Plan a Business
Tax & Reporting Requirements
Other State and Federal Requirements
There are a few steps that you need to take when you hire an employee - from ensuring legal compensation or a safe environment to posting workplace notices. Here are some things to consider before you bring on your new team.
TAX & REPORTING REQUIREMENTS
1. Obtain and Employer Identification Number
A Federal Employer Identification Number (EIN) is required for most businesses, although sole proprietors with zero employees are exempt from the filing requirement. (Sole proprietors can use a Social Security Number in lieu of an EIN, or they can file for an EIN). There is no charge to obtain an EIN.
You will need an EIN if you answer "Yes" to any of the following questions:
If you have or plan to have employees or contractors. If you operate your business as a corporation or a partnership. If you plan to file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms. If you withhold taxes on income, other than wages, paid to a nonresident alien. Do you administer a Keogh plan? (Keogh plans are a type of retirement plan for self-employed people and small businesses in the United States).
2. Set up a system to withhold income taxes
As an employer, you’re required to withhold a portion of each employee’s wages for taxes, including:
- Federal income tax
- Social Security and Medicare Tax
- State income tax (Some states do not collect income tax, so check this list of state tax agencies to see what rules apply in your state.)
You also need to send the amount you withhold to the proper tax authorities. Rather than managing this yourself, consider using a payroll service or online payroll app. Doing so can simplify payroll and tax withholding, and ensure the process is completed correctly. Payroll services stay current on tax law changes, and they automatically withhold the proper tax amounts from employees’ wages. Many payroll services offer reasonable rates, so even the smallest businesses can afford them.
3. Verify employee eligibility
Within three days of hiring an employee, you must verify the individual is legally allowed to work in the United States. This means you will need to complete a Form I-9 (Employment Eligibility Verification). Law does not require that you submit the I-9 form, but you must keep the form for three years after the employee’s hire date (or one year after the employee leaves your company, whichever comes later). Try to keep all I-9 forms stored together in a single location, and separately from employees’ other personnel forms and records.
4. Report your new hire
New Hire Reporting may be accomplished online. It is mandated by federal law under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, and requires employers to report new hires and rehires within 20 days.
For more information about the State of Texas New Hire Program, how and when to report, visit Office of the Attorney General's New Hire website.
5. Obtain Workers' Compensation Insurance
In Texas, private employers can choose whether or not to carry workers’ compensation insurance coverage. Texas employers who carry and who do not carry workers’ compensation insurance coverage are required to comply with certain reporting and notification requirements under the Texas Workers’ Compensation Act.
Refer to the Texas Workers’ Compensation Employer Requirements/Resources webpage for more information.
6. Post Required Notices
Certain federal and state labor posters are required to be posted at a place of business. The Texas Workforce Commission maintains current, comprehensive information about workplace poster requirements.
7. Pay Taxes
The IRS requires you to keep employment tax records for at least four years after the taxes were paid, so set up an effective recordkeeping system for your employees’ tax information.
OTHER FEDERAL AND STATE REQUIREMENTS
Americans with Disabilities Act
The Americans with Disabilities Act (ADA) provides protection for people with disabilities in the areas of employment, public services and transportation, public accommodation US Equal Employment Opportunity Commission, and telecommunications. The ADA, as pertaining to employment, is enforced by the .
For information or technical assistance on the Americans with Disabilities Act, state disability policy information, disability statistics, and local disability resources contact the Texas Governor's Committee on People with Disabilities.
The Texas Department of Licensing and Regulation reviews construction documents for the construction or substantial renovation, modification, or alteration of buildings or facilities defined as public or commercial accommodations for architectural barriers. This review is mandated through the Americans with Disabilities Act. For additional information on architectural barriers contact the Texas Department of Licensing and Regulation.
Advice is available to Texas employers with 15 or more employees who maintain workers' compensation coverage. Employers must comply with certain drug-free workplace requirements, and are also subject to federal regulations. These federal regulations include the Drug-Free Workplace Act of 1988 and U.S. Department of Transportation regulations requiring drug and alcohol testing.
Federal and state laws prohibit employment discrimination. The United States Equal Employment Opportunity Commission (EEOC) and the Texas Workforce Commission, Civil Rights Division (TWCCRD) are charged with enforcing fair employment laws which prohibit discrimination on the basis of race, color, sex, religion, disability, age, or national origin.
The TWCCRD will provide technical assistance and training to employers to facilitate compliance with laws prohibiting employment discrimination. The EEOC promotes voluntary programs that allow employers and organizations to implement equal employment opportunity programs within their businesses.
For information regarding federal equal employment requirements contact the Equal Employment Opportunity Commission (Houston Office): 1919 Smith Street, Houston, TX 77002 (6th Floor) or at 713-209-3320.
Certain business must maintain records on occupational illnesses and injuries and are subject to inspection from the Occupational Safety and Health Administration (OSHA).
The Occupational Safety and Health Consultation is a program through the Texas Department of Insurance that conducts free on-site safety and health consultations to help small, private sector employers understand and comply with Occupational Safety and Health Administration (OSHA) regulations. The program is geared toward employers in high hazard industries with 250 or fewer employees per work site and less than 500 employees nationwide.
For more information regarding state and federal occupational safety and health requirements contact OSHA (Houston Office): 17625 El Camino Real, Ste 400, Houston, TX 77058 or at 281-286-0583.
Wage & Labor
The City of Houston's minimum wage is currently $7.25/ hour, consistent with the state and federal minimum wage. The Texas Minimum Wage Act, Chapter 62 establishes the minimum wage for non-exempt employees and designates the Texas Workforce Commission (TWC) as the agency responsible for disseminating information about the Act. It also exempts a laundry list of employers from its coverage and provides civil remedies for violations.
The primary exemption from the Act is for any person covered by the federal Fair Labor Standards Act (FLSA). Other specific exemptions include employment in, of, or by religious, educational, charitable, or nonprofit organizations; professionals, salespersons or public officials; domestics; certain youths and students; inmates; family members; amusement and recreational establishments; non-agricultural employers not liable for state unemployment contributions; dairying and production of livestock; and sheltered workshops.
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