DISTRICT OF COLUMBIA EMPLOYER REQUIREMENTS
Before you hire your first employee in the state of District of Columbia you should understand what is required of you as an employer.
Every company that pays employees in the state of District of Columbia has specific administrative and tax obligations.
Not fulfilling these obligations could result in the loss of the District of Columbia Company's charter and hefty fines.
Federal Employer Identification Number (EIN)
explain
If you plan to be an employer in the District of Columbia or any state, you will need a Federal Employer Identification Number, commonly called an EIN or FEIN.
You will need to get an EIN before you hire any employees.
An EIN is like a Social Security Number for a business.
It is assigned by the US Internal Revenue Service (IRS).
An EIN is used to identify your business both to the IRS and the state of District of Columbia.
You can pay a business services company to get your EIN or you can do it yourself online at the
IRS website.
Sometimes the process can get problematic.
You should understand the information that the IRS requires for your EIN before you try to get it online.
Refer to
IRS Form SS-4 for guidance.
Depending on the exact nature of your business you may need to register one or more employer accounts with the District of Columbia.
You will need your EIN in order to complete the registration process.
District of Columbia Tax ID
explain
If you plan to make a profit in the District of Columbia, then you will have to register your business with the District of Columbia Office of Tax and Revenue.
There are a few tax classifications that are available to a District of Columbia business.
You should understand the nature of each tax classification type and the implications to your business before you register for a District of Columbia Tax ID.
Get a District of Columbia Tax IDOffice of Tax and Revenue Contact Information
1101 4th Street SW
Suite 270 West
Washington, DC 20024
Telephone: 202-724-5045
Income and Payroll Tax Withholding
explain
The District of Columbia has a Personal Income Tax.
When you pay wages to your District of Columbia employees, those employees will have an Income Tax obligation with the District of Columbia Office of Tax and Revenue on the wages that you pay them.
The Office of Tax and Revenue wants to make sure that they get the taxes due them from your employees.
In order to guarantee that the District gets its taxes, every Company which has employees in the District of Columbia has specific employee Income Tax Withholding requirements.
This includes both filing reports and paying the Withholding amounts on a regular basis, usually quarterly.
Income Tax is withheld from employees' wages. There are no employer contributions.
Generally, if someone who works for you is considered to be your employee for Federal Income Tax purposes,
that person is also considered to be your employee for District of Columbia Income Tax purposes.
District of Columbia Employer Income Tax Withholding information
As a District of Columbia employer
you are also required to withhold Federal Payroll and Income taxes from your employees' wages.
Payroll taxes include Social Security and Medicare taxes.
Employers send the withheld amounts to the federal government.
The US Internal Revenue Service requires that every employee must provide an employer with a signed withholding exemption form,
IRS Form W-4, on or before the date of employment.
The employer must then submit Form W-4 to the IRS.
Employers use Form W-4 to determine how much Income and Payroll Tax to withhold from each employee's wages.
Note that independent contractors are not considered to be employees.
The amount withheld for each employee is expected to be the employee's approximate tax obligation to both the District of Columbia and the federal government.
IRS Withholding Depositing and Reporting Information
The District of Columbia Unemployment Insurance program is administered by the Department of Employment Services.
District of Columbia Unemployment Insurance is an employer obligation. Payments are not deducted from an employee's wages.
The District of Columbia Unemployment Insurance program is part of a nation-wide program administered by the US Department of Labor.
Unemployment Insurance provides temporary payments to individuals who are unemployed through no fault of their own.
Unemployment Insurance is, like other insurance policies, a numbers game.
Employer tax liability is based on a percentage of each employee's wages.
When a new District of Columbia employer registers for Unemployment Insurance, the District has no numbers on which to base the percentage.
First time District of Columbia employers are assigned an introductory rate based on the type of business and number of employees among other factors.
After the District has had enough time to compile insurance numbers on your business
(total contributions vs. total paid to former employees over time) they will assign an "Experience Rate" to compute the
percentage of wages to be paid going forward.
The percentagde rate is commonly adjusted on an annual basis.
Department of Employment Services Contact Information 4058 Minnesota Avenue, N.E.
4th Floor
Washington, DC 20019
Telephone: 202-698-7550
Email:
UITax.Info@dc.gov District of Columbia Unemployment Insurance information
Federal Unemployment Tax Act (FUTA) Tax
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The Federal Unemployment Tax Act is a federal law that imposes an unemployment tax on employers.
The FUTA tax funds the federal government's oversight of each state's unemployment program.
Only employers pay FUTA tax; there is no requirement for withholding amounts from employee wages.
Employers must deposit the tax quarterly and file an annual form.
FUTA Tax is used to fund the administrative costs of the District of Columbia Unemployment Insurance program while Unemployment Tax is used solely for the payment of benefits to
unemployed District of Columbia workers.
The current FUTA tax rate is 6%.
FUTA tax only applies to the first $7,000 you pay to each employee in a calendar year.
You will stop paying FUTA taxes on an employee's wages once you pay the employee more than $7,000.
Currently, the largest FUTA amount you will have to pay is $420 per employee ($7,000 x 0.06).
If you have FUTA tax liabilities, you need to make quarterly deposits and file
IRS Form 940.
All employers must now deposit FUTA taxes by using electronic funds transfer (EFT).
Usually, EFT payments are made using the Electronic Federal Tax Payment System (EFTPS).
EFTPS is a free service offered by the U.S. Department of the Treasury that allows you to pay federal taxes online or over the phone.
When you request a new EIN and indicate you will have federal tax payments, you are automatically pre-enrolled in EFTPS.
The IRS will notify you about the pre-enrollment and how you can activate the account.
If you are not pre-enrolled, you can sign up directly on the
EFTPS website or by calling the EFTPS at 800-555-4477.
Workers' Compensation Insurance
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The District of Columbia Workers' Compensation Insurance program is administered by the Office of Workers' Compensation.
District of Columbia Workers' Compensation Insurance is an employer obligation. Payments are not deducted from an employee's wages.
District of Columbia employers are required by law to pay their employees if they are unable to work because of a work-related injury or illness.
Most employers pay the premiums for a Workers' Compensation Insurance policy which has been approved by the Office of Workers' Compensation.
Some employers opt to self-insure themselves if they are able to qualify with the Office of Workers' Compensation.
All District of Columbia employers may be required to have Workers' Compensation Insurance even if they have only one employee.
While there are exceptions, almost all District of Columbia employees who are injured on the job are eligible for Workers' Compensation Insurance benefits.
Insurance rates vary depending on the type of business being conducted, the carrier's rate and the employer's annual payroll. On average the current cost of an approved Workers' Compensation Insurance policy in the District of Columbia is approximately $0.48 per $100 in payroll.
Office of Workers' Compensation Contact Information 4058 Minnesota Avenue N.E. Third Floor
Washington, DC 20019
Telephone: 202-671-1000
Disability Insurance pays benefits to employees who are unable to work due to non-job-related accidents or illnesses.
The District of Columbia does not require employers to provide Disability Insurance to employees.
District of Columbia employers may provide Disability Insurance but are not required by law to do so.
Both federal and state law requires all District of Columbia employers, both public and private, to report all contractors and newly hired employees to the state within 20 days of the hire date.
Along with new employees, all District of Columbia employers are also required to report employees who are rehired after a separation of 60 days or more, including individuals who remain on the
payroll during the separation.
Generally if an employee is required to fill out
IRS Form W-4, you must report that employee as a new hire.
District agencies use this information to assist in locating parents who are delinquent in their child support obligations.
District of Columbia New Hire Reporting information
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, which requires employers to examine documents to confirm the employee's citizenship
or eligibility to work in the U.S.
Employers can only request the documentation specified on the I-9 form.
Employers do not need to submit the I-9 form to the federal government but are required to keep them on file for three years after the date of hire or one year
after the date of the employee's termination, whichever is later.
Both the federal and District of Columbia governments require employers to post certain specific information related to wages, hours and working conditions in a location used by employees
where they can be easily read during normal work hours. The postings are commonly in a break or lunch room.
Posting requirements vary by type and size of business.
All mandatory posters are available free from the federal government or from the District of Columbia.
Posters required by the federal government are available from the
US Department of Labor
District of Columbia Employer Poster Information
Provide a Wage and Tax Statement to Each Employee
explain
District of Columbia employers must provide each employee with an
IRS Form W-2, Wage and Tax Statement, each year.
Form W-2 includes the total amount of the employee's wages withheld for the past year, as well as the amount of specific deduction categories.
Form W-2 must be filed by January 31st each year for the previous tax year.
District of Columbia employers must also file
IRS Form W-3, Transmittal of Wage and Tax Statements.
Form W-3 contains a summary of the total employee withholding amounts which a District of Columbia employer withheld during the year.
Form W-3 with all IRS Forms W-2 attached must be filed before the last day of February.