The end of the calendar year will soon be upon us. There are a few items to keep in mind as you begin to think about government forms that must be submitted in January.
Employers often give their employees holiday bonuses around the end of the year. It is important to remember that all bonuses must be included in the taxable wages reported on Form W-2. This includes cash bonuses as well as the value of other gift items. The employer can choose to absorb all the payroll taxes related to the bonus, but this needs to be calculated carefully for proper reporting.
It is important to get address updates for your current or former employees if they change during the year. This may require some additional time and effort for those that have moved away from the area. It would be a good idea to get started gathering this information before the end of the year.
Industry Specific Exceptions or Specialties
Subchapter S corporations are different from other business entity types when it comes to W-2 preparation. There are special rules related to reporting health insurance premiums paid by the company on behalf of employees that also own greater than 2% of the company stock. These premiums should be included in Box 1 federal taxable wages and Box 16 state taxable wages. The premiums total should also be reported in Box 14 with “2% Health Ins” noted.
Correct Form Filing
Over the last few years, the IRS has significantly increased the penalties for not filing 1099 forms. It is important to understand the laws and issue all 1099 forms required based on your vendor types and payments made during the year. You must have the vendor’s correct name, address, and EIN reported on the 1099 forms. Requiring your vendors to complete a Form W-9 before they are paid is the easiest way to get this information.
WOTC Eligible Employees
Take some time to review the Work Opportunity Tax Credit (WOTC) and the list of target groups that identify eligible employees. You must identify an eligible employee at the time they are hired, complete required forms, and submit them to the IRS and state workforce agency. A common target group used by employers is based on the county the employee lives in. There are thirty counties in the state of Iowa that have been designated as eligible for this credit.
These are just a few topics to consider as the end of the year approaches. If you need any clarification or additional information about these topics, please contact the accounting services professionals at your local TDT office.
Jodi Kerr, CPA, and TDT Tax Partner specializes in small business consulting, individual and business tax compliance.