Once you fire off your tax payments, it can be tempting to think you’re good to go for the rest of the year. You may say to yourself:
Don’t run off to that food truck just yet. (Or maybe go get one celebratory taco—but bring it back to the office.) Good reporting can help you better manage your business and your team, in addition to helping you circumvent expensive legal fines. There are a lot of IRS forms you need to stay on top of throughout the year to enable this. We know it’s not easy. And we know it’s nearly impossible for all these forms to capture the abstract stuff, like the look in someone’s face when they feel truly recognized. That’s okay. These forms are just one piece of the payroll puzzle. In fact, they allow the entire payroll engine to work.
For your employee:
Form I-9: Each employee needs to fill out Form I-9 to verify that they’re legally eligible to work in the U.S. You don’t need to mail the form anywhere, but you must keep it on file (the cloud counts!) for the entire span of your worker’s employment. Hold on to the form for a minimum of either three years from the hire date or one year from the date of termination, whichever one is longer. You can also choose to verify your employee’s work status online using e-Verify, a nifty tool developed by the Department of Homeland Security.
Form W-4: Your employee will also need to fill out Form W-4 to determine their tax withholding amount. We know you love helping your team, but this is something they have to handle on their own. The W-4 doesn’t need to be mailed anywhere, but you do need to keep your hands on it for a minimum of four years. Let the countdown begin.
What’s a withholding tax you ask? It’s a pay-as-you-go tax that you have to pay to the IRS periodically throughout the year. The amount can easily be calculated through Form W-4 or the IRS withholding calculator.
These three things will determine how much your employees should withhold:
- Marital status.
- The number of allowances claimed on the W-4.
- Compensation. (This may depend on the state where your employee receives payroll.) Employees who anticipate a full refund may be exempt from withholding, which is different from employees who are exempt, like clergy or certain visa holders.
New hire reporting for states: If you just hired someone unbelievable, it’s time to celebrate in style. Whenever you find someone whose skills and philosophies match up with what you’re looking for, it’s a pretty big deal—and a pretty big milestone to recognize.
After the champagne and cupcakes disappear, take the party elsewhere—the state. Really. Each state has a specific department where you can report the new hires you bring on board, and depending on the state, you may have anywhere between a few days to 90 days to submit this information. When reporting new employees, you will typically provide their name, address, and Social Security number. Be sure to check your local state tax, labor, and workforce websites to see exactly how much time you have after your welcome party draws to a close.
Form 941: Every paycheck, you’re required to withhold a certain amount of federal income tax and payroll taxes from your employees. And this is why each quarter you have to file Form 941 to report the amount withheld. You may also see this written as the Employer’s Quarterly Federal Tax Return, but don’t worry, it’s the exact same form.
State-specific withholding forms: Now, this is the state version of the form above. Since the majority of states also require employers to withhold state income tax, this form is used to report the total amount to your state. For example, in California you would use Form DE-9 to tell your state how much you withheld.
Form 940: This form is submitted each year along with your taxes, and is used to compute your Federal Unemployment Tax Act (FUTA) tax. The money you pay goes directly to unemployment funds to help out people who are looking for work. While you’ll send this form in only once a year, you’ll have to pay your FUTA tax payments every quarter.
Form W-2: Don’t forget to file your employees’ W-2s and then distribute them so your team can file their taxes. Generally, here’s how the process goes:
- You fill out Copy A of Form W-2 and send it to Social Security.
February 29th: Paper filing deadline
March 31st: Online filing deadline
- Then, you give each employee a W-2 by January 31st
- That’s it!
Check out more employer-specific filing instructions right here.