Payroll Forms Small Businesses Should Know About

As a small employer, you’re required to give your employees specific payroll forms to complete. Further, you must submit certain payroll forms to the federal, state, and/or local government. In these 2 cases, the forms are mandatory — and failure to comply can lead to penalties.

Adding to the mix are voluntary payroll forms which — while not required — are instrumental to a smooth-running payroll department.

To help you determine which payroll forms you need, we compiled a list of those commonly utilized in small businesses.

Mandatory payroll forms

IRS Form W-4

Under IRS rules, you must give each of your new hires a Form W-4 to complete, in time for their first payroll.

Under IRS rules, you must give each of your new hires a Form W-4 to complete, in time for their first payroll.

• Use the employee’s submitted W-4 (along with the IRS’ withholding tables) to figure how much federal income tax to withhold from their wages.
• Encourage your employees to submit a Form W-4 whenever their financial or personal situation changes.
• Withhold federal income tax as though the employee were single with no other adjustments, if they fail to give you a completed W-4.

IRS Forms W-2 and W-3

• Fill out a Form W-2, Wage and Tax Statement, for each employee to whom you paid wages and withheld taxes for during the year.
• File the completed Form W-2s with the Social Security Administration and furnish employees with their copies of the form. The deadline for filing W-2s with the SSA and distributing W-2 copies to employees is January 31 — or the next business day if January 31 occurs on a Saturday, Sunday, or legal holiday.
• Include a Form W-3, Transmittal of Wage and Tax Statements, with your Form W-2 submission to the SSA. Form W-3 is a summary of the W-2s being submitted. It includes the number of W-2s being sent, total wages paid to all employees, and total taxes withheld from all employees’ wages. Basically, it’s a cover sheet for your W-2s.
• File the W-2 with the state and/or local taxation agency by the mandated due date, if you also withheld state and/or local taxes from the employee’s wages.

IRS Form 941

Unless otherwise notified by the IRS, you must file a Form 941, Employer’s Quarterly Federal Tax Return, with the IRS each quarter.

Employers use Form 941 to report the federal income tax, Social Security tax, and Medicare tax withheld from their employees’ pay for the quarter — plus their own portion of Social Security and Medicare taxes.

Form 941s are usually due by the last day of the month that follows the end of the quarter.

IRS Form 944

If your annual employment tax liability is $1,000 or less, the IRS permits you file annual (instead of quarterly) tax returns via Form 944, Employer’s Annual Federal Tax Return.

Form 944 aims to alleviate the filing burden on businesses with small payrolls, by letting them file only once per year instead of every quarter. However, to use Form 944, you must receive approval from the IRS beforehand.

Typically, Form 944s are due by January 31.

IRS Form 940

If you paid $1,500 or more in wages for the quarter, you must:

• Pay federal unemployment (or FUTA) tax on those wages — up to the taxable wage limit for the year.
• Report FUTA taxes to the IRS on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, typically by January 31.

IRS Forms 1095-C and 1094-C

Under the Affordable Care Act (ACA), Applicable Large Employers (ALEs) — i.e. those with at least 50 full-time employees — must provide health insurance to their full-time (or full-time equivalent) employees, or risk a penalty.

As an ALE you must:

• Give every employee who’s eligible for health coverage a Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, which is used to describe the coverage offered to the employee. Eligible employees who declined coverage should get a Form 1095-C, as well.
• File the Form 1095-Cs with the IRS by the mandated deadline. When filing Form 1095-Cs, include Form 1094-C, which is a transmittal/cover sheet for the 1095-Cs.
• Give each eligible employee a copy of their Form 1095-C by the IRS-mandated deadline.

Applicable Large Employers (ALEs) — i.e. those with at least 50 full-time employees — must provide health insurance to their full-time (or full-time equivalent) employees, or risk a penalty.

IRS Form 1095-B and 1094-B

If you’re not an ALE — i.e. you have fewer than 50 full-time employees — but are self-insured, you must fill out Form 1095-B, Health Coverage for each employee who received minimum essential coverage (as defined by the ACA).

• File the Form 1095-Bs with the IRS and furnish employees with their copy, usually by the same deadlines that apply to Form 1095-C (for ALEs).
• Include Form 1094-B, the transmittal/cover sheet, when filing your 1095-Bs with the IRS.

State payroll forms

Although state payroll forms vary by state, they often include:

• State tax withholding form, which must be given to each new hire, if the state requires state income tax withholding. This form helps you determine the amount of state income tax to withhold from the employee’s wages. Also, the state may have its own exemption form that employees must complete if they need to claim exemption from state income tax withholding.
• Forms for reporting wages paid to employees, your state unemployment (or SUTA) tax liabilities, and state taxes withheld from employees’ wages. Many states require employers to perform quarterly reporting.

If the state has other types of payroll taxes — for instance, California imposes an employment training tax and state disability insurance — you’ll need to know the reporting criteria and associated forms for those taxes.

Local payroll forms

These forms vary by locality, but may entail forms for:

• Withholding local income tax — such as city or county taxes — from employees’ wages.
• Reporting wages paid and local income taxes withheld.
• Reporting local payroll taxes levied on employers.

Voluntary payroll forms

Direct deposit form

Though direct deposit forms are not mandatory, they are highly advisable, especially from a legal standpoint — as they prove that the employee gave you the authority to deposit their wages into the stated bank account.

At a minimum, your direct deposit form should have these items:

• The employee’s name and address
• Name of bank
• Type of bank account, such as checking or savings
• Routing number and account number for the bank account
• A statement saying that you have authorization to deposit wages into the bank account
• Lines for the employee to sign and date

Payroll Action Request (PAR) form

A PAR is a multi-purpose document that managers or employees can use to submit requests to the payroll department. For example, PARs can be used to authorize:

• A manual or emergency check
• A salary advance
• Retroactive pay
• Pay rate changes
• Changes to benefit deductions

Industry-related payroll forms

Certain payroll forms may be recommended, based on your industry. For instance, service employers can give their tipped workers IRS Form 4070A, Employee’s Daily Record of Tips, to document daily tips received from customers.

Wrapping up

Mandatory payroll forms

• IRS Form W-4
• IRS Form W-2
• IRS Form 941
• IRS Form 944
• IRS Form 940
• IRS Forms 1095-C and 1094-C
• IRS Forms 1095-B and 1094-B
• State payroll forms
• Local payroll form

Voluntary payroll forms

• Direct deposit form
• Payroll Action Request form
• Industry-related payroll forms