An Overview of the Annual Payroll Reports for Employers

As you prepare to file the annual payroll reports for your company, it is important to have everything in order. This post is here to help!Whether you are brand new to payroll reports or just need a refresher, this guide exists to give you a clear overview of the requirements. 

What are annual payroll reports?

Annual payroll reports are the tax forms that employers use to report income, unemployment taxes, and payments to independent contractors. 

They are always due within the first quarter of the year that follows the payout. 

Form W-2 and Form W-3

If you have ever been paid as an employee of a US company, then you have received a W-2. This is the form that employees use to file their personal income tax return. It is used to report both gross wages and federal tax withholdings. 

A Form W-3 (Transmittal of Wage and Tax Statements), on the other hand, is used to report the total wages and tax withholdings of an employer. 

Form W-3 is submitted alongside a copy of each W-2 that you issued that year. Although most businesses submit these forms electronically, there is an option to submit paper forms if that is what you prefer. Regardless of paper or electronic filing, these forms must be submitted to the SSA (Social Security Administration) by February 1st. 

February 1st is also the date by which you must send out W-2s to each of your employees. 

Form 940

Before discussing Form 940, it is important to understand FUTA.

FUTA stands for the Federal Unemployment Tax Act, whereas SUTA stands for State Unemployment Tax Act. Both of these laws provide temporary income for workers who qualify for unemployment. Typically, when a worker loses employment by no fault of their own, they collect unemployment.

FUTA taxes paid in accordance with FUTA and SUTA fund these important programs in conjunction with federal and state budgets. Be sure to check the SUTA laws in your state to be compliant. 

If your business pays $1500 or more to employees during the calendar year, you are required to pay FUTA taxes. The tax rate in 2021 is calculated by taking 6% of the first $7000 earned by each of your employees. 5.4% of the total you pay into state unemployment can be used to calculate an additional tax credit for your business. 

FUTA taxes are generally filed electronically and are due quarterly. You have to file them on the last day of the first month following the end of the quarter. 

Form 940 is the annual form that documents all FUTA taxes paid throughout the previous year. 2021’s Form 940 will need to be filed by Monday, January 31, 2022. 

Form 1096

Employers must file forms related to their use of independent contractors and freelancers. Keep in mind that each state has different laws governing the use of independent contractors and freelancers, so the business must abide by those laws. 

Form 1096 is the Annual Summary and Transmittal of US Information Returns. It reports all money that was paid out accompanying Form 1099, as well as the gross earnings paid. 

You can use Form 1099-NEC or Form 1099[18] to report compensation paid to individuals who are not your employees, but whom you hired for contract or freelance work. Because Form 1099 does not include any withholdings for FICA or income taxes, Form 1096 is an essential part of reporting. 

If your company paid any individual $600 or more, you need to provide them with a 1099.

January 31, 2022 is the deadline for filing Forms 1099 and 1096. That same date is when you must submit 1099 forms to any independent contractor or freelancer you worked with in the 2021 calendar year. 

Form 944

Some small businesses may have less than $1000 in liability for federal income taxes and FICA. If this describes your business, you may file Form 944, which allows you to pay taxes annually instead of quarterly. 

The form for 2021 will be due on January 31, 2022.