Notify Revenue Departments - State and Federal

In order to set up payroll and handle personnel issues later on you will need to notify the Internal Revenue Service (IRS) and the State of Montana's Department of Revenue of the new district's existence. Note: you might not need to do this if you contract with the city or county to handle the district's accounting and payroll. Talk to the clerk and recorder to learn more.

If you choose to be completely independent then you need to register with the Internal Revenue Service as an employer. This means applying for an EIN as mentioned earlier, completing W-4 forms for all of your employees as well as other duties. See "Publication 15: (Circular E) An Employer's Tax Guide" for general information about being an employer. It's designed for first time employers. See "Publication 963: Federal-State Reference Guide" for more information about being a government employer. The IRS has a department dedicated to assisting public employers. You can visit it at https://www.irs.gov/government-entities/federal-state-local-governments/public-employers-toolkit. The toolkit is particularly helpful for new employers.

Local government employers (this includes districts) fall into a special category when it comes to Social Security. All states have entered into what is called a Section 218 agreement with the federal government. This is very simplified but there are guidelines for employees and who has Social Security and Medicare taxes withheld and who does not. It's based on a number of factors that are too complicated to tackle here. What you need to do is contact the Montana Social Security Administrator for assistance. They can help you figure out what you need to do to correctly withhold Social Security and Medicare Taxes for your employees. Here is the website: http://accounting.mt.gov/sssa.mcpx.

In addition you need to register with the State of Montana Department of Revenue to make sure that state income tax is withheld from employees' paychecks. The Department of Revenue offers an online service where you can complete required forms. Visit the wage withholding site for a direct link to information and forms required of employers or you can contact the Department of Revenue directly to ask questions. They can be reached at 1 (866) 859-2254.