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Payroll Reporting and Deduction Requirements for Your Business

payroll

Arguably one of the toughest parts of running a business is managing the people who are supposed to help you succeed.

From finding great employees to training and retaining, then figuring out the basics of payroll, it’s a lot to add to your plate. Payroll is also a huge expense that could cause even more headaches if not done right.

Here, we’ll go over a few key components of payroll that you need to know including: mandatory reports and forms, recordkeeping requirements, and deductions.

What payroll reports are due annually?

What about quarterly?

Once your employees get an accurate paycheck on time, your payroll job is done for that week, right? Nope. You also need to submit certain payroll reports to ensure you’re staying compliant. Luckily, they don’t need to be submitted every week though.

Quarterly

Forms 941

Every quarter you must file Forms 941 to report federal income, Social Security, and Medicare taxes as well as employee wages. This form is typically due the last day of the month following the end of a quarter.

State payroll reports

On a more local level, many of the state payroll reports due are quarterly. These would include reports on state income taxes and state unemployment taxes.

Annual

Forms 944

Similar to a Form 941, Forms 944 are used to report federal income, Social Security, and Medicare taxes on an annual basis. The IRS will tell you if you’re qualified to use Forms 944 or if you must use Forms 941.

Forms 940

This payroll report is used to report federal unemployment tax (FUTA).

Forms W-2 and W-3

Form W-2 is what you give to each employee, as well as federal and state governments. This lists out wages and withholdings and a lot more that you can find explained here.

Form W-3 is the transmittal form for Form W-2, which summarizes all of the employees’ Forms W-2 information.

Monthly

Believe it or not, some states actually require monthly filings. It’s best to check with your state or locality for more information.

What payroll information must be kept?

No one likes clutter, but when it comes to payroll information, you probably want to keep those documents around for a while. The FLSA actually has recordkeeping requirements that say employers must record and maintain specific information to demonstrate compliance with FLSA standards. That includes minimum wage, overtime, equal pay and child labor.

According to the Society for Human Resources Management (SHRM), information must be made available to DOL representatives within 72 hours of a request.

The DOL lists the following as basic records that employers must maintain:

  1. Employee’s full name and Social Security number.
  2. Address.
  3. Birth date if younger than 19.
  4. Sex and occupation.
  5. Time of day a week when employee’s workweek begins.
  6. Hours worked per day.
  7. Total hours worked each workweek.
  8. Basis on which employee’s wages are paid (ex. $9 an hour.)
  9. Regular hourly pay rate.
  10. Total daily or weekly straight-time earnings.
  11. Total overtime earnings for the workweek.
  12. All additions to or deductions from the employee’s wages.
  13. Total wages paid each pay period.
  14. Date of payment and the pay period covered by the payment.

The DOL explains that records that wage computations are based should be retained for two years. Ex. time cards, or work and time schedules.

For more on these requirements, please click here.

What payroll deductions are required by law?

Mandatory payroll deductions for taxes include – federal income tax, state taxes, local income tax withholding, FICA that includes social security taxes and Medicare tax withholding.

There are also some voluntary payroll deductions that often are a benefit for the employee. That can include charitable donations, employer-sponsored 401 (k) plans, and insurance.

For more in-depth information on running payroll for your small business, please click here

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Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.