Third Quarter Payroll reports

941?  940?  SUTA?  What are these?  Should I care?

If you are a small business and pay a payroll, then you need to care.  You are required to file payroll reports quarterly and remit to the federal government the amount of Social Security, Medicare and income taxes that were withheld from your employees' wages.

If you are using a payroll program, and most employers are, then the reports will be prepared by your program and all you need to do is generate these reports and send them in by the deadline, which is October 31.  If you are still preparing payroll by hand, which you may be doing if you have always done it that way or you only have one or two employees and can't justify the cash outlay for a payroll program, you have a bit of math in front of you, but your deadline is still the same, October 31.

How do you determine if the people you work with and pay are employees?  Basically, if you tell them when to show up, where to show up, how long to stay and what tools to use, these people are employees.  If you discuss with them the job to be done and when it is to be completed and they come and go as they please, use their own tools and send you invoices for services rendered, then they are sub-contractors and you don't owe any payroll taxes for them.

Some employers want to avoid payroll and payroll taxes and try to pay everyone as a sub-contractor.  That only works until the state or IRS auditor comes knocking asking to see proof that your subs are really subs.  How do you prove that?  Sub-contractors are in business.  You are not their only client so they have business cards that they hand out to make it easy for you to remember them.  Keep those cards.  They bid on jobs.  Keep the bids.  Employees don't usually have professional business cards and never bid on jobs, they fill out applications.

A word to the wise:  Keep up with the payroll tax payments.  Pay attention to when you need to pay and how you need to pay.  If the IRS says pay weekly and pay on line, then do it that way.  Paying any other way will get you a fine.  If the IRS says pay monthly, you can still pay weekly.  The IRS will always accept money more quickly but never more slowly.  The penalties and interest on payroll taxes can mount up quickly.

If you do have sub-contractors, make sure you get their Social Security number and address so you can send them a 1099-MISC at year end.  If they have a business ID number, get that as well.  If anyone refuses to give you this information, consider carefully the advisability of continuing to work with them.

Some forms you need to have, which you can download from the IRS web site: W-9 Request for Tax Payer Identification number for sub-contractors, W-4 Employee's Withholding Allowance Certificate for employees and don't forget the I-9 which employees fill out to prove they can legally work in the United States.  This is the form that would stop all illegal workers if employers required that it be filled out.  The employee would either have to lie and provide false documents or not work.  In fact all employers are required, by law, to have this form filled out and on file for every employee.

You might also want to check out Pub 15 or Circular E- Employer's Tax Guide, which gives much more detail on all the topics I've touched on here.

So what's SUTA?  This is the State Unemployment Tax.  This is a tax on employers only and is not withheld from the employee and not paid at all for sub-contractors.  This tax is a percent of the payroll paid to each employee that is over $9,000 (used to be $7,000 but the recent high unemployment required the state of Tennessee to raise the base) per year.  The rate is based on several factors and is determined by the state each quarter and sent to the employer.  Generally, employers with low turn over, that is few people who draw unemployment, have a lower rate than those with high turn over, or a lot of employees who draw unemployment.

People who are self-employed, that is sole-proprietors, don't pay payroll taxes on themselves.  They pay self-employment tax on their personal tax returns.  If you're self-employed and making money, you'd better be making quarterly income tax deposits which include amounts for federal income tax, Social Security and Medicare.  If you don't, and you don't have a large amount of money when it comes time to pay your taxes, you may be in trouble.  Sole-proprietors do not get to draw unemployment if they go out of business, so they don't pay into the Unemployment Tax fund.

There you have a run down of the payroll taxes.  Probably more than you wanted to know, but if it's less, let me know and I'll write some more.  Don't forget to leave me a comment on this topic or any other topic you'd like to see me address.

Tax Deadlines in October

More on these later, but first a heads up.

Monday, October 15, is the final deadline to file the 1040.  FINAL!!!  There are no more extensions.  If you, for some reason, can not file a final return, file something.  You can amend it later.  But you run the risk of a late filing penalty if you don't file something that is postmarked October 15.

Wednesday, October 31, is Halloween and the deadline to file the 941 - the quarterly payroll tax report.  In Tennessee, and maybe other states as well, this is also the deadline to file and pay your State Unemployment Tax or SUTA.

And if your company has a large enough liability you may need to make a quarterly deposit toward the 940 or Federal Unemployment Tax or FUTA.

October 20 is a Saturday which means you have until Monday, October 22, to pay your monthly or quarterly sales tax report in the state of Tennessee.

These are all the deadlines I'm going to be dealing with this month.  This doesn't mean this list is all inclusive.  Other tax deadlines may apply to you, but these are a start and I'll talk more about them as the month progresses.