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Year End Requires Reporting to IRS and SSA

By: Mike Gallagher
District Director
North Dakota District Office

As taxpayers, we start to look for our tax returns and W-2 forms shortly after the New Year’s celebrations. As a business owner, you have additional responsibilities and time lines to meet if you  have employees or have made various payments to individuals or other organizations.

Form W-2 Wage and Tax Statement and Form W-3 Transmittal of Wage and Tax Statements
Most of us are familiar with the W-2 form. A completed Form W-2 must be given to each employee who has been compensated for services performed (including noncash payments) of $600 or more (even if the employee is related to the employer); from whom

  • income, social security, or Medicare taxes were withheld; and
  • income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4.

A completed W-2 form must be sent to each employee no later than January 31, 2017. In addition you must file a Form W-3, along with Copy A of each Form W-2, with the Social Security Administration (SSA) no later than January 31, 2017.

The W-3 form may be submitted electronically at www.socialsecurity.gov/employer. This is a very handy website which will automatically complete a W-3 form from the data that you key in for the W-2 forms. It will verify the calculations for social security and Medicare on each form and will verify that the social security number and employee’s name matches the SSA database. This site also allows you to save the W-2 in a PDF format so that you can print copies for yourself and for your employees. The website offers instructions and tutorials on how to use the online service. Registration is required to use this reporting service. Since they send your User ID and temporary password in the mail, you will need to allow sufficient time to use this method in meeting your 2016 reporting obligations, if you do not presently have a User ID.

A couple notes of caution
First, make sure your totals equal the total amount you have reported on your Form 941 Employers Federal Quarterly Tax Returns during the year. These totals should also match what you have reported to your state for each quarter during the year.

Second, make sure you keep copies of the Form W-3 and Copy D (For Employer) of Forms W-2. A paper copy as well as an electronic copy is probably best.

IRS Form 1099
In addition to reporting payments made to employees, businesses and certain other organizations are also required to report certain payments made to nonemployee recipients in the course of trade or business. The IRS Form 1099 series is used for this purpose. Most of us are familiar with the Form 1099 as we would receive one from our bank for interest we may have paid on loans or interest income earned on our savings accounts.

IRS Form 1099-MISC
Business owners are required to complete a Form 1099-MISC to report rent, non-employee and independent contractor compensation, and various other types of income and payments. This would include payments for rents or services that are at least $600 and the gross proceeds to an attorney. Additionally, this form is used to report direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

If you are in the coin-operated amusement business, you would use Form 1099-MISC to report payments to the owner of a business establishment for allowing the space to place your device in their business.

There are a host of other situations where the Form 1099-MISC is used. It may be advisable to review the instructions for Form 1099-MISC on the IRS website.

IRS Form 1099-INT and Form 1096 Annual Summary and Transmittal of U.S. Information Returns
If in the course of your trade or business you paid at least $10 interest to a person, you are required to provide them with a Form 1099-INT. A Form 1096, with copies of the 1099-INT, must be submitted to the IRS by February 28, 2017.

IRS Form 944 Annual Employment Tax Filing
IRS  Form 944 is designed so the smallest employers (those whose annual liability for social security, Medicare, and withheld federal income taxes in $1,000 or less) pay these taxes only once a year instead of every quarter. The IRS will inform you of the need to file a Form 944 if a previously filed Form 941 indicated your employment tax liability is less than $1,000.

Through electronic means, the federal government has significantly improved the ability to make timely and complete reporting of employee and other information. As an employer, you must be familiar with your responsibilities and take actions to make sure you have fulfilled your obligations. Tax reporting is complex, so don’t be afraid to ask questions when in doubt.


Mike GallagherMike Gallagher joined the U.S. Small Business Administration in 1984 as a Business Development Specialist.  He was chosen as the Deputy District Director in 2005 and the District Director in November 2013.  A graduate of the University of North Dakota, Mike is a Certified Public Accountant and a former business owner.  He can be reached at michael.gallagher@sba.gov.