Originally Posted On: Payroll forms: A business owner’s guide 2021 | QuickBooks (intuit.com)
As a business owner, your employees play a major role in reaching your growth goals, representing your brand, and getting the job done, day in and day out. In return for their hard work, it’s your job to ensure they’re paid accurately and on-time.
But in addition to this basic task, the IRS requires you to complete a number of payroll-related forms. What is a payroll form? A payroll form is a document that informs the government of your employment tax liabilities, and shows comprehensive details about your payroll transactions in a given period. Within payroll forms, employers can document the taxes they have withheld from employee wages, for both federal and state taxes.
These forms help clue the IRS into your business’ finances and tax obligations, and serve as supporting payroll records for your employees’ tax responsibilities.
Here, we’ll define some of the most commonly used payroll forms for small businesses.
Form I-9, Employment Eligibility Verification, is used to verify the identity and employment authorization for any person who is hired in the United States. Both the employee and employer are required to provide information for this form. The employee should complete their section prior to their first day at work. Once an employee starts work, the employer must complete their section of the form within three days of the employee’s start date.
It is the employer’s responsibility to retain a completed copy of the form for every person who is on their payroll. The employer must hold on to the form for three years after the employee’s start date, or for one year after employment termination, whichever period lasts longer.
Every new employee must complete a form W-4, Employee Withholding Certificate, prior to or on their first day of work. A W-4 is crucial so an employer can withhold the correct federal income tax from each employee’s paycheck. While a W-4 should be filed out prior to an employee’s first day, they do have the ability to edit it anytime during their employment if their financial situation changes.
The form includes 10 sections that need to be completed including your legal name, marital status, Social Security number, total number of allowances, additional amount to withhold from each paycheck, first date of employment, and more. The employer must keep the form on file for at least four years after an employee is hired.
Form W-9 is necessary for contract workers only. It should be filed out before you pay a contractor and should be kept on file indefinitely. Form W-9 must be filed out by any self-employer worker, such as an independent contractor, freelancer, vendor, or consultant. It requests basic information, such as the name, address, and taxpayer identification information of a taxpayer. You use a W-9 to provide your correct Taxpayer Identification Number to the person who must file an information return with the IRS to report.
Form 940 is necessary to calculate the Federal Unemployment Tax Act (FUTA) tax that your business pays throughout the year.
Form 940 is used to report the FUTA taxes that your business pays throughout the year. The money that comes from this tax goes towards paying unemployment compensation. Only employers must pay a FUTA tax, so none of this tax is taken from an employee’s paycheck. An employer is obligated by law to pay unemployment taxes until a specific employee accumulates $7,000 in taxable wages for the year. You must file this tax if you paid wages of at least $1,500 to any employee during the calendar year or if you had an employee work anytime for 20 or more weeks.
This is an important payroll form for small businesses, so make sure you keep track of your employee’s hours and wages. The deadline to file Form 940 is January 31.
Form 941 is an important payroll form so that employers can report payroll tax and employee wages. Form 941 is used to report federal income tax that is withheld from employees, in addition to Social Security tax and Medicare tax. On the form an employer will report information like wages paid to employees, reported tips, and federal income taxes withheld.
Any employer that withholds taxes from their employee’s payroll needs to fill out a Form 941, except for two exceptions: household employees and farm employees, who have to fill out separate forms instead. Household employees and farm workers have to be filed on the schedule H portion of Form 1040 and farm employees will also have to complete Form 943 instead of 941. Seasonal workers are another exception, as employers only have to include them on their 941 if they worked during that quarter. Since this is a quarterly form, there are multiple deadlines: April 30, July 31, October 31, and January 31.
Form 943 is a specific form that pertains to farmworkers only. Form 943 must be used by any employer who has paid a farmworker, as long as the wages were subject to federal income tax withholding, as well as Social Security and Medicare Taxes. If taxes for the year are less than $2,500 then taxes can be paid at the time the form is filed. The deadline to file Form 943 is January 31.
Form 944, Employer’s Annual Federal Tax Return, is one of the most important annual payroll tax forms for small businesses. It is a small business payroll tax form for businesses who report federal income and FICA taxes annually instead of quarterly. You must file Form 944 if your business’ annual liability for Social Security tax, Medicare Tax, and federal income tax is $1,000 or less. If you’re not sure what payroll forms need to be filed for your small business, check with the IRS. You have to receive permission from the IRS first in order to file Form 944. The due date to file Form 944 is January 31.
Form 945 is only used to report federal income tax withheld from nonpayroll payments that are made. Nonpayroll payments include pensions, military retirement, gambling winnings, Indian gaming profits, backup withholding, and more. The deadline to file Form 945 is February 1.
Form W-2, Wage and Tax Statement, is used to report an employee’s total gross earnings, as well as federal and state taxes, Social Security, and Medicare taxes that are withheld. An employer must file a W-2 for any employee they have during the calendar year, except for independent contractors. W-2 is due to all employees by January 31 each year.
Form W-3, Transmittal of Wage and Tax Statements, summarizes the information in Form W-2. Form W-3 summarizes total earnings, Social Security wages, Medicare wages, and federal and state withholding totals for each employee. The deadline to file a W-3 is January 31.
Form 1099-NEC is used to report payments that are made to contractors and other non-employees throughout the year. This is not to be confused with 1099-MISC, which is used if a business needs to report other income, such as rent, medical payments, prizes, or awards paid to third parties. When it comes to filing the proper payroll forms for your employees, make sure you understand the difference between Form 1099-NEC and 1099-MISC. Form 1099-NEC should be filed with the IRS and sent to recipients by February 1.
An employer who processes 1099s will also need to send over Form 1096. Form 1096 is a summary of the forms being submitted and it is only required for paper filing Form 1099-NEC and 1099-MISC. The deadline to file this form is February 1.
Form SS-8 is used to determine the status of a worker for federal employment taxes and income tax withholding purposes. When you file a Form SS-8, you’re requesting the “worker status” and this can be done by the worker or the business.
These are all important IRS Employment Tax Forms necessary for any business to file in order to hire employees. Depending on what your business is, you may need to file additional forms, so make sure you do your research so that you don’t end up in trouble with the IRS. Understanding these forms is essential to ensure that your employees’ hard work and dedication is recognized and paid for. However, it can definitely be difficult to get a grasp on what the different forms mean, which is why it is helpful to use a payroll service.
If you’re struggling with how to set up payroll for your business, Quickbooks Payroll is a great service to help with a myriad of payroll tasks. Quickbooks can help with anything from the Paycheck Protection Program (PPP) to certified payroll reporting. Quickbooks Payroll simplifies payroll functions by keeping all your important forms organized and accessible from anywhere. You can get as much or as little help as you need with QuickBooks Payroll and it is completely customizable to your business needs.
Hopefully you now have a better understanding of the various payroll forms necessary for employment and how to set up payroll for your business. For more helpful posts on topics like, “What is Payroll?” and setting up payroll for remote workers, head over to our blog.
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