Werner Von Braun, German-American aerospace engineer and architect of the rocket that took us to the moon, once said, “We can lick gravity, but sometimes the paperwork is overwhelming.” He could very well have been talking about payroll forms!
When it comes to your business, you probably feel the same way. You can deliver incredible results with the product you make or the service you provide, sometimes seeming to defy all of the odds…until the paperwork shows up.
Payroll forms can be some of the most frustrating things you deal with as a small business owner. You know they have to be done, but it can feel like they never end. Or at least you’re never really sure if you’ve done them correctly.
Payroll Forms Made Simple
As an accounting firm dedicated to small businesses, nonprofits, and agricultural operations, we help clients find their way through mountains of complex payroll forms every year. We understand how overwhelming it can be, so we thought it would be a good idea to provide you with a list of the 13 essential forms related to payroll and taxes that you’ll deal with.
The descriptions below are only meant to give you a brief overview of some of the most common forms. (A more in-depth list of downloadable Employment Tax Forms is available from the IRS.)
The information below shouldn’t be taken as in-depth accounting advice. (Normally, these disclaimers say “for entertainment purposes only.” But, let’s face it…unless you’re an accountant, there’s probably not much about payroll forms that you find entertaining!) Still, we hope this helps you understand it all better.
Once you’ve gotten a good overview of these payroll forms, get in touch with one of our HR & Payroll specialists. They love this stuff and can guide you through the details of each one as they apply to your particular business needs.
13 Common Payroll Forms
Any worker in the United States is required to prove that they are eligible to work within this country. This form verifies that they are who they say they are and that they are legally employable. Employees must fill out their portion of the form before their first day of work, and employers have 3 days afterward to complete the form and send it in. They must then retain a copy for 3 years after the employee’s start date, or 1 year after their termination…whichever is longer.
The “Employee’s Withholding Certificate” is essential to everyone working in the U.S. IRS Form W-4 enables employers to withhold the proper amount of federal income tax from each paycheck. After WWII, the government set up our current system to make the flow of tax income more efficient and predictable. (We actually covered the history of payroll taxes in a recent post, “How Payroll Withholding Helps a Company’s Employees.”)
At the end of 2020, the IRS made updates to Form W-4 that affect all new hires from that point on. However, employees who initially filled out the previous version won’t be affected unless they choose to make any withholding changes at some point. Learn more about the new W-4 here.
Form W-2 is used by employers to report all of the wages paid to a worker throughout the entire year. It also lists all income tax, Social Security payments, and Medicare payments that have been withheld.
As the business owner, you are required to deliver to each employee a copy of the form that you file with the IRS for them. In fact, you should plan to make up to 6 copies for:
- Your records
- Employees’ personal records
- Employees’ federal tax return
- An employees’ state tax return (if applicable)
- Your report to the Social Security Administration
- Your report to state/local tax authorities (if applicable)
If you hire independent contractors, you will need to use this form to report any compensation you pay them during the year. (Note: 1099-MISC is not used for these kinds of payments. It is set aside for income from rents, royalties, crop insurance proceeds, and–most interestingly–cash payments for fish.)
This form is used by self-employed independent/freelance/contract workers. It provides you with their proper Taxpayer Identification Number (TIN) so that you can properly report the sources of their wages to the IRS when you complete Form 1099-NEC at the end of the year.
Business owners use this form to report their Federal Unemployment Tax Act (FUTA) tax each year. The funds collected by the government through this Act are what provide unemployment compensation to those who need it. This tax is paid solely by employers.
Form 941 is used by employers to report the information that ultimately shows up on an employee’s W-2. It must be sent in quarterly, and it lists all wages and withholdings that affected the employee’s paychecks for that time period.
It must be filled out for every employee who has any taxes withheld, except for farm and household workers. Their withholdings are reported on either 1040 Schedule H or on Form 943.
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If you paid cash wages to a household worker (maid, nanny, butler, etc.) of more than $2,200, you are required to complete this form with the IRS. You would provide the employee with a W-2 by February 1 and include Schedule H with your 1040 return by April 15.
This form applies only to employers of agricultural workers who have taxes withheld from their paychecks. (Seasonal farm workers would be included in a quarterly reporting of Form 941 for the particular quarter that they were employed.) This form is only filed annually and is due by January 31.
The IRS has designed this form for small employers whose tax liability is $1,000 or less annually. Instead of filing Form 941 each quarter, they can simply send this form in at the end of the year. (The IRS directly notifies eligible businesses that they have permission to file this form, so unless you’ve heard from them you’ll need to plan on using Form 941.)
Use Form 945 to report any federal income tax withheld from nonpayroll payments. These sources of income would include:
- Pensions or distributions from retirement plans, annuities, and IRAs
- Military retirement
- Gambling winnings
- Other payments specified by the IRS
This form is simply used to transmit to the IRS “Copy A” of the W-2 that you prepare for each employee. (“Copy B” is what you give to the employee.)
This form is sent to the IRS along with several of the other forms you may be required to submit including 1099s (NEC and MISC) and W-2G (for gambling winnings).
When Payroll Forms Become a Hassle
We get it. Trying to run your business and stay on top of the mind-numbing amount of payroll forms that you are required to submit can be a hassle.
Unfortunately, over the course of our 40+ years in the accounting world, we’ve seen far too many small business owners either make mistakes on these forms or just give up on them entirely. Either choice is not good. The IRS does not accept “it’s too confusing” as a reasonable excuse.
We can help! Our team of Payroll & HR Support specialists is more than happy to help. We can take on the responsibility of making sure your payroll forms are in order and on time so that you can focus on growing your business and serving your customers!