Articles

Businesses Must Prepare Now for January Payroll Filing Deadline by Flor Escudero, CPA

Posted on December 19, 2017

Businesses have until Jan. 31, 2018, to file employee wage statements and non-employee compensation forms with the government.

More specifically, employers must provide their employees with Forms W-2, Wage and Tax Statement, and furnish copies along with Forms W-3, Transmittal of Income and Tax Statements, to the Social Security Administration (SSA) by the required deadline. In addition, businesses that hire independent contractors must file with the IRS certain Forms 1099-MISC to report the compensation they paid to non-employee workers. Failure to correctly and timely file any of these forms may result in penalties.

Classifying Workers

To begin preparing for the filing deadline, businesses should first review their relationships with workers and the degree of direction and control they have over each worker’s work product. The more control the business wields, the more likely the relationship is that of employer-employee.  In these instances, employers are responsible for paying employees’ wages and withholding and remitting to the IRS the appropriate amount of workers’ federal income tax, Social Security and Medicare tax, and Federal Unemployment (FUTA) Tax. Businesses do not have to withhold or pay any taxes on payments to independent contractors.

Misclassifying workers, even unintentionally, can put businesses at risk of legal exposure, severe penalties on the state and federal levels, and required payments of back wages, overtime, and taxes.

Forms to Know

Employers should use Forms W-2 to report wages, tips and other compensation paid to employees as well as amounts paid to the government for the employees’ share of income and social security taxes. In addition to providing W-2s directly to employees, businesses must also send W-2s with Forms W-3 to the SSA, which will share wage and withholding information with the IRS. Prior to the filing deadline, it is critical that employers verify employees’ information, including their names, addresses and Social Security numbers, and place orders for paper copies of W-2 forms, as needed.

Should a business determine that it will not be able to meet the Jan. 31, 2018, it may request from the IRS a 30-day extension. However, these requests must be made in writing via Form 8809, Application for Extension of Time to File Information Returns, before the filing deadline.

When a business confirms that it has an independent contractor agreement with a worker, it is required to furnish that non-employee with a Form 1099-MISC to account for the income he or she received from the business. It will be the responsibility to the non-employee to pay his or her share of taxes, including self-employment tax.

The advisors and accountants with Berkowitz Pollack Brant work with businesses and individuals across a broad range of industries to maintain tax compliance and efficiency.

 

About the Author: Flor Escudero, CPA, is a senior manager of Tax Services with Berkowitz Pollack Brant, where she provides domestic and international tax guidance to businesses and high-net-worth individuals. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.