Federal law requires all employers, even those with just one employee, to report all new hires to the appropriate state agency. In turn, these state agencies must turn over the information to a national directory of new hires, maintained by the Department of Health and Human Services. The information will be used primarily for two purposes: to help prevent unemployment compensation fraud, and to track down parents who owe child support.
All states were required to implement a program conforming to the federal rules by October 1, 1998.
What does this mean to you as an employer? Fortunately, the process isn't very burdensome. The information that you must submit is information that each new employee must submit when completing IRS Form W-4 for income tax withholding purposes. Specifically, you must report each employee's name address, social security number, and your business's name, address, and federal employer identification number. The easiest way to do this is to use a copy of the Federal W-4.
Under the federal law, reports must be submitted to the appropriate state agency within 20 calendar days of the date of hire, although some states may require shorter reporting windows. Reports must be sent by first class mail, electronically, or magnetically (generally useful only if you use a payroll service). If you have employees in more than one state and you file your reports by mail, you must report in each state. However if you file electronically or magnetically, you can designate, to HHS, one state where you will report all new hire information.
Where you file the reports varies by state. In many states that had programs
in place before the federal law was enacted, reports were filed with the agency
that administers the state unemployment compensation program or the agency that
has responsibility for child support enforcement. Since enactment of the law,
many states have enacted new hire reporting centers. Therefore, we suggest that
you consult a current phone book under "state government."