Tax time is enjoyed by very few. The process can be cumbersome and confusing, especially for new small business owners. There’s a lot to learn—everything from payroll taxes to specific tax forms—and it can seem overwhelming. With the right information, however, the filing process can be easier than you think. That’s why we’re breaking down the types of tax and IRS forms.
IRS forms should be completed for both your own taxes and for parts of your employee’s taxes that you’re responsible for as an employer. There are a variety of different tax and IRS forms. Whether or not you need to use an individual form depends on multiple factors, like how many employees you have, where your business is located, and whether or not you employ contractors from outside the county.
That said, there are tax and IRS forms that are used far more frequently than others; these are the W-4, W-2, and I9 tax forms.
Employees typically fill out W-4 forms on the first day of the job. This two-page form tells employers what they need to withhold from their employee’s pay for federal income tax purposes. While each employee is required to fill this form out when they’re first hired at a new job, it can be re-filed at any time. It is important to re-file when life changes occur, like a divorce, the birth of a child, or anything that could affect how much money is withheld.
Every worker who has federal taxes taken out of their pay (i.e., anyone who isn’t a freelancer or contractor for the most part) will fill out this form when they’re hired.
Both of these may start with a “W,” but they are very different forms.
Workers do not fill out this form at all. Instead, this is a form that employers fill out for each of their employees. It reports exactly how much is withheld from employee checks for Social Security and Medicare, as well as, state, local, and federal income taxes. Additionally, this form reports each employee’s annual earnings along with any tipped wages.
This is another important form that each employee must fill out when hired. I9s are used to verify an employee’s identity and employment status in the U.S. It’s the employer’s responsibility to ensure that the form is properly and completely filled out for each employee. New hires are often asked to bring certain types of identification (a passport, driver’s license, etc.) on their first day in order to fill out this particular form.
Like both of the forms above, apart from freelancers, every type of worker is required to fill this form out.
It’s important to note that, in general, the I9 and the W-4 have to be filled out before a new hire starts work, and certainly before they receive their first paycheck. Explain to your employees that the W-4 gets sent to the IRS for record, while the I9 is simply kept on file by the employer.
When you give employees their W-2 forms, usually at the beginning of every year, explain to them that the W-2 is for their own personal records. They don’t need to send it to the IRS, as it’s simply a statement of what was deducted from their earnings.
As long as both employer and employee fill out the necessary forms and stay on top of deadlines, tax season may not be so bad after all.