The end of the year, for employers, means that tax season is almost upon us. One big tax task in January and February is year end tax summaries for employees and contract workers. Yes, I'm talking about W-2s for employees and 1099-MISC forms for independent contractors.
The W-2 process has 3 steps:
1. Preparing W-2 forms
2. Distributing the forms to employees, before January 31, 2013, for 2012 taxes, and
3. Filing the W-2 forms, along with transmission form W-3, with the Social Security Administration before February 28.
But before you begin working on those forms, take some time to consider these questions:
1. Make sure you have classified workers correctly as employees instead of independent contractors. If you aren't sure of status, learn how to distinguish employees vs. contractors.
3. Gather information on employees for W-2s. You will need personal information and total wages and withholding amounts, as well as taxable benefits.
4. Decide how W-2s will be created and distributed to employees. Will you use a tax preparation program, do it yourself, or get a payroll service?
5. Decide how to handle employee requests for duplicate W-2 forms. What if an employee wants several copies? (It happens!)
6. Decide how you will submit W-2 and W-3 forms to the Social Security Administration. One option: Use Business Services Online.
7. Finally, be sure to check with your state's taxing authority to find out how to handle state W-2 forms.