April 15 is not the only critical tax deadline. If you are a small business owner with employees or independent contractors, January 31 is an important tax deadline you cannot afford to ignore.
The end of January is the due date for several payroll-related tax forms and tax payments. Also keep in mind that to comply with any federal tax deadline, your mailing must be postmarked on or before the due date.
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Here are the key federal payroll forms and tax payments due on January 31:
1. Form 941. Employer’s Quarterly Federal Tax Return.
This is the form used to report all employee compensation (wages, salaries, commissions, bonuses, etc) during the fourth quarter, as well as federal income tax withholdings, social security taxes and medicare taxes (both the employee’s withholding amount and the employer’s match).
If the quarter’s total tax is more than $2,500, then you should have been making payroll tax payments during the quarter according to the IRS payroll tax payment requirements. (See IRS Publication 15 for details on that.)
But if the quarter’s total tax is less than $2,500, you can pay your entire quarterly payroll tax liability with Form 941. Just be sure to include voucher Form 941-V with the return and make your check payable to the U.S. Treasury.
For more info on Form 941, here’s a good article – What Is Form 941?
2. Form 940. Employer’s Annual Federal Unemployment (FUTA) Tax Return.
This is the form used to report federal unemployment tax, which employers’ must pay (i.e. out of your own pocket) on behalf of each employee. The tax is typically 0.8% of the first $7,000 in wages paid to each employee each year. So usually the most you pay for any one employee is $56, assuming the employee had at least $7,000 in wages.
The Form 940 is only filed annually. But the 940 tax must be paid at the end of any quarter in which the unemployment tax liability reaches $500. So you should be calculating the tax every quarter to see what your liability is. If it reaches $500, make a payment by the end of the month following the end of the quarter. If it’s less than $500, you carry over the liability to the next quarter.
Most small businesses that have fewer than 10 employees usually don’t have to make a federal unemployment tax payment for quarters 1, 2 or 3. But when the 4th quarter rolls around you will have to pay the entire annual tax liability. If your total annual tax is $500 or less, you can pay it with the Form 940 (be sure to include voucher Form 940-V). If the tax is more than $500, you must pay the tax via the IRS electronic payment system (EFTPS).
For more info on Form 940, here’s another good article: What Is Form 940?
3. Form W-2. Wage and Tax Statement. You must give or mail W-2’s to all your employees no later than January 31. Employers must include Copy B, Copy C and Copy 2 along with the Instructions for Employee. In addition, you must send a copy of all W-2’s to the Social Security Administration by February 28, along with Form W-3, Transmittal of Wage and Tax Statements.
Important: If you own a corporation (or a LLC being taxed as a corporation) and you performed work for the corporation, you are considered an employee of that corporation and should pay yourself wages/salary as an employee. The IRS will make your life miserable if you are not paying yourself reasonable compensation, filing all the required payroll tax returns and paying all the payroll taxes mentioned in this article.
4. Form 1099-MISC. Miscellaneous Income. The most common use of this form is to report total annual payments to independent contractors (sole proprietors who provided services to your business) of $600 or more. You must send Copy B of the 1099-MISC to the recipient by January 31. And you must also send Copy A to the IRS by February 28, along with Form 1096.
For details on the filing requirements on Form 1099-MISC, check out this article: Who Should Receive a Form 1099-MISC?
Important: Your state probably has payroll tax forms and payments due on January 31, so be sure to check with your state’s tax department for details.