you have questions about consumer protections, or a complaint about a business that you would like assistance with, contact our consumer hotline, or file a complaint online.

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Announcing Vermonter of the Month: Sarah Waring

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This is the first of a monthly series in which the Attorney General will feature a Vermonter doing exemplary work in their community. Have someone you think should be featured? Email AGO.CAP@vermont.gov.

Sarah Waring serves as the Executive Director of the Center for an Agricultural Economy (CAE) building a regenerative, locally based, healthy food system in the NEK and beyond.

Sarah was born and raised in Glover, VT, but spent a decade outside of the state, working in the Rocky Mountains and in Washington DC. Her background includes community development, federal land use planning and management, conservation, outdoor education and non-profit work.

Since coming to the Center for an Agricultural Economy in 2013, she has worked with the Board and staff there to increase the viability of the VT Food Venture Center (VFVC), a shared-use food business incubator and food hub, designed to support entrepreneurs and farmers with industrial kitchens, storage, and technical assistance. She graciously took the time from her busy schedule to answer a few of our questions:

What inspires your work with CAE and VFVC?
First and foremost, I get to work with visionary people, who are also grounded, intelligent and hardworking. That’s motivation to do my own best work. Whether its our staff and volunteers, the farmers who are stewarding the land, or the entrepreneurs who are growing their businesses, we have wonderful people around us. But then secondly, our mission is critical to our region – because we need to build a place-based economy, with local ownership. Its also critical to the globe – because our food system is broken. We can make changes to global trends, like hunger, global warming and more, by starting locally to fix our food system. So that’s the urgency behind the work we do!

What impact has VFVC had on your community?
In the past few years, the VFVC has developed Farm and Food Business Services; working with 18-20 farmers and 12-15 food businesses each year to deep dive into operational viability. The team has also begun the state’s only Farm to Institution processing program – purchasing local farm products from small and medium scale farmers to process and selling to colleges, hospitals and schools. In three years, the sales of locally grown and processed vegetables through the VFVC has grown by 230%.
What have you learned from your work at CAE?
I’ve learned more about food safety than I ever knew before! But really, I do get to work with folks who have deep knowledge of the land, the plants or animals they take care of, or the business model and the food product they are creating. As far as the work we do to support these folks, I’ve been lucky to re-learn that we can’t do this larger food system work alone. All things that are most worthwhile will take partnership, and our organization and team works hard to build trust with our partners.
What advice do you have for others looking to impact their community?
I think the best thing I can say is this – look at the assets and gaps in your own region. Take your time to do your homework on what efforts already exist, and make sure you practice collaboration – because goals and activities go further with many hands being involved! We can create positive impacts on our own, but we can create them even faster with others.