Reporting and tax requirements for small business employers

Obtain an Employer Identification Number

Before hiring your first employee, you need to obtain an Employer Identification Number (EIN). This is also called a FEIN (Federal Employer Identification Number) or Tax ID, from the IRS. The number is necessary for reporting and filing employment taxes. To obtain an EIN, you may apply online for free. Learn more about applying for an EIN.

Set up a payroll system to withhold taxes

The IRS requires that you keep records of employment taxes for at least four years. Keeping good records can also help you monitor the progress of your business, prepare financial statements, identify the sources of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.

Federal Income Tax Withholding

Every employee must provide their employer with a signed W-4 withholding exemption form so that you can withhold the correct amount from their paychecks. On the W-4 form, employees tell you how many allowances they are claiming for tax purposes. You should ask employees to fill out a new W-4 form each year if they want to change their allowances. For more specific information, read the IRS Employer’s Tax Guide or check out irs.gov.

Verify employee eligibility

Federal law requires employers to verify an employee’s eligibility to work in the United States. Within three days of hire, employers must complete Form I-9, employment eligibility verification, to confirm the employee’s citizenship or eligibility to work in the U.S. To verify citizenship, employers can only request the documentation specified on the I-9 form.

Employers must keep each employees I-9 on file for three years after the date of hire or one year after the date of the employee’s termination, whichever is later.

NOTE: Employers can use information taken from the Form I-9 to electronically verify the employment eligibility of newly hired employees by registering with E-Verify. 

Report new hires to the State

All employers are required to report newly hired and re-hired employees to California’s New Employee Registry within 20 days of their hire or rehire date.

File your taxes

Every year, employers must report the amount of wages paid and taxes withheld for each employee on a federal wage and tax statement. This report is filed using Form W-2, wage and tax statement which employers must complete for each employee. 

By the last day of February, employers must send Copy A of their employees W-2 forms to the Social Security Administration to report wages and taxes of your employees for the previous calendar year. In addition, employers should send copies of W-2 forms to their employees by January 31 of the year following the reporting period. Visit ssa.gov/employer for more information.

Featured resources

Hire your first employee

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Recruitment assistance to find local talent

The Office of Economic and Workforce Development knows that finding good talent in a market like San Francisco can be a challenge—but the Employer Engagement Team is here to help! We customize our services based on the needs of each business. Our services range from simply presenting qualified and screened candidates that match your job requirements to assisting you in scheduling interviews in our recruitment facilities. We can also help connect you to local hiring events. 

Tax credits and incentives

Certain employers can be eligible for thousands of dollars in Local, State, and Federal tax credits and incentives based on hiring and other business expenses. Find out if your business qualifies.

CityBuild Employment Networking Services

The Office of Economic and Workforce Development's CityBuild Employment Networking Services connect contractors with qualified San Francisco resident trades workers. CityBuild maintains a database of over 4,000 local workers and can assist Contractors in meeting workforce hiring requirements.

Layoff response assistance

The Office of Economic and Workforce Development can provide services through our Rapid Response Program that will assist you in easing the transition of your workforce when a downsizing event cannot be averted. Staff will conduct on-site or virtual orientations with our partners from the Employment Development Department and other appropriate agencies. We will inform your employees about resources and services that can assist them with applying for unemployment, access to career coaching, and healthcare options.