One of the primary responsibilities employers must follow is ensuring annual payroll tax forms are completed correctly and filed by the appropriate deadline to avoid penalties and ensure compliance. By understanding the required payroll tax forms, you can streamline your payroll process while enjoying peace of mind knowing you’re in compliance with federal and state guidelines.
While owning a business can be rewarding on many levels, employers have to meet different types of requirements in order to run it successfully. One of the responsibilities they have is knowing which forms are payroll tax forms and when to use them.
Missing a deadline or filing the wrong form can have expensive consequences. Therefore, it is necessary for employers to understand which payroll forms they need to file based on their employees and business type, their due dates, and where to send each form. In our payroll tax form guide for employers, you’ll find all the necessary information you need to ensure you’re abiding by the appropriate state and federal payroll tax laws.
Payroll Tax Forms: What They Are and Why They Matter
Payroll tax forms are documents that employers use to report employment taxes to state and federal agencies. These tax forms are crucial for maintaining compliance with tax laws to ensure the appropriate amount of taxes are withheld and remitted by both employers and employees. Annual payroll tax forms at the federal level are used for payroll taxes like FICA taxes that support social programs like Medicare and Social Security, as well as federal income taxes. Ensuring accurate and timely filing is crucial for avoiding non-compliance penalties that not only hurt your bottom line but can damage your reputation.
In addition to understanding which taxes are payroll taxes, it is important to know which forms are used to calculate and submit associated payroll taxes. Otherwise, employers can face significant fines due to failure to submit the proper paperwork within the federal guidelines.
Payroll tax forms are used to inform the government of payroll tax liabilities. Employers use them to document the taxes withheld from employee wages and the taxes paid.
Essential Federal Payroll Tax Forms
There are several federal payroll tax forms that employers are required to file annually. Below are some of the common forms to understand:
Forms 940, 941, 944 and 945
Form 940, Employer’s Annual Federal Unemployment Tax Return, is used to report the federal unemployment (FUTA) tax. Employers have to pay FUTA taxes if they paid at least $1,500 in wages in a quarter within the past year. The due date for Form 940 is January 31. FUTA taxes are payroll taxes that employers are required to pay to fund unemployment benefits for workers who have lost their jobs through no fault of their own.
Form 941, the Employer’s Quarterly Federal Tax Return, reports the number of employees, their wages and taxable tips, and the federal income taxes withheld. This form is used to report federal income and FICA taxes along with any adjustments made to them to the IRS each quarter. Form 941 is a quarterly form, and due dates for each quarter include April 30, July 31, October 31, and January 31 of the subsequent year.
Form 944, Employer’s Annual Federal Tax Return, is designed to allow small business owners to pay federal employment taxes once a year, not quarterly. It applies to employers whose annual liability for Medicare, Social Security, and federal income tax withheld from employees is $1,000 or less. Employers need to have written notification from the IRS to use this form instead of Form 941. The due date for Form 944 is January 31.
Form 945, Annual Return of Withheld Federal Income Tax, is used to report withheld federal income tax from nonpayroll payments, including distributions from qualified retirement plans. Form 945 must be filed with the IRS by January 31 of each year, reporting withholding during the prior calendar year. However, if all withheld tax has been deposited in a timely manner to the IRS, the deadline can be extended to February 10.
Beyond Federal Forms: State and Local Considerations
Along with federal annual payroll tax forms, employers are required to complete and file state and local tax forms. These payroll tax forms vary by jurisdiction, but common variations include state unemployment tax forms and state income tax withholding forms. As an employer, it’s important to check with your relevant state and local authorities for the specific forms and filing guidelines for your location.
Common Employer Forms
If you’re an employer, there are several common employer forms to be aware of. Below is a simple breakdown of each payroll tax form and its importance.
What is Form 940?
Form 940, Employer’s Annual Federal Unemployment Tax Return, is used to report the federal unemployment (FUTA) tax. Employers have to pay FUTA taxes if they paid at least $1,500 in wages in a quarter within the past two years. The due date for Form 940 is January 31.
What is Form W-2?
Form W-2, Wage and Tax Statement, is used to report each employee’s annual compensation and all federal, state, and other payroll tax withholdings. Form W-2 can be sent in either paper or digital format and should be received by employees no later than January 31 of the following year. Employers should be careful not to fill out this form for independent contractors and use Form 1099 instead.
What is Form W-3?
Form W-3, Transmittal of Wage and Tax Statements, summarizes information from Form W-2. It includes total earnings, FICA wages, federal income wages, and tax amount withheld. This form is not given to employees and should be sent to federal and state governments along with Form W-2.
Quarterly State Unemployment (SUI) Tax Filings
Quarterly SUI tax filings, also known as quarterly contributions or wage reports, are the reports employers file on a quarterly basis with each state, district and territory in which they pay employees in order to stay compliant with paying state unemployment taxes.
As their name suggests, these tax filings are due quarterly but, while the months covered by each quarter are standardized, states can vary on the actual due date.
Periodic State Income Tax Withholding Forms
A state W-4 form, also known as an Employee’s Withholding Allowance Certificate for state income tax withholding, is a state payroll tax form that indicates an employee’s state tax withholding preferences and is similar to the federal W-4 Form.
Employers use state Form W-4s to determine state income tax withholding for employees. States either use their own version of the state Form W-4 or the federal Form W-4. Unless employees work in a state with no state income tax, they generally must fill out the W-4 state tax form before starting a new job. Most states update their W-4 forms annually.
The rules and regulations relating to reporting of income tax withholding vary greatly from state to state so it is important for employers to understand these rules in each of the state(s) where employees are working, even on a temporary basis.
Annual State Income Tax Withholding Reconciliation Forms
The Annual State Income Tax Withholding Reconciliation Forms are documents that employers use to reconcile the state income tax they withheld from their employee’s paychecks throughout the year. These forms show the total amount an employer must remit to their state tax authority.
Most states that demand income tax withholding also require employers to file an annual reconciliation return after the end of each calendar year. Some states only require an annual reconciliation return if the employer is filing paper copies of federal Form W-2 but, in a few states, instead of an annual reconciliation return, employers must file quarterly returns.
Periodic Local Income Tax Withholding Forms
Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, is used to determine the correct amount of federal income tax that should be withheld from a periodic pension, annuity, profit-sharing and stock bonus plan, or individual retirement arrangement (IRA) payments.
Ensuring Payroll Tax Compliance
Having employees means that employers have to accept the responsibility of payroll taxes. Not paying them to tax authorities is against the law, and if the sums are large and the pattern repeats, the IRS can impose criminal sentences and even close businesses.
While mistakes can happen, if there are signs of negligence or intent, employers can face some serious fines and potential legal troubles. Missing payments and reporting deadlines or using the wrong payroll tax forms can result in the tax authorities getting more aggressive each time an error is left uncorrected. With that said, it’s crucial as an employer to use updated and accurate forms, file on time to adhere to deadlines, and consider professional payroll services for complex situations.
Ensuring that employers use up-to-date payroll tax forms can be a challenge, often requiring a significant investment of time and effort. However, by outsourcing payroll management, businesses can ensure constant compliance without worrying about submission guidelines, the accuracy of payment, or getting payroll taxes paid on time.
Taking advantage of payroll tax consulting can help identify and reduce errors that can occur when dealing with these various forms and their requirements. Learn more.
Working With a Trusted Advisor
Overall, there are several state and federal annual payroll tax forms that employers are required to accurately complete and file by their respective deadlines. Common forms include Form W-2, Form W-3, Form W-4P, and state-specific W-4 Forms, among others. Working with a reputable payroll services provider can help ensure compliance to avoid fees and penalties. Contact us today to learn how Experian Employer Services can help you.
