Managing payroll is far more than just issuing paychecks—it’s about ensuring compliance with complex tax laws, avoiding IRS penalties, and structuring your payroll efficiently to save time and costs. Businesses that fail to maintain proper payroll records and meet federal filing requirements risk significant fines and legal repercussions.

A well-organized payroll system not only ensures seamless payroll processing but also shields your company from unnecessary IRS scrutiny. To help your business stay tax compliant, here are five mandatory payroll filings that must be completed on time.

1. File New Hire Reports & IRS Form 941

Every business that withholds payroll taxes (Income Tax, Medicare Tax, and Social Security Tax) or pays employer contributions for Social Security and Medicare must file IRS Form 941 (Employer’s Quarterly Federal Tax Return).

Who Must File?

• Every employer withholds taxes from employees’ wages.
• Filing Frequency: Quarterly (April, July, October, and January).
• Why It Matters? Failure to file Form 941 results in IRS penalties and interest on unpaid taxes.

Additionally, employers must report all new hires to their state’s New Hire Reporting Program, ensuring compliance with federal and state workforce tracking regulations.

Failing to file IRS Form 941 will lead to IRS enforcement actions, including financial penalties and legal consequences.

2. File Form W-2 for Every Employee

• IRS Form W-2 is a mandatory annual tax form that reports an employee’s earnings, tax withholdings, and other payroll-related details. Employers must provide a W-2 for every employee, including family members or friends working for the company.
• Who Must Receive a W-2? Any employee earning $600 or more annually (excluding independent contractors).
• Filing Deadline: Employers must send copies to employees by January 31 and file with the IRS & Social Security Administration by the end of February.

Common Mistakes to Avoid:

• Incorrect employee details (SSN, name, address).
• Reporting the wrong taxable wages.
• Failing to submit electronic W-2 forms if required by law.

• Missing or incorrect W-2 filings can trigger IRS audits and financial penalties.

3. Accurately File IRS Tax Form W-3

Form W-3 serves as a summary of all W-2 forms filed by the employer. It reports the total wages paid, Social Security and Medicare earnings, and total withholdings for all employees.

• Who Must File? Any employer required to submit W-2s.
• Filing Deadline: February 28 (paper filing) or March 31 (electronic filing).
• Why It’s Critical? Inaccurate or late filings may result in fines and processing delays that impact employee tax returns.
• Employers who fail to submit Form W-3 risk delayed tax refunds for employees and IRS penalties for non-compliance.

4. Employees Must Complete Form W-4 and Update It Annually

IRS Form W-4 is used to calculate how much federal income tax should be withheld from an employee’s paycheck. Employees complete a W-4 upon hiring, but it’s critical to update W-4 forms annually to reflect changes in tax status.

Who Must Complete a W-4? Every employee at the time of hire.

Employer Best Practice:

• Implement an annual review process for employees to update W-4 forms.
• Ensure proper withholding adjustments to prevent underpayment or overpayment of taxes.
• Failure to collect W-4 forms from new hires can result in IRS penalties and incorrect tax withholdings.

5. Verify Employee Work Authorization (Form I-9 Compliance)

Federal law mandates that all employees working in the U.S. must complete Form I-9 (Employment Eligibility Verification). This form ensures that employees are legally authorized to work in the United States.

• Who Must Complete Form I-9? Every new hire, including U.S. citizens and non-citizens.
• Deadline: Must be completed within three days of hire.

Employer Responsibility:

• Maintain completed I-9 forms for at least three years.
• Verify identity and employment authorization documents (e.g., passport, work visa, green card, driver’s license).
• Employers failing to comply with Form I-9 regulations may face federal fines and legal action.

The Bottom Line: Payroll Compliance is Non-Negotiable

A company’s payroll system must be structured for efficiency, compliance, and accuracy. Keeping up with federal payroll requirements is essential to avoid costly IRS penalties, legal issues, and employee tax complications.

By outsourcing payroll processing or using a payroll service provider, businesses can streamline payroll tax compliance, eliminate costly mistakes, and focus on growth.

Ensure compliance. File accurately. Avoid penalties. Protect your business.