A scruffy character rolls into town needing some money badly, and out of pity and a bit of self-interest the shopkeeper in question hires him for the day to sweep the storefront or wash some dishes. He pays him in cash so he can get something to eat, and the drifter moves on.
You’ve seen it in old movies– maybe set in an inner city in the grips of the Great Depression, or the Dust Bowl: the romantic notion of hiring someone on the spur of the moment for a day’s work. Maybe you even keep him around for a while ’cause you like the guy (or gal.)
Such a transaction today would look a little different:
- You meet the drifter, assess his pennilessness and strong back, and offer him a job sweeping your store front for $20. (You’ve already checked the Washington state, Federal, and city of Seattle minimum wage laws and confirmed this salary is appropriate.) He accepts.
- You’d both like him to get started sweeping right away, but before you lend him the broom you ask him to take a seat while you print off a W-4 form to withhold his Federal payroll taxes, and an I-9 form to prove that he’s legally allowed to work for you. You need his passport or two other forms of government-issued, identity-proving documentation. Fortunately, he happens to have his passport in his dirty cotton knapsack.
- He signs the forms, and asks for the broom, but you remember that you’ve never hired an employee before, so you need to do a few things first. You offer him a cup of coffee while you fire up your laptop to login into the IRS site to get an EIN, and then you register on the EFTPS to pay his payroll taxes later.
- You live in Washington state, so you pour him another cup of coffee while you log into your SAW account to register for unemployment insurance as well as worker’s compensation. (He would definitely NOT qualify as an independent contractor since you’re dictating and overseeing his sweeping work.) You pay the $19 for the worker’s comp registration fee, ruefully realizing that’s equivalent to the hour of wages you intended to pay him for.
- You remember that Washington state also requires paid family medical leave and long-term care insurance, so you sign up for those programs as well. You ask him first if he’s happened to file for a Washington state LTC exemption, but he just looks at you blankly, so you figure you better withhold the 0.58% taxes…
- You dutifully report your new hire to the Washington Division of Child Support so that they can check if he’s behind on his child support.
- You realize all these applications are going to take a while to process , so you ask your would-be sweeper to come back in 2 weeks for that porch-cleaning job. He looks puzzled, then shrugs his shoulders and wanders off. You curse the
godslegislature for not exempting the 54% of US small business that have fewer than 5 employees from at least SOME of these payroll taxes since they only employ 5% of the US workforce…
- Since you have time to kill now before his start date, you research three different websites to print off and put up all the required Federal and State labor posters where your drifter can see them. You note that despite answering ‘no’ to most of the ~20-odd Federal questions, you still have to put up posters pertaining to The Employee Polygraph Protection Act (EPPA), The Fair Labor Standards Act (FLSA), The Occupational Safety and Health (OSH) Act, Uniformed Services Employment and Reemployment Rights Act (USERRA), and Whistleblower Protections. For Washington state, you put up the four required L&I posters (‘Your Rights as a Worker’ and so forth), and the six required Employment Security Department posters about domestic violence (you scratch your head at that one since you’re not married to the drifter), PFML, and unemployment benefits. (Well, three posters really, but these must be in both English and Spanish, even though you’re pretty sure the drifter was speaking fluent English…) You find the links to the PDFs, fire up the printer–praying that you have enough ink in there–, run off fourteen different posters, and tack them up in a place where your customers won’t notice but that no labor department will fine you for not being visible enough.
- Two weeks later your applications have been processed. Your worker’s comp rate has been determined, and your sweeper hasn’t left town. You spot him loafing in front of Doc Erbswurst’s Dry Goods Emporium and wave him over, proudly offering him the broom. He accepts it gladly, and starts sweeping. You come back in an hour to a spotless storefront, and proffer an Andrew Jackson for his trouble. He’s about to grab it, when you realize you need to withhold payroll taxes first. You apologize, stuff the bill back into your pocket, and offer him a seat and yet another cup of coffee while you fire up the laptop again.
- You calculate the 15.3% in Federal payroll taxes, the 0.58% Washington LTC tax, Washington PFML (0.6%), the ~1% Worker’s Comp rate, and Federal unemployment of 0.6%. You query a bewildering table with 40 different lines of Washington state unemployment rates and figure yours is 1.3%. These add up to 19%, and just as you’re about to remove only $3.80 from his paycheck, you remember to withhold Federal income taxes. You consult the tramp’s W-4 to see whether he has a working spouse or other employment (he doesn’t) and determine that you need to withhold another 10%. You remove $2 more.
- You’re about to hand him the $14.20, but remember that you need to keep careful records of timesheets and wages for four year. You ask him to first fill out his hours on a slip of paper. He does so. You put the cash in his hand– he didn’t fill out a direct deposit authorization form– and before he gets too irate about the ‘missing’ $5.80, you remind him that he’s earned 1/75th of a social security credit thanks to your scrupulous withholding, and that he should file for the Earned Income Tax Credit to get some of the rest back.
- He slouches away mumbling “and they say the bottom 47% pay no taxes!” You busy yourself with sending ACH payments from your bank account to all of the various payroll tax agencies before you forget. You make a note to get the tramp’s forwarding address before he leaves town so that you can send him a W-2 at the end of the year for his income taxes, and to file a copy of the same along with a W-3 to the IRS before next January 31st.
- You record the $20 in expenses on your accounting spreadsheet to remember to deduct it from your income taxes come April. You pray that your drifter doesn’t sue you later for a hostile work environment (a customer made an off-color remark while coming into the store), sexual harassment (you were admiring his strong back), or discrimination (was he a member of a ‘protected class’?) Perhaps he’ll settle for simply roasting you on social media…
- You smile ruefully and make one more mental note: never, EVER hire an employee again!