The deadline for filing IRS Forms W2 for your employees and 1099-MISC for non-employee compensation is January 31—but why wait until the last minute to scramble to complete these and put everyone in a panic? You’ll have plenty of other accounting issues to handle at the end of the year so now, as we head into fourth quarter, is the perfect time to prep for these filings.
Preparing W2s for employees
The first thing to do is review all your employees’ personal information to ensure accuracy. Are addresses and withholding selections correctly noted on their W4 forms?
If you use a payroll processing service or practitioner, verify the cutoff date the service requires to process final payroll for the calendar year. Be sure to adhere to the deadlines so that your W2 forms will be prepared on time, without undue stress on any party’s part and without incurring extra fees to rerun.
Determine whether you will be paying year-end bonuses; these bonuses are taxable income for the employee and will affect your payroll taxes on the employer side. If you are paying bonuses, bear in mind that the timing might make a difference to the employee (even if it does not affect your accounting or operation). Depending on how your fiscal year is structured, you may have flexibility about when to pay bonuses.
Ask your employee if he or she wishes to receive the bonus this year or defer payment to next year for tax purposes. Also ask about withholding; does the employee prefer to have taxes withheld now or assume the responsibility later?
Thinking about bonuses now means planning ahead in terms of cash flow, so be sure to plan accordingly. Assess whether or not you’ll be in a position to pay that benefit—and also have the benefit to your company of the additional expense that comes off the top. Discuss this with your accountant in advance.
NOTE: Be sure, if you do plan to pay bonuses, that your payroll processing partner knows this and provides you with deadlines to include this on time.
Preparing 1099s for non-payroll employees
A Form 1099 is filed for non-employee compensation. The 1099-Misc is filed a) for anyone to whom you paid at least $600 for services performed by someone who is not a W2 employee, b) to report direct sales of at least $5000 of consumer products for resale anywhere other than a permanent retail establishment, and c) in certain other circumstances (read more here). The deadline for filing is January 31. But again, why wait until you are trying to gear up for the new year to handle this filing task?
As with your payroll employees, make sure that all vendor information is verified. Have a current, signed Form W9 on file with the correct address, a social security or tax ID (EIN) number, and proper business entity selection noted.
Paying attention to these issues can distract business owners from focusing on their daily operations. That’s why many companies turn to CFO Your Way, a virtual CFO service, to manage their corporate finances.
From professional bookkeeping to preparation of critical financial statements to business strategy, CFO Your Way provides financial management expertise and ongoing guidance without adding an in-house employee. Schedule a Complimentary Consulation to prepare for filing Forms W2 and 1099 on time.