What Are the Key Employer Responsibilities When Rehiring an Employee During the Year?

When you rehire someone during the year you must treat the return as a new payroll event while also reconciling any earlier wages and records for the calendar year. Immediate, documented steps reduce audit risk and avoid payroll tax mistakes.

Essential steps (day‑one checklist)

  • Verify work authorization: reuse or complete Form I‑9 per U.S. Citizenship and Immigration Services rules—if rehired within three years you may complete Section 3 or a new I‑9; otherwise complete a new form (USCIS: Form I‑9 Central).
  • Collect an updated Form W‑4 so federal withholding matches the employee’s current filing status and allowances (IRS: W‑4 guidance). See our guide to the W-4 Form for detail.
  • Confirm employee classification (employee vs contractor) and exempt/nonexempt status under the Fair Labor Standards Act (DOL) to set overtime and minimum wage rules (DOL: Wage and Hour Division).
  • Update payroll: set correct pay rate, pay frequency, and make sure year‑to‑date (YTD) wages are accurate so tax reporting (W‑2) is correct.

Tax withholding, deposits, and reporting

  • Withhold federal income tax according to the W‑4; withhold and match Social Security and Medicare (FICA). Employers must deposit withheld taxes and employer portions on the schedule required by the IRS and file quarterly Form 941 (or applicable alternative) and annual Form 940 for FUTA where required (IRS: Employment Taxes).
  • Combine wages paid during the calendar year for a single employer/EIN on one Form W‑2 issued by the January deadline (see IRS W‑2 guidance). If the rehired employee worked under a different EIN, separate W‑2s apply.
  • Check state and local withholding and unemployment rules; rehiring can change state tax sourcing if the employee’s work location changed (see state withholding rules).

Benefits, leave, and retirement considerations

  • Re‑evaluate benefits eligibility and waiting periods. Plan documents (health insurance, retirement, PTO) dictate whether prior service counts toward eligibility and vesting.
  • Coordinate retirement plan contributions and employer match rules; confirm whether prior deferrals or vesting need reinstatement.

Recordkeeping and retention

  • Keep updated personnel files, signed W‑4 and I‑9, payroll records, and benefits enrollment forms. Retain employment tax records and I‑9s for the period required by federal law (IRS and USCIS guidance).

Multistate and remote work implications

  • If the employee’s work state changed during or after separation, review state withholding, unemployment, and nexus implications. Multistate filing rules can affect withholding and unemployment taxes; consult state agencies or our article on employer withholding responsibilities.

Common mistakes I see in practice

  • Not collecting a new W‑4 or failing to reconcile YTD wages, which leads to under/overwithholding.
  • Ignoring I‑9 rehire rules and retaining incomplete documentation.
  • Assuming prior benefits automatically restart without checking plan documents (costly errors for employers and employees).

Quick compliance checklist

  • Day 0–1: I‑9, W‑4, payroll detail, classification.
  • Week 1: Confirm benefits enrollment windows and retirement plan handling.
  • Month 1: Verify payroll tax deposits and year‑to‑date reporting alignment.

FAQs

  • Do I need to issue a new W‑2 for a rehired employee?

  • No. For the same employer/EIN, combine all wages paid in the calendar year on one Form W‑2 issued at year end (IRS: About Form W‑2). If the rehire is with a different employer/EIN, each employer issues its own W‑2.

  • Must I complete a new I‑9 for a rehire?

  • You may complete Section 3 or a new Form I‑9 if the employee is rehired within 3 years of the original I‑9; otherwise, prepare a new I‑9 (USCIS: I‑9 Central).

When to get professional help

If payroll tax deposits, multistate withholding, retirement vesting, or wage classification are unclear, consult a payroll tax professional or employment attorney. In my practice, early review of payroll and benefit rules prevents most rehire problems.

Sources and further reading

This content is educational and does not replace legal or tax advice. Consult a qualified advisor for decisions tailored to your business.