A beginner in small business? Here is the exciting time where you come to work every single day because of the job you are currently in, business owner. Being self-employed can sure take a toll in your life. Because of E-Commerce, business is just a hand-reach. When you have everything set up such as location, structure and resources—it’s time for employees. You still need manpower to rise up.
For a beginner, you might not know but companies certainly don’t like to do payroll. It can be such a pain to calculate how you need to pay them and the jobs they do.
Never forget that you pay your employees for the work they do for you. You deduct your employees’ salaries for taxes and insurances (depends on what you have arranged). This can be processed weekly, semi-monthly, monthly or daily. Let us not forget that we calculate base on time or productivity, benefits and deductions.
Employees complete the Employee’s Withholding Allowance Certificate (W-4). What is it for? It prevents employees from overpaying taxes and lets you (the employer) know how much federal income tax to withhold from their pay. The form must be filed before the paycheck.
When the situation changes, that’s when a new form is filled out (situations such as marriage, having a family or a new job).
Newly hired employees must fill out this form. Employment Eligibility Verification Form (I-9) is for employee’s protection (citizen and non-citizen) against discrimination and are authorized to work in the United States. Both employers and employees take part in filling the form. Keep in mind not to file the Form I-9 with USCIS or ICE. And, this must be stored for three years after the hired date or a year after employment is terminated.
IRS Form 941
Form 941 (Employer’s Quarterly Federal Tax Return) reports the total taxes withheld from the employee’s paychecks. Use this Form to pay for your portion of Medicare taxes and social security taxes. It is important to report about the number of employees, wages paid, and the amount of taxes withheld. Under the withholding system, taxes withheld from your employees are credited to your employees in payment of their tax liabilities— according to https://www.irs.gov/instructions/i941/ch01.html. Deadlines are always at the end of the month. This gives you time for filing. Employers like employers of household employees, agricultural employees and seasonal employers who don’t pay employee wages are exempted from this form.
IRS Form 940
Form 941 is for quarterly reports and pays. Form 940 is for the employer’s payment annually. Both pages of the form must be filled and signed otherwise processing of return will be delayed. This is for the compensation to workers who lost their jobs. FUTA tax must not be deducted from the employee’s wages.
W-2 Form and W-3 Form
W-2 is for the employees’ income tax returns. Employers send a copy of the employee’s W2 before the deadline set by IRS. Most people consult the specialist for the deductions and credits. E-file such as TurboTax allow those to file without consulting. This also includes first timers.
W-3 Form is for the total earnings, Medicare wages, Social Security wages and withheld wages for the entire year. Both forms must be submitted at the same time. W3 must contain the necessary information needed such as your business, EIN, address, and contact details (contact person, email, fax and phone).
This form is for the smallest business owners whose annual liabilities (Medicare taxes, SSA and withheld federal income taxes) are less than $1000 per year.
According to the federal law, an employer must withhold certain amount of federal income tax, withheld Medicare tax and SSA tax from the employee’s pay of more than $200,000 in a year.
Those exempted from this form are employers who are not notified, household employers and agricultural employers.
Taxes may be filed through e-filing. Tax payments can be made through online or through banks that authorized federal payments. Taxes are not only for us but also for other’s welfare. As we go on with life, until we are tired, these taxes can also ensure our retirement and our loved ones future as they go on. Pay the right taxes at the right time. When things get difficult, seek someone you can trust to the things you need help with.