Hiring and retaining employees requires filling out various forms that must be submitted to the state and federal government. Learn basic information regarding the W-2 and W-4 tax forms so that you save time this tax season.
About the W-4:
The W-4 is a tax form used to evaluate an employee’s personal tax situation and calculate the correct amount of federal income tax that should be withheld from his/her pay. Factors used to determine this amount include family situation (number of children, marriage status), home ownership (buying/selling a house), saving contributions (college, retirement), number of dependents, and employment status. This form must be completed whenever an employee starts a new job or experiences change in his/her personal or financial situation. This form is required for all employees except for those who earn less than $800 per year. Recently, the IRS has created an online withholding calculator for the purpose of improving accuracy. It can be found here:
About the W-2:
The W-2 is a tax form that employers give to their employees each year to be submitted with the 1040. It includes wages earned, federal and state taxes withheld, and social security tax information. Employers are required to provide their employees with this information by January 31st of each year and submit a copy to the Social Security Administration by February 29th. A copy must also be kept on record for a minimum of four years. An additional three copies are furnished to the employee for their personal records and tax submission.
The Social Security Administration has made recent efforts to increase efficiency and decrease waste by allowing for electronic filing. If you chose to file this way, the deadline is extended to April 2nd. Employers can also save time and money by distributing an electronic W-2 to employees. If you would like to file a W-2 form electronically, please visit the following website: http://www.socialsecurity.gov/bso/bsowelcome.htm
More detailed information regarding completing a W-2 form can be found in a booklet published by the IRS. Order by calling 1-800-TAX-FORM or visiting IRS.gov. Customer service representatives are available by calling the toll free number 1-866-455-7438.
Running a small business presents various challenges related to recordkeeping for tax purposes. Stay informed about tax forms such as the W-2 and W-4 to save time and money and avoid missing important deadlines.