As the year comes to a close, businesses are preparing to complete their year-end filing of both employment and payroll forms.
While we often associate Forms W-2 and 1099-NEC with year-end filing because they are so crucial to the employees and independent contractors that businesses compensate throughout the year, these are not the only filing requirements for business owners.
The forms in the IRS 94x series are used to report a variety of payroll taxes, and while copies of these forms are distributed, filing with the IRS is a crucial element of tax compliance.
In this blog post, we’ll guide you through the essential steps to ensure a smooth process for completing and filing payroll forms.
Understanding 94x Filing Requirements for Your Business
Familiarize yourself with the specific purpose of each 94x form. While no business needs to file every form in this series, many businesses are required to complete several of these forms. Here’s a quick recap of what they used to report.
The 941 form is for quarterly reporting of federal income tax withholdings and Social Security/Medicare taxes.
The 940 form addresses the annual federal unemployment tax (FUTA).
Form 943 is an alternative to the quarterly 941, it applies to businesses that are in the agricultural industry specifically.
The 944 form is an alternative to the quarterly 941 for eligible small employers with $1,000 or less in withholdings annually.
The 945 form is for reporting federal income tax withholding on non-payroll payments. A common example of this would be backup withholding.
Review Withholding Amounts and Tax Liability for Form 941
For Form 941, review employee wage withholding amounts quarterly and adjust if necessary. Ensure that you are accurately reporting wages subject to Social Security and Medicare taxes, as well as any adjustments for tips, sick pay, and other relevant factors.
When it comes to calculating your tax liability, this is important to ensure accurate 941 reporting. If you are a semi-weekly depositor, it is crucial as you are required to report the daily tax liability for the business on 941, Schedule B.
Prepare for FUTA Reporting on Form 940
Form 940 is used for calculating Federal Unemployment Tax Act (FUTA) taxes and reporting them to the IRS.
The Federal Unemployment Tax Act was established to bridge the financial gap for individuals during the period between job loss and securing new employment, guaranteeing access to unemployment benefits. Employers are required to pay a FUTA tax rate of 6% on the first $7,000 of wages that is paid to each employee.
Typically, employers that meet the following guidelines must pay into this fund and report these taxes to the IRS:
If the employer paid $1500 in wages to employees in any quarter of the past 2 calendar years.
The employer had one or more full-time, part-time, or seasonal employees for at least part of a day in 20 or more different weeks in 2022 or 2023. This doesn’t apply to businesses that are partnerships.
Employers can reduce the 6% tax rate by up to 5.4% if they have paid their State Unemployment Tax Act (SUTA) taxes. If you are operating in a Credit Reduction State, you will need to offset this percentage based on your state’s rate. Check out this blog to learn more about Credit Reduction States.
Re-evaluate Your Business’ Eligibility for Form 944:
If your business is on the smaller side, with annual tax withholdings of $1,000 or less, you may be eligible to file Form 944 annually as opposed to filing Form 941 quarterly. If your business is eligible for this switch, you must request this properly from the IRS and wait for their approval before making any changes to the forms you are filing for your business.
Double-check Your Records for Form 945 Non-Payroll Payments
Form 945 comes into play for reporting federal income tax withholding on non-payroll payments, such as pensions, backup withholding, and gambling winnings. Verify the accuracy of information on non-payroll payments and calculate the corresponding tax withholdings.
Backup withholding is a process that the IRS requires businesses to implement if they’ve made payments to a vendor or contractor, and this individual or business fails to provide their Taxpayer Identification Number (TIN) to the business.
Establish a Filing Timeline for Compliance Using TaxBandits!
Successfully navigating year-end filing for 94X forms demands a strategic approach and meticulous attention to detail. By understanding the nuances of each form and staying proactive in compliance, businesses can ensure a smooth transition into the upcoming fiscal year while maintaining adherence to payroll regulations.
That may sound daunting, but TaxBandits is here to help! Our application has the streamlined features you need whether you are filing a few forms for your business or hundreds of forms for your clients!
Tax professionals can create an efficient workflow with built-in Staff Management tools, Client Management tools, and multiple easy options for bringing their filing data to the application.
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