A Guide to Essential Payroll Forms & More for Small Business Owners

September 4, 2021

Running any successful business requires dealing with a lot of mandatory paperworks.

With pages of various forms and multiple due dates, it can quickly become overwhelming for a single person to manage, especially if you’re a new business owner. Fortunately, there are solutions that will help you overcome these challenges and lead your business to success.

We’ve created this guide to provide an overview of the most common payroll forms for small businesses you’ll run into, neatly organized for your convenience.

Whether you’re trying to do it all yourself or simply want to learn more about payroll forms and payroll reports, you’re sure to learn something from the in-depth list below! Keep reading.

Essential Initial Payroll Forms

To begin our comprehensive list of payroll forms, we’ll start right at the beginning with a short list of the essential forms you’ll need to complete before commencing business.

The completion of these forms allows your company to legally function as a business entity according to the minimum requirements set out by the federal government.

However, this doesn’t necessarily mean that your local jurisdictions (state or local) may not have additional requirements, so we highly recommend looking into this while completing the mandatory federal forms.

SS-4 Application

Before you can set up payroll for your business, you’ll need to register an EIN (Employer Identification Number) for your company. The IRS allows you to do this for free on their website.

After applying, your business will be assigned a nine-digit number that will serve as a way for the IRS to identify your company (for tax purposes).

This number is extremely important; without it, you will be unable to create company bank accounts, run your payroll, or file taxes, so you should get on this right away (even if your business is still in the process of being established).

Form 8655

This form may be optional: it depends entirely on how you choose to manage your payroll.

Are you planning on managing your payroll personally, or are you planning on outsourcing the job?

If you chose the latter then you’ll need to complete Form 8655.

This form authorizes a third party (your choice of reporting agent) to manage and file payroll taxes on behalf of your company.

Fortunately, this form will be provided by your payroll service provider so you won’t need to track it down yourself. Be sure to complete it right away. Your service provider can’t provide any payroll services until you do!

It’s also worth enrolling in the EFTPS (Electronic Federal Tax Payment System).

Enrolling will allow you to track payments yourself, ensuring that no payments have been missed or made late by your agent.

Employee Onboarding Forms

Next, we’ll take a look at the forms you’ll need to have available for new hires to complete.

The Equal Employment Opportunity Commission (EEOC) requires you to keep all employee information on file for at least one year after employee termination or resignation.

However, the IRS may have longer requirements for retaining files depending on the particular form, so you’ll want to ensure that you comply with these requirements as well. Failure to do so will not end well if the IRS decides to audit your business, since these forms will be requested as part of the audit.

Form W-4

Chances are, you’ve probably seen this form before. Form W-4 is an IRS-issued form that businesses are required to have completed by all employees before work can begin.

This form collects a variety of important information about the employee, such as their name, Social Security number, current address, and dependents that will be added to the IRS’s records.

However, the most important information collected is deduction information, which will be used to calculate the amount of money withheld throughout the year for income & FICA taxes.

Employee information may change from time to time, so it’s important that you encourage employees to complete a new W-4 when their personal or financial situations change. If not, their deductions may not be correct, meaning they’ll have an incorrect amount withheld from their paychecks which may result in the under (or over) paying of their taxes.

Employee Information Sheet

Unlike most of the other forms included in this list, an employee information sheet is not a mandated form.

However, these sheets collect vital information relevant to that specific employee so we highly recommend including one in your standard onboarding paperwork. The employee information sheet may contain information such as the employee’s address, contact information, pay rate, start date, spouse information, and emergency contact information.

Generally speaking, employers won’t need to reference these forms often, but they can be extremely useful in the event of a work-related incident as well as for maintaining records on both current and past employees.

Form I-9

In order to be legally approved to work, potential employees must prove that they are authorized to work in the United States. Form I-9, also known as the Employment Eligibility Verification form, serves this purpose.

This form is provided by U.S. Citizen and Immigration Services (part of the Department of Homeland Security) and must be completed by every new hire before work can commence.

The new employees must not only complete and sign this form, but also provide you (the employer) with proof of residency for your records. Acceptable documentation for proof of residency varies, but common options include state IDs, driver’s licenses, passports, and Social Security cards.

Direct Deposit Authorization Form

Unless you plan on paying your employees via cash or check, you’ll need to have them complete a Direct Deposit Authorization Form.

As the name suggests, this document provides authorization for the employer to make direct deposits into the employee’s bank account using the ABA routing number and the employee’s personal account number.

This form will need to be completed, signed, and returned before you can begin to pay the employee via direct deposit. If the employee hasn’t completed and returned this form by the end of the first pay period, you will need to provide them with a paper check instead.

Form W-9

Unlike with part and full-time employees, you (the employer) are not required to withhold income or FICA taxes when paying independent contractors (also referred to as freelancers).

However, the IRS still requires employers to gather contractor information to ensure that the contractors pay the proper taxes due. Therefore, when hiring an independent contractor who you anticipate paying over $600 (throughout the entire year), you’ll need to have them complete a Form W-9.

However, if you anticipate paying the contractor less than $600 for the entire year then you’re not required to have them complete a Form W-9. You will need to keep this form on file, but you’re not required to submit it to the IRS unless requested.

Crucial Business Tax Forms

Now that you’ve learned what paperwork and forms you’ll need to register your business and begin to hire employees, let’s go over the various other forms you’ll be dealing with moving forward.

You’ll want to pay close attention to the due dates of each individual form since some forms must be submitted more often than others. Like the employee onboarding forms listed above, the IRS may require you to keep some of these files on record, so you should double-check before throwing out any old files or forms.

Although this is not a complete list of each and every form you’ll ever need throughout the entire duration of running your business, these are the most common forms that you’re likely to deal with year after year.

Form W-2

The Wage and Tax Statement (commonly referred to as Form W-2) is an end-of-the-year form that you (the employer) will need to submit both to your employees and the IRS.

This form summarizes an employee’s earnings for the year and also discloses the amount of taxes withheld.

Taxes withheld may include federal income tax, state income tax, local income tax, and FICA taxes (Medicare and Social Security). You won’t need to fill these forms out until the end of the fiscal year, but you must provide both your employees and the IRS copies by January 31st of the new year.

Form W-3

Unlike Form W-2, which provides specific income and tax information on a per-employee basis, Form W-3 provides a summary of the total wages paid and taxes withheld throughout the entire year for every employee.

In addition to your Form W-2’s for each employee, you will also need to submit your Form W-3 alongside the other documentation.

However, Form W-3 does not need to be provided to your employees, only the IRS. Similar to Form W-2, you must submit your Form W-3 by January 31st of the following year.

Form 940

All employers are required to pay FUTA (Federal Unemployment Tax Act) taxes on the amount paid to employees throughout the year (or, in some cases, per quarter), which is done using Form 940.

Currently, the FUTA rate sits at 6.0%, with a maximum payment of $7,000 due per year per employee.

You may have to pay less depending on if your state requires an unemployment tax. If you owe less than $500, then you’re not required to pay FUTA taxes for that quarter. However, FUTA taxes are due once the amount owed exceeds a total of $500.

Currently, the quarterly due dates fall on April 30th, July 31st, October 31st, and January 31st.

Form 941

This form is used to report employee compensation and the taxes withheld so far. The withholdings reported on this form include both income and FICA taxes.

In addition to providing employee withholdings so far, Form 941 also provides the IRS with employer withholding information. Form 941 must be submitted to the IRS every quarter and is also used to calculate employer FICA taxes due.

Form 944

If your company is one of the few businesses that have an annual tax liability of less than $1,000, you’ll file a Form 944 instead of Form 941. Annual liability includes Social Security, Medicare, and federal income taxes due, so the vast majority of businesses do not meet the requirements for submitting a Form 944.

If your business does meet the requirements, then the IRS will usually notify you that you’re eligible to complete Form 944. However, if you do not receive a notification but still believe that your business is eligible, you can reach out to the IRS by phone or mail to request Form 944.

It’s important to remember that you only file Form 944 or Form 941; never file both!

Unlike Form 941, Form 944 is an annual report that only needs to be filed once at the end of the year. It must be submitted to the IRS by January 31st.

Form 1094-B

Acting as “proof of insurance” on a per-individual basis, a copy of Form 1094-B is provided to every employee (as well as the IRS) at the end of the year.

It provides the name of the employer, the name of the insurance company, and the insurance company’s contact information (address & phone number).

Form 1095-B

This short form acts as “proof of insurance” for your business. Generally one page, Form 1094-B is generally provided to the IRS by your insurer & summarizes your individual employee’s health care plans as provided on the Form 1094-B paperwork.

Form 1099

When you hire an independent contractor, their yearly information must be reported using Form 1099, rather than Form W-2.

However, you’re only required to provide Form 1099 if the independent contractor earned over $600 throughout the entire year, meaning you may not need to provide them for small, one-time jobs.

However, if you are required to submit a Form 1099, you must provide one copy to the contractor and another to the IRS.

Like W-2s, these forms must be sent out by January 31st at the latest.

Failure to do so will result in a penalty from the IRS for each form distributed late.

If your state has a state income tax, you may also be required to send a Form 1099 to your state tax authority as well.

Summary

Payroll forms and payroll reports are certainly plentiful, but that doesn’t mean that they’re unmanageable. The most important part of managing your payroll is keeping an accurate record of any due dates, as even accidentally missing a due date may result in unnecessary (and hefty) fines from the IRS.

Although the vast majority of companies will find it much easier to manage their payroll using payroll software, there are other alternatives (such as doing it yourself, hiring an internal payroll staff, or outsourcing your payroll) you may want to consider.

Ultimately, the decision of how to manage your payroll is up to you, but after reading the list above, you’ll at least have a general idea of the files/forms you’ll be dealing with and how to approach them.

Want to learn more about the benefits of using payroll software? Click here!