As many of us prepare to take a little time off to enjoy the holidays, business owners and other leaders should start preparing for the upcoming tax filing deadlines looming ahead just after the New Year. There are several forms that must be filed annually with a January 31 deadline to the Internal Revenue Service (IRS). Here’s a quick look at how to prepare your business for the due dates ahead.
Forms W2 & W3
Employers will need to get their Form W-2 Wage and Tax Statements, Form W-3, and Transmittal of Wage and Tax Statements prepared as much as possible before the end of the year. The due date for filing these forms for 2021 is January 31, 2022, regardless of whether you are filing electronically or with paper forms.
The more you get done before the New Year, the easier these forms will be. You can get a jump start now by filling out the basic information for each employee on these forms so all you have to do at the start of 2022 is pop in the final total amounts paid in wages and withholdings for social security, income tax, and Medicare.
Any employer engaged in a trade or business who pays someone for work or service, including noncash payments of $600 or more for the year, must file a Form W-2 for each employee. This is true for all amounts paid out if income, social security, or Medicare tax was withheld. Even if the employee is related to the employer, a Form W-2 must still be filed. Finally, a Form W-2 must be filed if income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Allowance Certificate.
A Form W-3 is used to total up all parts of Form W-2. Both of these forms are filed together and are sent to the Social Security Administration (SSA) annually. The Form W-3 is known as the “Transmittal of Wage and Tax Statements” by the IRS. It is the responsibility of the employer to review Form W-2 for each employee, summarize the employee’s wages and tax information, and then share that data on Form W-3. Any employer required to file a Form W-2 is also required to file a W-3 form.
What’s New for 2021 Taxes
The American Rescue Plan Act of 2021 (ARP) permits employers to increase the amount of dependent care benefits that can be excluded from an employee’s income from $5,000 to $10,500 ($5,250 for Married filing separately). You would see Box 10- Dependent Care Benefits for additional information on this change.
Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
This form is also due to the IRS no later than January 31, 2022. Form 940 allows employers to report taxable FUTA wages paid in the previous year. If you deposited all of the FUTA tax when it was due, then you have 10 additional calendar days to file Form 940.
This tax along with state unemployment tax systems provides funds for paying unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and state unemployment tax. Only employers pay the FUTA tax and are not allowed to deduct this tax from their employee wages. It’s simply considered part of conducting business in the United States.
If you have employees conducting agricultural work, then you’ll need to submit Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees with the IRS no later than January 31, 2022. This form is completed by employers who paid wages to farmworkers in the previous year that were subject to employment taxes. These employers will submit Form 943 to report wages paid to farmworkers if these wages were not already reported on Form 941 or Form 944.
Form 944, Employer’s Annual Federal Tax Return
Form 944 is the Employer’s Annual Federal Tax Return that must be submitted by January 31, 2022, to the IRS. This must be filed if you are notified in writing by the IRS that you are to submit a Form 944 rather than a Form 941 and you paid wages in the previous year that are subject to employment taxes.
If you wish to change whether you file a Form 941 or Form 944 for the year, follow the instructions for Form 944 to request the change. Until you receive written confirmation from the IRS that your filing requirement has changed, you should continue to file the form previously required by the IRS.
Form 1099, Nonemployee Compensation
If you made payments in the course of business or trade totaling more than $600 to a payee for services to someone who is not a formal employee, you must still file a Form 1099, Nonemployee Compensation (NEC), for them. This also includes employers who made cash payments for fish or fees to attorneys. These forms may also be filed either electronically or by paper form.
If you file a Form 1099, you will also need to file it with Form 1096, Annual Summary and Transmittal of U.S. Information Returns. Do not use this form to transmit electronically.
Form 945, Annual Return of Withheld Federal Income Tax
The last form due by January 31, 2022, is Form 945. This is filed annually with the IRS to report all federal income tax withheld (or required to be withheld) from nonpayroll payments. If you deposited all withheld income taxes when they were due, then you have an additional 10 calendar days to file.
This form reports federal income taxes withheld for the following nonpayroll payments:
- Pensions (including distributions from tax-favored retirement plans such as section 401(k), section 403 (b), and governmental section 457(b) plans and annuities.
- Military retirement.
- Gambling winnings.
- Indian gaming profits.
- Voluntary withholding on certain government payments.
- Backup withholding.
Getting started on these tax forms before the end of the calendar year will make preparing them that much quicker and simpler come your return to the office in January 2022. To learn more about employment tax dues dates or getting a head start on your 2021 tax filings, visit the IRS online or contact Lora Vega, CPA, at (520) 271-3230 to schedule a free initial consultation. We are Tucson’s trusted CPA firm with years of experience to help your business with tax forms, retirement planning, benefits, and more.