payroll tax compliance - The Payroll Company

Expert Guide to Payroll Tax Compliance - Five Essential Filings Every Business Must Follow

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.

Exactly how a company organizes its new payroll covers far
more just the salaries paid to its initial employees. A well-organized payroll structure
will shield your company from IRS and it will most like mean savings in both
time and cost. Completing company payroll properly often is a task most company’s
struggle with, so a well-structured organized payroll system is worth the cost.

See to it you take into consideration the UNITED STATE
Census Bureau suggestions generally of thumb and not gospel truth. For example,
the Bureau recommends local business to restrict pay-roll expenditures to
between 20 percent and 30 percent of gross income (earnings less the cost of
goods or services sold by the company).

The fact is that company’s payroll costs differ considerably,
depending on the company itself and the industry it is in.

Featured here please see the mandatory payroll filings to
remember when completing the new task of filing your company’s payroll during
its initial year of operations:

1. File New Hire Reports When Required

Every local business that keeps wage taxes including Income
Tax, Medicare Tax, Social Security Tax from its employee’s incomes or pays its owed
amount of Social Security Tax or Medicare Tax are required to file IRS Form 941.
This form is the Employer’s Quarterly Federal Tax Return.

Otherwise, if not file eventually trouble with the IRS will
ensue.

2. Make Certain to File W-2’s Correctly

File Form W-2 for each and every worker and Independent
Contractor (make sure a Form W-2 is filed for everyone, including family
members or friends) if your company pays them a yearly overall wages of $600(minus
withholding for income tax, social security tax, or Medicare taxes for regular
employees).

3. Never Miscalculate Wages Earned and Taxes Paid IRS Tax
Reporting Forms, Particularly Form W-3

IRS Tax Form W-3 is submitted to the Social Security Administration.
This form reports overall earnings, Social Security and Medicare earnings, and the
corresponding taxes withheld for all workers on the company payroll for the prior
year. IRS Tax Form W-3 must be submitted to the Social Security Administration
prior to the end of February each year.

4. New Hire Complete Form W-4 and Instruct Your Employees to
Update W-4s Annually

New workers fill out a W-4 form for employers each time a new
one is hired. This form gives employers the necessary information needed to collect
from employee’s wages to meet their federal government income tax obligation. Put a system in place that requires company
employees complete a Form W-4 annually.

5. Mandatory Employee Validation of Authorization to Work in the U.S. – Form I-9 Compliance

Federal legislation mandates everyone that works for an
employer in the U.S. must finish a Form I-9, the Federal Government Employment Eligibility
Verification. This form gives employers the ability to verify each employee’s
identity, as well as confirm that they are authorized to work legally in the
United States of America.

Expert Guide to Payroll Tax Compliance: Five Essential Filings Every Business Must Follow