Filing taxes as a business owner can be a complex task. You have to understand and fulfill all your federal, state, and local tax obligations. The many tax-related forms published by the Internal Revenue Service (IRS) do not make things easier.
Fortunately, understanding various necessary IRS tax forms can help you make the process less taxing and ensure your business’s compliance.
Below is a list of tax forms you need to know about as a business owner.
W-2 is one important tax form that reports the precise amounts paid to your employees in a calendar year. It also reports all the taxes withheld from the employees’ wages and other statutory deductions for the same period. Usually, the Form W-2 must be filled by every employer and filed with the IRS by January 31 every year.
Form W-2 must not be confused with paystubs. Although they have one thing in common: they contain information on an employee’s pay and deductions, the documents differ in the period they cover. W-2 forms are issued to the employees annually, while paystubs are issued at the end of each payment period. If you are having problems creating paycheck stubs for your employees, this online paystub maker can help you simplify the process.
Form W-3 is another important document that summarizes the W-2 and is transmitted along with Form W-2. Much like Form W-2, its due date is January 31. However, a business owner is not required to give a copy of this form to an employee.
Employee’s Withholding Certificate, commonly known as Form W-4, is an important tax an employer has to fill out when hiring a new employee. The form determines the amount of federal income tax to withhold from the worker’s earnings.
Form W-4 requires an employee to share information, such as their name, marital status, address, and Social Security number.
Form 940 is an annual form filed annually to report your federal unemployment tax obligations to the IRS. Most employers are required to pay FUTA with only a few exemptions.
You are obligated to file form 940 with the IRS if:
- You have paid wages of more than $1,500 to an employee in the year
- You had a full-time, part-time, or seasonal employee for a part of the day for 20 or more weeks
Form 941 (Employers Quarterly Federal Tax Returns) is used by employers to report employee wages and payroll taxes quarterly. The information contained in form 941 include:
- Paid out wages
- Income taxes withheld
- Reported tips
- Statutory deductions
- Additional taxes withheld
Form 941 must be filled accurately because the IRS uses the quarterly reports to compare with your annual form W-2 for accuracy. Inaccuracies in the forms may lead to suspicions of tax evasion.
Form 944 is an important document often filed by businesses whose Medicare tax, annual social security tax, and federal income taxes liability is equivalent to or less than $1,000.
While most businesses are required to file their federal income and FICA taxes quarterly, others may be required to file their returns annually by filling form 944. Consulting with the IRS can help you understand the category in which your business falls.
If you have worked with contractors, you will need to issue them with Form 1099. The form captures the wages paid for the work done and the taxes withheld from their earnings during the tax year. There are a few exemptions to this requirement. It is, therefore, important to confirm with the IRS or a lawyer to be safe.
Form 1095-B is a necessary tax form for any employer who offers self-insured health plans to their employees. A self-insured health plan is a health insurance policy that your small business operates instead of buying coverage from an insurance company.
Form 1095-B must be filed for each covered, full-time employee, and copies sent to employees by January 31 and the IRS by February 28.
U.S. Corporation Income Tax Return, also known as Form 1120, is a vital tax form that reports the business’s income, gains, losses, deductions, and credits and helps figure out its income tax liability.
Form 1120 can be filed by mail or online, and in most cases, the filing must happen by the 15th day of the 4th month after the end of your business’s tax year.
Now that you know the nine most essential tax forms that you must file, there is no reason why you should not ensure your business is tax compliant. However, remember that this may not be a comprehensive list because requirements may vary from one industry to another. That is why you will want to consult the IRS or your tax attorney for clarification when filing taxes.