New hire reporting is mandatory for all employers. Here’s how to do the process properly.
Every employer, no matter how big or small, should know about new hire reporting — which is directly tied to child support collection.
Child support collection is a top priority for federal and state governments. Both entities often work together to implement child support enforcement programs, including income withholding orders. Another collaborative effort is new hire reporting.
What is hire reporting?
New hire reporting is a process that requires employers to submit information on new and rehired employees to the state.
New hire reporting is regulated by the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). The Office of Child Support Enforcement (OCSE) is the federal agency that oversees the national child support program and relevant provisions under the PRWORA. Moreover, the OCSE works with states and tribes to create, manage, and administer their child support programs in accordance with federal law.
The new hire data that employers submit helps child support agencies to locate noncustodial parents faster, plus enables prompt issuing of income withholding orders to the noncustodial parent’s employer. This includes noncustodial parents who live in a separate state from their children and those who frequently change jobs.
The PRWORA sets the minimum data elements that employers must submit to the designated state agency. Each state may require additional information.
The new hire data that employers submit helps child support agencies to locate noncustodial parents faster, plus enables prompt issuing of income withholding orders to the noncustodial parent’s employer.
Is new hire reporting mandatory?
Yes. Every employer who is required by law to have an employee fill out a Form W-4 (for federal income tax withholding purposes) must conduct new hire reporting.
Note that the definition of “employer” for both new hire reporting and federal income tax purposes is the same, as Section 3401(d) of the Internal Revenue Code (IRC) defines.
Under IRC Section 3401(d), an employer is “any person for whom an individual performs or performed any service, of whatever nature, as the employee of such person.” In this case, IRS common-law rules generally dictate whether a person is an employer.
Which individuals should you report?
You must perform new hire reporting on all newly hired employees. The federal definition of a “newly hired employee” is:
- An employee who has not previously been hired by the employer, or
- A rehired employee who was previously hired by the employer but had been terminated for at least 60 days straight
Federal law does not require you to send in a new hire report for anyone who’s not an actual employee, such as an independent contractor. However, some states require new hire reporting for independent contractors. So, if your business utilizes independent contractors, consult your state’s guidelines to see if you must submit new hire reports for independent contractors.
Who is responsible for new hire reporting?
Generally, if you’re responsible for paying wages to the employee, then you’re responsible for submitting the new hire report. In the case of temporary staffing agencies, if the agency is the one paying wages to the individual, then the agency is responsible for submitting the new hire report. But if you employ someone referred by the staffing agency, then it’s your duty to conduct new hire reporting on that individual.
Things may be more complicated if you use a Professional Employer Organization (PEO) that assumes many of your HR responsibilities or serves as the co-employer of your employees. The IRS provides some information on the employment tax obligations of PEOs and the employers that use them or other third party payers. But for a nuanced understanding of how the PEO relationship might affect new hire reporting obligations, consider getting expert or legal advice.
If you use a PEO, make sure the contractual agreement expressly states who’s responsible for new hire reporting.
What information is mandatory for a new employee?
The PRWORA requires all employers to report the following data elements for newly hired employees:
- Employee name
- Employee address
- Social Security Number
- Date of hire (i.e., the date the employee starts performing services for pay)
- Employer name
- Employer address
- Federal Employer Identification Number (FEIN)
Be sure to check with the designated state agency for any additional data elements or requirements under state law. Although most states adhere to the federal definition of “newly hired employee,” many states define “rehired employee” somewhat differently from federal law. Also, state reporting criteria for independent contractors may differ.
Where and how can employers report new hires?
New hire reporting should be done with the agency that administers the state new hire reporting program.
Federal law gives employers three submission methods for reporting newly hired employees:
- First-class mail
- Magnetic tapes
The state may offer additional options like email, phone, fax, or website reporting.
For state-specific information, see the OCSE’s State Contact and Program Information matrix, which includes:
- Agency contact information
- Reporting timeframe
- Mandatory and optional data elements
- Method of transmission
- Whether the state mandates independent contractor reporting
The new hire report must be either the employee’s Form W-4 or a comparable form that you or the state develop.
The new hire report must be either the employee’s Form W-4 or a comparable form that you or the state develop. If you choose to report via Form W-4, ensure it is legible. Also, make sure contains all the required information — including the
- Employee’s date of hire
- Employer’s name, address, and FEIN
If you have employees in more than one state, you can perform new hire reporting in 1 of 2 ways:
- Report each newly hired employee to the individual state they work in.
- Choose one state where you have employees working and report all newly hired employees to that state.
Option 2 tends to be simplest and most cost-effective, because you only need to follow the reporting rules for a single state.
What happens if you don’t report new hires?
States can impose civil money penalties on employers that fail to report newly hired employees. However, federal law limits the amount that a state can charge for noncompliance; it’s no more than $25 per newly hired employee. The maximum fine goes up to $500 per newly hired employee if the employer and the employee engaged in a conspiracy to not report the information. According to the OSCE website, “States may also impose non-monetary civil penalties under state law for noncompliance.”
For more information on new hire reporting, see the OSCE’s New Hire Reporting – Answers to Employer Questions.