W-2s, 1099s and Year End Payroll Reports

It's about time to get those tax statements out to employees and sub-contractors.  These need to be mailed by the end of January but don't have to be filed with the IRS (for 1099s) or the Social Security Administration (for W-2s) until the end of February.  The reason for this?  If there are errors in name, address or ID number, in either the 1099 or W-2, the recipient of the form will let the sender know.  A corrected form can be generated and the documents needed to be sent to to the taxing authority can be corrected before the forms are sent in.  That's the easiest way to do it.

The other reports that need to be sent in by January 31, no extension on these forms, are the 941, the 940 and the state unemployment.  These have to be sent in by the end of the month.  The main thing to remember about these reports is that they all need to balance to each other.  The four quarterly 941 reports need to match the the W-2s in gross payroll.  The gross payroll total of the 941s need to equal both the quarterly state unemployment reports and the total payroll for the annual 940 or federal unemployment.  If these reports don't match, you will find out about it years later and have to dig through your old files to figure out what the error is and how to correct it.  Best to get it right the first time.

Now let's take a look at the W-2.  New this year on the W-2 is the requirement to include the value of health insurance.  Small employers are exempted from this requirement.  Only large employers need to worry about this.  In any event, this amount is not taxable to the employee but is included for information purposes only, to let the employee know the value of health insurance paid on his behalf.  If the employer can't afford health insurance for the employee, then there is nothing to include.

That's a brief overview, except to let you know that there are a multitude of 1099s - miscellaneous, interest, dividends, mortgage interest (actually a 1098), and a host of others.  So don't forget any of them.  You still have time to get them out.  Have fun.