Employers Face Looming Payroll-Tax Filing Deadline by Jack Winter, CPA/PFS, CFP
Posted on December 30, 2019
by
Jack Winter
Businesses have until January 31, 2020, to file employee wage statements and non-employee compensation forms with the federal government for tax year 2019. Failure to correctly and timely file this information may result in penalties and back wages and back taxes.
The Forms to File
Employers must provide IRS Forms W-2, Wage and Tax Statement, to their employees by Jan. 31 to report the amounts of earnings, withholdings for state and federal taxes, Social Security, Medicare wages and tips. Employees use the information on Form W-2 when they file their individual tax returns in April.
In addition, businesses must submit copies of Forms W-2 with Forms W-3, Transmittal of Wage and Tax Statement, to the Social Security Administration (SSA), which shares wage and withholding information with the IRS.
In contrast, when businesses hire independent contractors, they must instead file with the IRS Forms 1099-MISC, Miscellaneous Income, by January 31 to report the amounts they paid as compensation to each of those non-employee workers during the most recent tax year. Independent contractors do not receive W-2s or W-3s from for which they work.
Preparation Tips
To prepare for the payroll-tax filing deadline, employers should first ensure that their companies’ account information with the SSA is current and active. They should then verify the names, addresses and Social Security Numbers of its employees as well as the individual taxpayer identification numbers (ITINs) of its independent contractors.
At this point, it is critical that businesses assess their relationships with workers and confirm that they have properly distinguished employees, for whom employers must withhold Social Security and Medicare taxes, from independent contractors, or self-employed taxpayers, who are responsible for paying those taxes on their earning themselves. Worker classification has been an ongoing subject to IRS scrutiny; failure to classify workers correctly can trigger an IRS and/or Department of Labor audit and result in a sea of legal problems, penalties and back payments of wages, taxes, unemployment insurance and workers’ compensation premiums.
Worker Classification
In general, the less control a business has over a worker’s work product, financial circumstances and day-to-day activities, the more likely the relationship is that of an employer-independent contractor. Under these circumstances, businesses are not required to withhold or pay any taxes on workers’ behalf. Instead, self-employed, independent workers bear the burden of reporting their income directly to the IRS and paying their own share of Social Security and Medicare taxes, even if they have no income tax liability.
Businesses should work with experienced advisors and tax accountants to ensure they meet all their tax-filing deadlines, and avoid potential errors, including the very costly risk of misclassifying workers. Should a business determine that it will not be able to meet the January 31 deadline, it may submit a written request for a 30-day extension from the IRS using Form 8809, Application for Extension of Time to File Information Returns, before the January deadline.
About the Author: Jack Winter, CPA/PFS, CFP, is an associate director in the Tax Services practice of Berkowitz Pollack Brant CPAs + Advisors, where he provides estate planning, tax structuring and business advisory services to individuals, families and business owners. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or info@bpbcpa.com.
Information contained in this article is subject to change based on further interpretation of the law and subsequent guidance issued by the Internal Revenue Service.
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