When it comes to The Importance and Difference of Payroll Forms, there are many different forms required, which can be overwhelming. There are close to 40 tax forms listed on irs.gov that fall under the ‘filing and paying business taxes’ section, alone! What does that mean for you and your business? It all depends on several factors. But these are the most common payroll tax forms that you will need to submit in order to stay compliant with the government.
The Importance and Difference of Payroll Forms
1. Wisconsin State WT-4
This form will change per state IF they withhold income tax – IE – neither Florida nor Nevada withhold income tax.
2. Form W-2: Summary of Wages and Withholding
The W-2 is one of the better-known forms and should be given to each employee at the end of each year and is filled out by the employer. It is used to report each employee’s annual compensation and all federal, state, and other payroll tax withholdings (NOT independent contractors). Even if you had an employee leave during the year, you will still need to provide a W-2 to them, and it will be due by January 31st of every year.
3. Form W-3
The W-3, also called the Transmittal of Wage and Tax Statements, summarizes all of your W-2 forms. For example, one W-3 can represent 10 W-2s and does NOT need to be sent to employees. It includes total earnings, FICA wages, federal income wages and tax amount withheld. Your W-3 should be sent to federal and state governments along with your W-2 forms and is also due on January 31st of every year.
4. Form W-4
Form W-4, Employee’s Withholding Certificate, determines the amount of federal income tax to withhold from an employee’s wages. When you hire a new employee, that employee will fill out Form W-4, which will include their personal information and if they are claiming dependents.
5. Form W-9: Independent Contractor Form
Form W-9 is ONLY used for independent contractors and doesn’t have any kind of withholding or allowance information. If the company pays the independent contractor more than $600 in a tax year, the company has to report those payments to the IRS using Form 1099-MISC. On Form W-9, the employer asks the contractor for the tax filer’s name, address and tax identification number. Since the W-9 is not filed, there is not a specific due date for the form. However, companies should request the form be completed before paying the independent contractor.
Review of W-2, W-4, and W-9
An employee uses a W-4 to inform the company’s payroll department how much tax to withhold from their earned income. Then, at the end of the year, a W-2 reports year-end earnings and deductions. The employer provides the W-2 to the employee, summarizing gross pay for the year. This includes information on how much was taken out of the employee’s gross pay for deductions, like state and local taxes.
When comparing the W-4 vs W-9 forms, the simple difference is that an employee fills out Form W-4 while an independent contractor fills out Form W-9 and in the case of the employer, they have to fill out Form 1099.
6. UCT-101: WI Unemployment Form
7. WT-6 (WI state specific)
8. WT-7 (WI state specific)
9. Form 940
Form 940 is the Employer’s Annual Federal Unemployment Tax Return, which is also due by January 31st of each year. This annual payroll tax form is used to report the federal unemployment tax – or the FUTA tax, in reference to the Federal Unemployment Tax Act. This tax funds unemployment compensation to employees who have recently lost their jobs. Your business must pay FUTA taxes quarterly if you paid at least $1,500 in wages in a quarter within the past two years or your employee worked anytime during 20 or more weeks during the calendar year. However, some tax-exempt organizations will not need to file this form or pay FUTA tax.
10. Form 941
Form 941, the Employer’s Quarterly Federal Tax Return, reports the number of employees you have, their wages and taxable tips, and the federal income taxes you withheld. As the name indicates, it is due on a quarterly basis on April 30, July 31, October 31 and January 31. Social Security, Medicare taxes and sick pay are also documented here, along with adjustments made to them. You must file this payroll tax form unless you have already submitted a final return, are a seasonal employer, or employ farm or household workers. It is an important form to fill out accurately, as the IRS will compare your quarterly forms to your annual forms for accuracy.
11. Form 944
Form 944, or the Employer Annual Tax Return, is and alternative for Form 941 and is used for smaller businesses that report federal income taxes and FICA taxes annually, rather than quarterly. The only businesses that qualify to use it are those that have $1,000 or less in annual liabilities for Social Security, Medicare and federal income taxes. Additionally, you must have a written notification from the IRS permitting you to use this form instead of Form 941. This payroll tax form is submitted once annually by January 31 instead of quarterly, so if you are qualified, it will make life a little easier.
12. Form I-9
Form I-9 MUST be included as part of your onboarding package for new hires, as it’s required within three days of hiring a new employee. It confirms employee eligibility within the United States, where the employee attests authorization to work in the United States while also providing documentation to prove it. Both U.S. citizens and non-citizens must have Form I-9 completed before receiving payment for their work. Employers must review the documents and confirm if the papers appear genuine and not falsified and is expected to keep it on file in case of government review. These forms need to be kept separate from the employee files, meaning, you should have a separate file for strictly I-9s,
13. Form 1099 – Independent Contractor Form
Form 1099 refers to a series of documents made available through the IRS. Employers must submit Form 1099 to provide information to the IRS about any money paid to non-employees (independent contractors) during the tax year. Form 1099 covers various types of compensation, with the exception of wages and salaries paid to an employee. Since no taxes are withheld, the independent contractor is responsible to report and pay income tax based on the information listed on the Form 1099. Businesses are responsible for sending the Form 1099 to independent contractors before January 31.
Payroll forms are a necessity for your business. But it is important to fill them out correctly and pay attention to deadlines, as the IRS penalizes businesses for filing incorrectly or failing to pay employment taxes. If it all feels overwhelming, or will require more time than you have available, outsourcing payroll to a business like Knecht Business Solutions will ease your worry.
Forms in Review:
Employee fills out WT-4, W-4 and I-9 and Independent Contractor / Sub-contractor fills out a W-9
W-2 sent to Employees at year-end summarizing wages and 1099 sent to Independent Contractor / Sub-contractor at year-end summarizing payments
W-3 sent to IRS at year-end summarizing all wages paid to employees. 1096 sent to IRS at year-end summarizing all payments made to Independent Contractors / Sub-contractors.
WT-6 / WT-7: Wisconsin State Income Tax Withheld quarterly and annual summaries
941: Federal Income Tax and FICA (Medicare and Social Security) quarterly summary
940: Federal Unemployment annual summary
Other Health Insurance related documents
14. Form 1095-B
Use Form 1095-B to report each full-time, covered employee for health coverage if you provide a health insurance plan for your employees that meets or exceeds what the Affordable Care Act requires. On it, you’ll note the type of health insurance, whether dependents are covered, and the coverage period for the prior year. Your employees will use this form to prove they have qualifying health insurance that exempts them from paying a penalty when they file their tax returns. If your business has at least 50 full-time employees and is what the ACA calls an “applicable large employer,” you would fill out Form 1095-C instead, which you will learn about below. This form also is due annually by January 31st.
15. Form 1094-B
Form 1094-B is the Transmittal of Health Coverage Information Returns, which is similar to the W-3 in that it summarizes Form 1095-B with the number of forms you’re submitting for all of your employees. As an employer, you don’t have to send Form 1094-B to employees; just submit it to the IRS annually by February 28th, along with the 1095-B forms. Again, if your business is classified as an “applicable large employer,” you would fill out Form 1094-C instead.
16. Form 1095-C
If you are an applicable large employer (you employ at least 50 full-time employees), you must file Form 1095-C. This is the Employer-Provided Health Insurance Offer and Coverage Insurance, which provides your employees with health care coverage information. It also lets employees know whether or not they were covered. This is required to send to your employees by January 31st.
17. Form 1094-C
You must send Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, along with Form 1095-C to the IRS. Form 1094-C is a transmittal form summarizing information from Form 1095-C, which doesn’t need to be sent to your employees. This is due to the IRS by February 28th.
The Importance and Difference of Payroll Forms is something that is a big responsibility in business. Need help? Contact us today for a consultation!