I-9 and W-4 Forms: A No-Nonsense Guide for HR Teams

Ask any HR leader why they got into the job, and they likely won’t say it was for the exhilarating paperwork.

Yet, record-keeping and documentation are a massive part of any HR department’s responsibilities. And it’s an important one: Failure to comply with employment law can leave a business open to legal risks like government fines or other penalty actions.

Compliance failures can also negatively impact an employee’s finances and career growth. A simple HR oversight, such as not completing an employee’s I-9 form, can lead to broken trust and a feeling that your business just doesn’t put people first. An incorrect W-4 form, on the other hand, can mean unsuspecting employees get hit with an IRS fine. 

Staying on top of employment forms and paperwork is a foundational element of any impactful HR department. I-9 and W-4 forms are among the most common types of paperwork that HR teams oversee, so here’s how you can handle them effectively.

What Happens If You Don’t Use W-4 and I-9 Forms?

If you don’t use I-9 and W-4 forms when hiring or managing employees, it can be challenging to prove that your team is compliant with employment law.

You may risk having inaccurate information on employee files, which exposes your organization to unnecessary liability. What’s more, for both I-9s and W-4s, incorrect or missing forms can lead to financial penalties: 

• The U.S. Citizenship and Immigration Service (USCIS)can enforce fines for I-9 violations. The penalties start around $250 for a first violation and can reach as high as around $25,000 for repeatedly missing or incorrect I-9s.
• The IRS can fine employees up to $500 for claiming excess withholding allowance on the W-4 form. There’s even the chance of criminal proceedings if employees willfully supply wrong information to lower their tax contributions.

As an HR leader, it is important that you set up good practices around both these forms to avoid penalties and ultimately support your employees more effectively.

What Are I-9 Forms?

I-9 forms are used by HR teams to verify that new employees are legally eligible to work in the US. They must be completed accurately and promptly for every employee hired in the US, including foreign nationals with US contracts.

The current I-9 form came into force in 2020 and is available online through the U.S. Citizenship and Immigration Services.

The I-9 form contains two main sections:

• Section 1: Employee information and attestation. Here, new hires state they can legally work in the US. This means they are either: U.S. citizens, lawful permanent residents, noncitizen nationals, or otherwise authorized to work. They need to provide personal details like their social security number, as well as establish their identity. This can be done with a US passport, alien registration number, voter’s registration card, work permit, social security card, driver’s license, or something else from the government’s list of acceptable documents.

The employee needs to complete section one on their first day in a new job, and the employer has three business days to check the information provided and complete section 2.

• Section 2: Employer verification. This section is completed by employers and states that they’ve examined and approved the new hire’s documentation and agree they are allowed to work in the US.

Do All Employees Need to Complete Form I-9?

According to federal law, there are a handful of employee categories that don’t need I-9s, including:

• Independent contractors (1099 contractors)
• Temporary workers employed by a third-party contractor (for instance, temp agency workers)
• Individuals working outside of the US.
• Unremunerated interns (paid interns do need an I-9)
• Individuals hired into the company before November 6, 1986

Anyone you hire who doesn’t fall into the categories above needs an I-9 form. Our advice is to assume everyone needs an I-9 and then examine outliers or confusing cases as they arise.

Do Remote Workers Need to Complete I-9s?

Remote workers can be a confusing category for HR teams, especially when it comes to employment law compliance.

The rule of thumb is — if you’re hiring a W2 employee based in the US, they need an I-9 form even if they work from home. Although they’re not physically present in your office, remote workers still count as “hired” and need to be legally eligible for work in the US. 

If you’re hiring a remote 1099 contractor for a defined project, they won’t need an I-9.

How to Set Up an I-9 Processing Procedure

HR leads need to establish systems to ensure that I-9s are correctly completed during new hire onboarding. No one wants to get hit with a penalty, especially not one that could have been avoided by establishing best-practice behavior. Some best practices that can help include:

• Assign ownership of I-9 completion to a member of the HR team. Having one and only one person responsible for this duty ensures that this essential form doesn't fall through the cracks.
• Include I-9 instructions on Day 1 of employee onboarding. The employer section must be signed and completed within three business days of the employee’s start date, so having employees complete it on their first day is ideal.
• Automate reminders for both the employee and your own team. You can set up reminders in your onboarding software or add tasks to the new hire’s calendar.
• File completed documentation so it’s accessible. Keeping I-9s on file in case you get audited by the Department of Homeland Security (DHS) is vital. Depending on the later date, keep I-9s for three years after hiring or one year after employment ends. Make sure your HR team has a secure, centralized system where I-9 forms can be easily accessed and stored for compliance purposes. This might be an HRIS or an internal filing system.
• Run regular I-9 audits. You may have to prove that all your company’s employees are eligible for US employment. Proactively auditing your I-9 documentation will ensure you can catch and correct errors and omissions before they become a compliance liability.

What Are W-4 Forms?

W-4 forms are an essential part of the payroll process as they help employers determine how much state and federal income tax should be withheld from an employee’s paycheck. The W-4 form is used by employees to provide their personal information and tax status to their employer, and it includes a series of questions around factors like marital status, number of dependents, and previous employment.

There are several critical components to the W-4 form that employers should be aware of, including: 

• Tax filing status: This status is based on the employee’s personal information, such as whether they are married and filing jointly or single. The amount of tax withheld from an employee’s paycheck will differ depending on their status. 
• Dependents: Having dependents affects the amount of taxes being withheld from an employee’s paycheck. This section replaced a section on personal allowances, which was removed from the W-4 in 2020.
• Additional information: In some cases, an employee may have additional tax-related information or exemptions, presented through a withholding allowance certificate. These exemptions determine the amount of taxes that will be withheld from their paycheck. This may include items like estimated tax payments and more detailed information about job-related expenses.

Employees fill out W-4 forms any time they change jobs or experience a life event like the birth of a child. They may also fill one out if they want to alter their tax withholdings.

Do All Employees Need to Complete W-4s?

Yes. Any US employee who has earned income and is being paid by an employer needs to complete a W-4 form. This includes full-time employees, part-time employees, contractors, temporary workers, and remunerated interns. 

Remote workers all need to complete and submit W-4 forms, just like their in-office co-workers.

What To Do If an Employee Doesn’t Submit a W-4

If an employee fails to submit a W-4 form, you must reach out to them directly and ask for the completed form.

 Suppose they continue not to provide the information needed for payroll. In that case, you may need to start withholding taxes at a flat rate without any adjustments, usually that of a single contributor with no extra adjustments.

How to Set Up a n Effective W-4 Process

While it’s the employee, rather than the employer, who is responsible for completing and submitting a W-4 form, there are still a few actions HR teams can take to make sure things go smoothly: 

• Distribute the W-4 forms before an employee’s start date. This will give new hires enough time to complete the form accurately and thoroughly before their first day on the job.
• Create a structured onboarding process that helps employees to complete and submit their W-4. This can help to give them a few days to file instead of trying to plow through all new hire paperwork in one day. It can also help improve accuracy by giving employees time to consult with family members or financial advisors as needed.
• Prompt employees to complete and submit their W-4 forms on time. This can minimize delays in payroll processing and safeguard employees against problems during tax-filing season.

Additionally, it’s good employer practice to keep a copy of W-4s on file for all employees and remind employees to submit a new W-4 by December 1 every year if their tax allowances have changed.

Streamlining Onboarding: Best Practices for Handling W-4 and I-9 Forms

The onboarding phase is a crucial juncture where employees must prioritize both a seamless transition for new hires and strict adherence to legal requirements. In order to make this process as smooth as possible, there are a few HR strategies to keep in mind. 

Pre-Onboarding Communication

Prior to the first day, be clear about the importance of W-4 and I-9 forms. It may help to create a comprehensive checklist outlining the documents employees need to prepare ahead of time, such as government-issued IDs and Social Security cards. By informing new hires well in advance, individuals are more likely to come prepared, which makes the process much smoother. 

Simplifying Form Completion

Offering clear instructions and assistance during the onboarding process is essential. Your team can develop FAQs that address common questions regarding W-4 and I-9 forms so that employees have easy access to information when needed. This proactive approach minimizes confusion from the beginning. It also showcases the organization's commitment to a transparent onboarding experience.

Using Onboarding Sessions Effectively

Structuring onboarding sessions to provide ample time for document completion is crucial. Consider incorporating interactive workshops or one-on-one sessions dedicated to walking through the forms in detail to avoid overwhelming new employees. This approach fosters a supportive environment that allows individuals to seek clarification on any uncertainties. In turn, this facilitates increased accuracy in form completion.

Ensuring Privacy and Security

Handling sensitive information requires diligence to safeguard privacy and comply with data protection laws. Your organization can establish best practices for secure storage and disposal of documentation. Clearly communicate these policies to new hires, instilling confidence in the organization's commitment to privacy. Doing so protects the interests of both the employee and employer.

Regularly Updating Onboarding Practices

Of course, legislation surrounding W-4 and I-9 forms is subject to change. This makes it even more important for organizations to stay informed so they can update onboarding practices to align with the latest legal requirements. Provide training for HR personnel to ensure they remain knowledgeable about best practices and understand any modifications to legislation that may impact the onboarding process.

Creating Feedback Loops

Implementing a system to gather feedback from new hires regarding their onboarding experience, specifically concerning the documentation process, is essential. You can use this feedback to identify areas for improvement and refine your approach to handling W-4 and I-9 forms. A dynamic feedback loop ensures that the onboarding process remains adaptive to the evolving needs of both the organization and its employees.

Systems that Drive Success

I-9 and W-4 forms are an essential part of smooth onboarding and payroll processing. Streamlining these operational basics gives you more time to focus on initiatives that drive results. 

One of the most impactful places HR can spend its time is improving workforce wellbeing. Happy and healthy workers are more productive, are less likely to turnover, and have lower healthcare costs. Setting up a wellbeing program can help your organization reap all of these benefits at once.

Advance your department’s strategic value. Speak with a Wellbeing Specialist today!

 References 

• 11.8 Penalties for Prohibited Practices. (2023, July 18). U.S. Citizenship and Immigration Services. Retrieved November 18 2023 from https://www.uscis.gov/i-9-central/form-i-9-resources/handbook-for-employers-m-274/110-unlawful-discrimination-and-penalties-for-prohibited-practices/118-penalties-for-prohibited-practices.
• How to Conduct an I-9 Audit. (2022). SHRM. Retrieved December 7, 2022 from https://www.shrm.org/resourcesandtools/tools-and-samples/how-to-guides/pages/conductani-9audit.aspx. 
• I-9, Employment Eligibility Verification. (2022). U.S. Citizenship and Immigration Services. Retrieved December 7, 2022 from https://www.uscis.gov/i-9.