Payroll Tax Forms and When to Use Them

If you are like most small business owners, you will spend much of your typical busy day communicating in various ways.  But how often do you stop and think about communication relating to payroll taxes?  This type of communication is done a little differently than most other interactions – it is done through IRS-specified forms such as W-2, W-4, and W-9 forms.

The IRS recently issued the 2014 versions of these forms, and whenever that occurs, it is important that you are aware of any impact for employers.  In this case, the first implication is an obvious one.  You will want to make sure that you are using the most current form.  For the W-2, this will not occur until early 2015 when this form will be used to summarize wages paid and taxes withheld.  But what about the W-4 and W-9 forms?  When would employers use these forms?

Business owners need a Form W-9 in order to report on a Form 1099 at the end of the year.

Use of the W-9 is fairly straightforward.  When beginning work with a business, a freelancer or independent contractor fills out the W-9 form.  Though not submitted to the IRS, this form provides information which will be used when completing a Form 1099.

Similarly, the W-4 form is to be completed by every employee at the beginning of employment.  The IRS suggests on its W-4 form that this document be filled out every year, but this is only a suggestion, not a requirement.  Only employees who claim exempt status from federal income tax are required to submit a new W-4 form each year.  Otherwise, the most current W-4 that was filed remains in place until another W-4 is filed to replace it.  However, since this form impacts the amount of tax withheld, it is in the best interest of the employee to be sure the W-4 is updated to reflect relevant changes.

It is important that business owners know how to use these forms or properly delegate that responsibility.  Often small businesses hire payroll providers, who make it their business to fully understand these kinds of details.  If you would like to take this responsibility off your plate and free up more time for yourself to run your business, contact The Payroll Department at (317)852-2568 and see what we can do for you.

-Jessica of the Payroll Department Blog Team