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. <\/p>\n\n\n\n
A few things upfront. First, if you’re not registered as a corporation or LLC, we strongly recommend you consider changing your registration<\/a>. 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<\/a>.<\/p>\n\n\n\n a. Obtain a Federal Employer Identification Number (EIN)<\/a>. The EIN gives your business a unique identifier instead of your social security number. You can apply for an EIN here<\/a>.<\/p>\n\n\n\n b. Enroll in the Electronic Federal Tax Payment System (EFTPS)<\/a> to make Federal tax payments (social security, Medicare, Federal withholding). Alternately, you can contact your bank to enroll in your bank\u2019s service to make tax payments under the Electronics Federal Tax Payment system. <\/p>\n\n\n\n c. Complete and file Form 941 – Employer’s Quarterly Tax Return<\/a>. 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.<\/p>\n\n\n\n Note: Form 944<\/a> 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.<\/em><\/p>\n\n\n\n d. Complete and file an Employers Annual Federal Unemployment Tax (FUTA) return<\/a>. The FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs, and cannot be deducted from employees’ wages.<\/p>\n\n\n\n e. Complete and file Form W-2 Wage and Tax Statement<\/a> and Form W-3 Transmittal of Wage and Tax Statement<\/a>. This can be done electronically.<\/a><\/p>\n\n\n\n Additional information is available at Publication 15 (Circular E)<\/a> which defines employees, wages and supplemental wages. Also Publication 15-A<\/a> provides supplemental information, and Publication 15-B<\/a> provides a guide to taxability and non-taxability of fringe benefits.<\/em><\/p>\n\n\n\n a. Your employee must complete Form I-9<\/a> for Employee Eligibility Verification. <\/p>\n\n\n\n b. Your employee must fill out Form W-4<\/a> for income tax withholding. <\/p>\n\n\n\n c. Hold onto these forms for your records.<\/p>\n\n\n\n There are two different accounts to set up with the Vermont Department of Taxes:<\/p>\n\n\n\n a. Set up a Business Tax Account<\/a> on the SoS Online Business Portal<\/a>. 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.<\/p>\n\n\n\n b. Set up a myVTax account<\/a>, which allows you to make online filings for all state taxes. <\/p>\n\n\n\n c. Calculate State withholding tax<\/a>. Complete and file Form WHT-436 Quarterly Withholding Reconciliation<\/a> or Form WHT-434 Annual Withholding Reconciliation<\/a> on the appropriate due dates<\/a>.<\/p>\n\n\n\n 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.<\/em><\/p>\n\n\n\n a. Register with the Department of Labor<\/a> to determine if you are liable for unemployment insurance<\/a> contributions.<\/p>\n\n\n\n b. Establish and maintain a worker’s compensation policy<\/p>\n\n\n\n c. Print out and post the mandatory posters<\/a> from the Department of Labor website — and familiarize yourself with each one.<\/p>\n\n\n\n d. Within 10 days of the employee starting work, fill out a New Hire Report<\/a>.<\/p>\n\n\n\n a. Calculate the employee’s wage due.<\/p>\n\n\n\n b. Calculate Federal and State taxes to deduct from wage due. Refer to:<\/p>\n\n\n\n c. Deduct taxes from wages due.<\/p>\n\n\n\n d. Sign and issue the paycheck.<\/p>\n\n\n\n Bi-Weekly <\/strong><\/p>\n\n\n\n Monthly<\/strong><\/p>\n\n\n\n Quarterly<\/strong><\/p>\n\n\n\n Annually<\/strong><\/p>\n\n\n\n All returns are due by January 31st<\/sup>, including:<\/p>\n\n\n\n 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. <\/p>\n\n\n\n Questions on the information above can be referred to:<\/p>\n\n\n\n1. Federal requirements – What you must do for yourself as an employer<\/h2>\n\n\n\n
2. Federal requirements – What you must do for employees<\/h2>\n\n\n\n
3. State requirements – Department of Taxes<\/h2>\n\n\n\n
4. State requirements – Department of Labor<\/h2>\n\n\n\n
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\u00a0<\/li>\n<\/ul>\n\n\n\n5. Paying your first paycheck<\/h2>\n\n\n\n
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6. Mark your calendar<\/h2>\n\n\n\n
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