If you own a business or plan to work for a business, this article is of interest to you. Most employers think that the recruitment process ends with shaking hands with a person and agreeing to give them a job, but that is only the beginning. While it´s essential to explain their duties and how they should perform in the company, one of the most important steps to take is to fill out the appropriate forms with the IRS.
If you hire someone new to your company, the first thing to do is to have them fill out a W-4 and be aware of the W-2 form, depending on several factors that we will discuss later. Let’s first remember that the IRS (Internal Revenue Service) is the U.S. government agency in charge of collecting taxes and verifying that tax laws are enforced. This means that the corresponding taxes are paid for each activity that merits it.
Surprisingly, many employers and employees are unaware that, when closing a new employment deal, one of the main obligations when making or receiving a payment is the payment of taxes. Failure to do so can subject both to fines and penalties for failure to pay. If the IRS audits a company and the company does not demonstrate that it has signed and filled out the corresponding forms, such as the W-4 or W-2, the result can be extremely counterproductive for the company.
What is the Tax Form W-4?
As we explained before, the first step an employer must take as soon as he hires an employee is to have the employee correctly complete Form W-4, which is the Employee’s Withholding Certificate. If you’re the employer, this document will provide you with very valuable information about the person you are hiring. Their marital status, if they have other income or credits, any adjustments related to multiple jobs and other withholdings, all in order to have the necessary data to calculate the amount of income taxes, federal funds and therefore the amount you must withhold from the worker’s pay.
What if the employee doesn’t want to fill out or submit the W-4 form?
Sometimes employees are afraid or want to reserve filling out the Form W-4, but this is not correct, and it’s not convenient for anyone. This fear lies precisely in the lack of information they have, and they think that signing documents related to the IRS, will affect them seriously and that, by omitting them, this can help them. This is not the case.
You as the employer are going to withhold in accordance with the law, whether or not you are given the form. In fact, employees who choose to omit the form, submit it incorrectly filled out, may not be hired, or have federal income taxes withheld from their wages, making guesswork that may not benefit the employee, but in the end was the consequence of their own actions.
On the contrary, if the employee learns how to correctly fill out the W-4 Form, he/she will know that it’s never final and that he/she can change the information as many times as necessary, depending on the changes in his/her personal or financial situation. And you as the employer must remember to file Form W-4 with the IRS as soon as you receive it, before the first payroll is paid. For more questions about the W-4 form, here are some FAQs provided directly by the IRS.
What is the Tax Form W-2?
It’s something totally different from the previous one and it’s important to start with that because many times people tend to think that they are similar and make mistakes when filling them out.
Let’s start by mentioning that this form is the one that is related to the declaration of salaries and taxes, and it’s a document that employers must send to their employees and later to the IRS. With it, employers report the annual wages of their employees and the amount of taxes they withhold to the authority. This means that it is of utmost importance that the earnings reported on the employee’s W-2 be consistent with the earnings reported on his or her personal taxes. If not, the taxpayer will be audited by the IRS.
In addition, the SSA (Social Security Administration) will use this form to calculate the employee’s social security benefits.
Who applies for the W-2 form?
All employees who receive a salary or any other form of compensation must receive this form from their employer. Independent contractors are an exception to this case, as they file their own taxes separately.
If as an employer you pay wages of $600 or more per year for services provided by an employee, you must file a W-2 for each employee.
To summarize
In summary, Form W-4 helps the employer determine the amount of money to withhold on each payment made to the employee, according to his or her current status. And although the obligation is the employee’s, the employer should always be aware that the information obtained or not obtained from the form will be used to calculate the payroll, deductions and withholdings that must be reported to the IRS. Incorrect or outdated information can result in penalties for under withholding or exaggerated deductions. While Form W-2 is an employer’s obligation to report to the IRS and the employee, how much payroll and withholding taxes were paid during the year. It´s filed by each employee on an annual basis and also references retirement savings, child care and social security.
But most importantly, both can be filled out electronically if you have the right tool.
Is there a platform to help me with these forms?
As we’ve seen throughout the article, filling out Forms W-4 and W-2 is not something to take lightly, but it’s totally understandable that you need some help with this. The advice is to look for the best paystub generator on the market, as it will help you calculate withholding based on the W-4 form, you will be able to fill out the W-2 form online getting validation against IRS business rules to reduce the chances of form rejections, your employees will automatically receive notifications via email, you will be able to execute returns and be on top of everything instantly.
Finding the best paystub generator will make your job much easier and allow you to always stay on top of the latest IRS-related regulations, so you can focus on what matters most. Doing good business.