As a business with employees, you have certain important responsibilities relating to payroll taxes. Understanding of these responsibilities will help you in making certain that you comply with the law. You must calculate payroll taxes and deductions, make payments and report payroll tax to the federal and state tax agents. Here is a summary of payroll bookkeeping and reporting responsibility for a business to pay employees.
Summary of Payroll bookkeeping and reporting
| Requirement |
Purpose |
Action |
Agency |
| I-9 (completed by both employee & employer within 3 days of hire) | Needed to provide proof of an employee’s eligibility to work in the U.S. | Keep on file | U.S. Dept. of Homeland Security |
| From W-4 (completed by employee prior to first payroll; new forms can be completed at any time) | Needed for employee information and to determine federal income tax withholding | Keep on file | U.S. Internal Revenue Service |
| New Hire Reporting (completed by employer within 20 days of hire or rehire) | State government agency determines if employee has child support enforcement obligations. | online filing | State Dept. of Social & Health Services |
| IRS Electronic Federal Tax Payment System (EFTPS) | Need account to pay federal taxes. | Set up account | U.S. Internal Revenue Service |
| IRS Form 941 Employer’s Quarterly Federal Tax Return (1 each calendar quarter per employer) | Report employee earnings, employer and employee paid Social Security and Medicare taxes, and employee-paid income taxes. | Send forms quarterly to IRS by mail (due 4/30, 7/31, 10/31, 1/31). Send payments using IRS online system EFTPS | U.S. Internal Revenue Service |
| State unemployment tax report(1 each calendar quarter per employer) | Unemployment benefits for employees who lose their jobs. | Complete and pay by 4/30, 7/31, 10/31, 1/31. | Sate tax agent. |
| IRS Form 940 – Employer’s Annual Federal Unemployment Tax Return | Pays for administration of the national unemployment insurance program | Send form to IRS by mail and transmit payment using IRS online system by 1/31 for the preceding year | U.S. Internal Revenue Service |
| IRS Form W-2 – Wage and Tax Statement for each employee for a calendar year | Employees need the form to file their federal income taxes. IRS and Social Security Administration need for recordkeeping. | Give three copies to each employee by 1/31 of the following year. | U.S. Internal Revenue Service and Social Security Administration |
| IRS Form W-3, Transmittal of Wage and Tax Statements (W-2 Forms). | Social Security Administration needs for recordkeeping. IRS needs for reconciliation with Forms 940 & 941. | Send with W-2 Forms to Social Security Administration by 1/31 of the following year. | U.S. Internal Revenue Service and Social Security Administration |
| Keep payroll record | Social Security Administration needs for recordkeeping. IRS needs for reconciliation with Forms 940 & 941. | keep on file. | Different agencies have different retention requirements but 6 years should be sufficient. |
