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.
Showing posts with label 941. Show all posts
Showing posts with label 941. Show all posts
Monday, January 28, 2013
Tuesday, October 16, 2012
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.
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.
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