Employers can start preparing for year-end.
Before you know it, the year will be over. If you are a business owner with employees, your to-do list is quickly growing.
If you issue any of your employees a holiday or year-end bonus, be sure that you are still withholding the appropriate income and FICA (social security and medicare) taxes. Any bonus monies given must be included in the total wages on your year-end payroll forms and the employee’s W-2.
The IRS will be looking for your W-2s and 1099s a little earlier this year, whether you file them electronically or on paper. The filing deadline has been moved up to January 31, 2017 for both forms. If you are using a software program for your payroll, the IRS will now accept most computer generated laser copies. But you should check with your software manufacturer to be sure. You may also file your company W-2s directly through the ssa.gov website using the Business Online Services. There is a registration process for the service, but the filing process is fairly simple. In years past, employers had until the end of February to paper file these, and even longer if you were filing them electronically. The deadline to issue the forms to employees and subcontractors will remain January 31st, as it has been in previous years. It is always good practice to have your employees verify their personal information on their W-2s for any errors before submitting them, so you can make any necessary changes. The SSA/IRS receive thousands of forms with incorrect information each year, which prompt notices to be sent and refunds to be held back. The IRS is hoping to curb fraud and pick up errors by receiving these forms earlier. This will hopefully allow the IRS to verify information quicker and issue refunds sooner. Although, the law states any refunds that include the Earned Income Tax Credit or the Additional Child Tax Credit cannot be issued until February 15th.
It is recommended that you have your employees review their current W-4 on file or fill out a new one for 2017. As their personal or financial situations change, they may need to reevaluate how little or how much they are having withheld from their paychecks. W-4s can be printed directly from irs.gov.
Review your records to see who should be issued 1099s. The most common recipients of 1099s are individuals and unincorporated businesses who performed services and were paid $600 or more during the year. Amounts should be listed as nonemployee compensation in box 7. Rents of $600 or more paid must be reported in box 1. You are not required to issue 1099s to incorporated businesses. You should already have any subcontractor’s tax information in your files before issuing any payments, but if not, now is a good time to have them complete a W-9, also available at irs.gov. It is good practice to obtain this information from your subcontractors before sending any payments to them, which will increase your odds of obtaining the information and avoiding any unnecessary scrutiny from the IRS.
Cheryl is an Enrolled Agent at Gamwell, Caputo, Kelsch & Co., PLLC in Conway, NH and can be reached at 603-447-3356. Cheryl welcomes any article feedback or questions for future article consideration.