Comply with Me: New Hire Reporting Requirements

In addition to the work tax and accounting departments may have to establish federal and state withholding and reporting for their employees, employers have to comply with special state reporting for new hires and rehires to comport with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) (Pub. L. No. 104-193). This area is important because federal law holds that an "employer" for “new hire” reporting purposes is the same as for federal income tax purposes, as defined under I.R.C. Section 3401(d). Best practice dictates that you direct clients, when they ask new employees to complete a Form W-4, to also focus on the new hire reporting requirements. This survey reviews the new hire requirements, the business case for compliance, what types of employers and employees are covered, and reviews enforcement. 

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Legal Developments

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  Due to a recent IRS notice, federal reporting is not required by entities granting the relief, nor will state reporting be required due to tack-on laws in place for most states. 

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

• Tax Key Legal Developments Tracker (Federal)
  Stay informed on new developments: 
  • Employee Benefits. Treasury and the IRS issue final regulations under I.R.C. Section 36B that amend regulations regarding eligibility for the Affordable Care Act’s premium tax credit to provide that affordability of employer-sponsored minimum essential coverage (employer coverage) for family members of an employee is determined based on the employee’s share of the cost of covering the employee and those family members, not the cost of employee-only coverage. T.D. 9968, 87 Fed. Reg. 61,979 (Oct. 13, 2022).
  • Payroll. Social Security Administration announces an 8.7% cost of living adjustment beginning in 2023. Based on that increase, the maximum amount of earnings (wages) subject to the Social Security tax (taxable maximum) will increase in 2023 to $160,200 from $147,000. SSA Press Release (Oct. 13, 2022).
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts. 
• Check out the new Practical Guidance Author Center! Learn about the 1500+ leading attorney authors contributing to our 22 practice areas, and find out how you can Become a Practical Guidance Author.
• Share fundamental guidance with your firm’s new associates to help them sharpen their research and writing skills, get the inside scoop on associate survival, and hit the ground running in the tax practice area. Review the resources in the First Year Associate Resource Kit: Tax.
• The Practical Guidance Journal Fall Edition features impacts of the Dobbs v. Jackson Health Organization decision on employers, healthcare, insurance, and privacy concerns, and tracks the status of state law changes.
• Listen up! Access our growing collection of podcasts by navigating to the Practical Guidance Podcasts Resource Kit.
• New and Recently Updated Practical Guidance Content
  • Hard-to-Value Intangibles
  • International Tax Consequences of Cryptocurrency Developments
  • Inflation Reduction Act of 2022: Tax Provisions
  • Statute of Limitations for Tax Returns (No Substantial Omissions)
  • Unauthorized Disclosure of Taxpayer Information (IRC Sections 6103 and 7431)
  • KPMG Report: Accounting for Tax Credits

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