With tax season rapidly approaching, many small business owners are working to ensure that everything goes smoothly for them and their employees this coming April. The best way to do that is to know and understand the various forms involved in taxing a small business. After all, we all are not fortunate enough to know the differences between finance vs accounting. Helping your employees to claim W-4 allowances and providing them with 1099s can be the key to a successful tax season. In order to help you understand these various forms, we have listed some of the most important employment tax forms below.
W-2 Wage And Tax Statement
The first form you should have on hand when preparing your taxes is the W-2 for all of your employees. The W-2 is one of the most important forms you will need because it reports your employee’s annual wages and the amount of taxes withheld from their paycheck. Think of it like an invoice system for employees. This form must be sent to your individual employee and the IRS when you are filing taxes.
W-4 Allowances And Employee’s Withholding
A W-4 form should be filled out during the hiring process for any new employee. This tax form will have allowed you to withhold the correct amount of federal income tax from your paychecks. On this form, employees can declare W-4 allowances which lowers the amount of taxes that can be withheld. W-4 allowances include spouses, children or multiple jobs. Unless you are in the process of hiring new employees, you should already have these completed forms ready and available to file.
W-4P Withholding Pension Or Annuity
Any employees that are the recipients of pensions, annuities or other deferred compensation plans must use this form. This form allows these individuals to tell employers the correct amount of federal income tax to withhold without the need for bank reconciliation down the line. This is a must if your business offers employee pensions as a part of your benefits packages. Make sure to include a W-4P form if your business offers employee pension programs or other type of deferred payments.
944 Employer’s Annual Federal Tax Return
The 944 form is an annual filing report for smaller businesses. This tax form is essential for small business owners who do not file quarterly taxes with a CPA certification accountant. If you only file once per year, you may be familiar with the 944. This is what helps you to report to the IRS the amount of taxes that were withheld from each of your employees and your equal amount withheld for FICA taxes.
8027 Tip Income And Allocated Tips
The 8027 form is for small businesses that have tip-earning employees. For example, if you own a restaurant and your wait staff collect tips during their shifts, this is the form you would have to file. This helps the IRS to determine allocated tips for your employees. It is important to fill this document out if you have employees that rely on this type of income. Be sure to fill out the 8027 on time this tax season.
I-9 Employment Eligibility
Finally, the last form you will need on hand to file your small business taxes is the I-9 Employment Eligibility form. This form helps to verify that your employees are able to legally work in the United States, similar to the E-Verify system. Both you and your employee must complete this form. Like the W-4 allowances and W-2 form, this is something that you would likely fill out during the hiring process. As long as you have it ready, there should be no problem when filing your taxes.
Filing taxes as a small business owner can be difficult. However, as long as you are prepared and have all of the right forms, it should be an easy process, just like IRA recharacterization. Make sure that you are familiar with each of these tax forms. Once you have a good idea of what you need, you can make tax season much less stressful for you and your employees.
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