What is Your Level of I-9 Compliance?
Yesterday I attended a one day seminar on payroll law and how to protect a company from costly mistakes. Why you ask would a CPA be interested in such a simple course? Seriously, handling payroll is a simple proposition. Employees work at a certain rate of pay. You take out taxes and give them the rest of what they’ve earned.
You wish it was that simple.
If you didn’t catch the title of the seminar, let me repeat it for you – Payroll Law 2012. That should tell you something. It’s highly regulated and like tax law has loopholes and gotcha’s. Even an innocent mistake can cost your company a significant fine. So if you don’t know what the law is you can easily find yourself in legal hot water - like Abercrombie & Fitch did. They were fined $1 million for mere paperwork mistakes when they filed I-9’s for its workers and that was in the state of Michigan alone. L
So are you in compliance with the handling of your company’s I-9’s?
So are you in compliance with the handling of your company’s I-9’s?
You better be sure. I-9 audits are on the rise and they are not just limited to large employers or worksite raids. So whether you handle your own payroll or use a third party provider, read on to find out how to protect yourself.
Form I-9 is the Employment Eligibility Verification Form issued by the Department of Homeland Security. By law all US employers are responsible for completion and retention of Form I-9 for all workers it has hired.
I’m not going to explain how to fill out this one page form. The Federal government has already done this for me with a 69 page color brochure.
But what I will do is pass on some of the information I learned yesterday about I-9 compliance.
Are you using the new form?
Make sure you are using the latest form. It was updated effective August 7, 2009 and you are required to use the new form for any new hires on or after that date. The biggest change is that new employees are not required to provide their social security number except where the employer participates in the E-Verify program. There is also a change in the list of acceptable documents. Click here to download a current copy.
New employees must fill out Section 1 on their first day of work and employers must complete Section 2 within three business days after their employment begins.
I-9 Retention
You must keep an employee’s I-9 on file for three years after his or her hiring date or for one year after the date of termination, whichever comes later. To limit your liability beyond that date, get rid of the I-9’s that you no longer need.
Employers may now sign and retain Forms I-9 electronically. If you choose to do so, make sure you treat all workers the same to avoid any anti-discrimination issues.
What if you discover a missing I-9 form?
It’s recommended that you document the error by creating a “Memo to File – Voluntary Self Audit”. Get the employee to fill out the I-9 immediately and do not back date the form. That is fraud. Use the current date. If you are audited, they might grumble about it but you should be fine.
What are the penalties?
One I-9 can have an infinite number of errors. Mere paperwork errors can cost you $100 to $1,100 per worker. Employers that knowingly hire illegal immigrants face civil penalties of anywhere from $250 to $3,000 per violation plus up to six months in prison. These penalties apply for incorrect I9’s even if the worker is legal and authorized.
Because the stakes are so high, one of the best things you can do to ensure compliance is conduct a self-audit once a year. The first year may be the toughest since you will need to review all files, but annually thereafter the process will be quicker to review just new files.
Since I hire independent contractors, I don’t have to worry, right?
Incorrect. Don’t think you can escape liability for hiring illegal workers by using subcontractors either. If you insist on exercising any significant control over how, when and where independent contractors do their jobs, you may end up paying penalties if your company is deemed the true employer.
How could this happen? Another hot topic with taxing agencies is the issue of independent contractor vs. employee worker status. Missouri ranks 50th in finding misclassified independent contractors. If a determination is made that your workers are in fact employees, I-9 compliance may become an issue.
