I dread January of every year. I have to spend so much time preparing the year-end payroll reports prior to the January 31 deadline. Not only must your quarterly’s and monthly’s tie together, but it has to match the general ledger at year-end. If you do these steps now in early December, then you only have to tie December’s payroll information to the final quarter and then to the year-end information in January. It will save you a lot of time in January.
It’s important to get the payroll documents correct. There are several reasons why:
1. The Internal Revenue Service has steep penalties for failure to provide accurate (to the penny) information to both them and the Social Security Administration. Your quarterly payroll reports (Form 941) must tie to the annual report (W-3) and to the year-end employee reports (W-2). Furthermore, all this information should also tie to your state unemployment documents and the IRS annual Form 940 for Federal Unemployment Tax. So by making sure the first 11 months are correct, you will save yourself a lot of time in January.
2. Employees get really upset if their W-2 information is wrong. They will call you every day until you get it corrected. I personally like to send out year-end reports to each one asking them if there are any errors or missing information prior to printing the final forms. Furthermore, errors with an employee’s report means errors with the IRS and the Social Security Administration. This means you have to file correction statements. This can and usually generates a lot of heartache.
3. The Internal Revenue Service is getting serious about the Subcontractor Reports effective in 2012. Failure to document and report the information correctly will generate a lot of nasty letters and communication issues with the IRS. The penalties alone should give you notice of how serious this is. Intentional disregard is $250 per form. So if you are a contractor – LOOK OUT! So for now, focus on getting the following from your subs:
a. Their correct federal identification number (EIN or FEIN); this is the 9 digit number similar to a social security number.
b. Get the name correctly spelled, i.e. the legal name with the commas.
c. Get the correct address and post office box.
d. Get the trading name or T/A or DBA (Doing Business As) name.
e. Since you are on the phone with them, go ahead and get the Workman’s Compensation Insurance Certificate faxed over to you.
By taking these steps now, you will save yourself a lot of heartache come January and you will not have to deal with the sense of urgency. Review my resources page for more information: https://businessecon.org/resources/ and look in the IRS section. Act on Knowledge.