SHRM: I-9 Paperwork Burdens Too Much for Small Businesses

Other paperwork requirements, particularly the Affordable Care Act’s, also are time-consuming

By Allen Smith, J.D. Apr 4, 2017
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​Frank Cania (in orange and white tie), testifying on Capitol Hill on behalf of SHRM 

Form I-9 requirements confound small businesses and often result in costly errors, said an HR consultant testifying before the U.S. House of Representatives' Small Business Committee on behalf of the Society for Human Resource Management (SHRM).

"The penalty for even a single mistake on the I-9 ranges from $216 to $2,126 per form," noted Frank Cania, SHRM-SCP, founder and president of driven HR, a Pittsford, N.Y., HR consulting firm. And it's easy to make a mistake on an I-9 form.

Not only are employers prohibited from requiring employees to provide certain documents to prove they can legally work in the United States, but employers also cannot suggest or explain which documents are most commonly presented, he stated. Many small employers nevertheless give new hires a checklist suggesting that the employee bring documents such as a passport, driver's license, Social Security card or birth certificate, though the I-9 instructions prohibit an employer from offering this information, he said in written testimony.

Cania said even when an employee asks which document(s) he or she should provide, the employer is best advised to provide the employee with the I-9 form, which separates different types of acceptable documents into three lists—A, B and C—and to say that the employee should provide one document from list A (establishing both identity and employment authorization), or one from list B (proving identity) and one from list C (authorizing work.)

Certain employees' work authorization documents may expire. Employers must remind employees of approaching expiration dates and the need to provide additional documentation for reverification at least 90 days prior to the expiration date.

When a worker's employment authorization or employment authorization document expires, an employer must reverify to ensure the employee is still authorized to work. An employee may enter a wrong, later date in Section 1, the employee portion of the I-9, than an employer enters in Section 2, the employer portion. U.S. Citizenship and Immigration Services states, "The employment authorization expiration date provided by your employee in Section 1 may not match the document expiration date recorded by you under List A or List C in Section 2. The earlier date should be used to determine when reverification is necessary." Cania said this requirement presents a "dangerous trap. An employer tracking the wrong date may be accused of failing to complete a timely reverification, which is all but certain to be construed as knowingly continuing the employment of an alien who lacks authorization to work."

Some employers have tried innovative ways to comply with I-9 requirements. He noted that one employer gave a bonus to employees for each I-9 form they submitted with no errors. "Yet most were submitted with information missing or some other error," Cania added.

"In my experience, the average error rate on I-9 forms by small-business employers exceeds 75 percent," he said. Consider an employer presenting 100 I-9 forms for audit. With a relatively low error rate of 9 percent, the minimum fine likely to be assessed adds up to $1,944 (nine times $216). With an error rate of 50 percent, the penalties may total $106,300 (50 times $2,126). And an error rate of 75 percent would result in fines of $159,450 (75 times $2,126) or more. 

Other Burdensome Paperwork

The I-9 form is just one example of burdensome paperwork for small employers, he noted. The Affordable Care Act requires employers to provide employees with one of two forms. Self-insured employers with fewer than 50 employees must distribute Form 1095-B (used to report health insurance information to the Internal Revenue Service and taxpayers about individuals who are covered by minimum essential coverage). Employers with at least 50 employees must complete Form 1095-C (furnished to any full-time employee of a large employer to show employer-provided health insurance offer and coverage). 

Small businesses often think the reporting requirement for Form 1095-C is an annual average rather than a monthly one, he said. "This commonly made and honest mistake required one of our clients to reissue every employee's form to avoid a potential IRS fine," Cania said.

[SHRM members-only toolkit: Communicating with Employees About Health Care Benefits Under the Affordable Care Act]

Burdens are not lower due to the Paperwork Reduction Act (PRA) of 1980, testified Sam Batkins, director of regulatory policy for the American Action Forum, a Washington, D.C., think tank that promotes smaller government. "In 1997, after amendments to the PRA, the cumulative burden was 6.9 billion hours. Today, it stands at 11.6 billion hours. Small businesses are particularly affected, with 3.3 billion hours of compliance burdens and $111 billion in costs," he said. For perspective on the 11.6-billion-hour figure, that is approximately 35 hours for every man, woman and child in the United States. "That is a workweek dedicated simply to filling out federal forms and retaining information for federal regulators," he said.

Sally Katzen, a professor of practice and distinguished scholar in residence at New York University School of Law and senior advisor of Podesta Group, estimated the annual amount of time spent filling out forms at 9.8 billion hours. "But over 70 percent of the total [time required] is attributable to one agency—the IRS," she said. Podesta Group is a bipartisan team of global public affairs specialists in Washington, D.C.

"While a small business is often unable to hire the army of accountants and lawyers retained by a larger corporation to prepare its taxes, it is not self-evident that it should be exempt from complying with straightforward requirements for posting, or otherwise providing, health or safety warnings for their employees or customers," she said.

Ways to Reduce Burdensome Paperwork

Rep. Aumua Amata Coleman Radewagen, R-American Samoa, asked what Congress could do to reduce the paperwork burden.

Batkins suggested that a retrospective review of how much time it takes to complete paperwork to comply could help identify more time-consuming compliance areas. Katzen agreed that retrospective review could help.

Committee Chairman Rep. Steve Chabot, R-Ohio, said that more paperwork could be filed electronically to reduce the burden but noted that many requirements remain in hard copy.

Cania recommended that the federal government partner with organizations like SHRM to field-test paperwork requirements before they are imposed on the employer community. "HR professionals have the expertise to understand not only the time it will take to complete a certain form but also to identify whether a new or revised form is redundant and show where common mistakes are likely to occur," he said. 

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