No matter which side of the equation you are – an employer or an employee – Tax Day can seem like one of the scariest days of the year. This is because there are so many rules and regulations that must be followed, as well as nitty-gritty bits of information that can trip you up if you’re not aware of them.
One of the ways that you might discover you’re in over your head is when it comes to payroll taxes. There are extremely specific requirements for how to dispense payroll information to your employees and contractors, and making a mistake when doing so can lead to headaches.
When it comes to payroll taxes, if you are an employer, realize that you must report tips, compensation, wages, and any other financial gain that has been paid out to the employee. This is a requirement by the government, so as an employer, this is not an action to skip lightly. Part of this process is that you must also provide the employee in question with this information through W-2s and 1099s (depending on the employee status as a full-time employee or a contractor).
Making a mistake as an employer can lead to complex and extremely detrimental penalties, so ensure that you’re doing your due diligence and getting your forms completed on time.
Responsibilities for Handling Payroll Taxes
When it comes to handling payroll taxes, realize that you will be required to:
- Ensure that you are paying and reporting state and federal taxes to the respective tax agencies.
- Accurately report withheld amounts, amounts paid out, and income for your contractors and employees.
- Maintain whatever federal and state records are required for handling taxes.
- Be prepared to submit all required documents by pre-specified deadlines so that you aren’t hit with a warning or a penalty for misfiling.
Specific Information You Need for W-2s and 1099s
Of course, there is specific preparatory work you must do before you can send out those W-2s and 1099s. Make sure you’re prepared well in advance so that you’re not scrambling to finish your taxes right up to a deadline.
Keep in mind that W-2s are for in-house employees and 1099s are for contractors.
As for the information you need to have a handle on for these forms, try to make sure that you have accurate employee/contractor details about:
- Their name, Social Security number, and address.
- How much they’ve been paid and when.
- What the payment cycle is for each individual.
- How much of the payment makes up taxable wages.
- The W-4 for all applicable employees.
- Amounts and dates of any tax deposits you made.
- Copies of any tax returns you may have filed as well as any W-2s that were returned as undeliverable.
All of this information is good to have on hand for four to five years in case the IRS decides to audit you and your business. So long as you have the appropriate forms and/or access to all the detailed information that the IRS is asking about, you’ll have a much better time on the off chance you have to go through an audit.
What Do You Need to Know for Filing?
There can be a lot that you need to know before you decide to handle or file payroll taxes. This is why it’s in your best interest to reach out to a professional tax resolution specialist, such as is at Guardian Tax Law. Whatever your tax issues are, even if it’s just a question that you’re uncertain about, reach out to us. We would love to help you so that your tax woes don’t have to be woes.