5 Tips to Get Ready for Filing W-2 and More

5 Tips to Get Ready for Filing W-2 and More https://ift.tt/2V7mItc

Filing W-2

Businesses not only have to file their income tax returns, but also various information returns. The failure to file these other returns can result in costly penalties. Here are some forms you’ll need to file in 2021 to report payments in 2020.

W-2 Filing Tips for 2020

Start preparing now so you can timely submit them. Here are some tips to help you.

1. Prepare now to complete and file required forms

Gather the information you’ll need to prepare required forms. This means reviewing payroll records for each employee, including those who are no longer on your payroll, as well as other records for any independent contractors engaged during 2020.

Decide who is going to prepare returns for you. Will you do it in house? Use a CPA or payroll service provider? If you DIY, obtain the required forms from the IRS (it can take a week, two weeks, or more to receive) or an office supply store, or check your business tax preparation software for its capability. You can’t simply download them from the IRS website.

Determine how you’ll submit forms to workers and to the government. For employees, you can provide them in person, by mail, or electronically if you obtain their prior consent for electronic delivery (e.g., email or access to an online portal). For the government, you can file on paper if you aren’t required to file electronically, but you can choose to file electronically.

Mark your calendar as described below so you don’t miss any deadlines.

2. File W-2s for employees

If you have any employees, you must provide them with Form W-2 reporting wages and certain benefits they received in 2020. The due date for 2020 W-2s is February 1, 2021 (January 31, the usual deadline, is a Sunday). Be sure to include any paid sick leave and paid family leave benefits for employees impacted by COVID-19.

If you opted to defer the employees’ share of Social Security taxes (part of FICA) on wages from September 1, 2020, through December 31, 2020, you’ll also have to file Form W-2c to report the catchup withholding from January 1, 2021, through April 30, 2021.

Be sure to timely transmit copies of W-2s, along with Form W-3, to the Social Security Administration (not the IRS). This can be done electronically. If your CPA or payroll company doesn’t do this for you, register to use Business Services Online.

3. Report payments to independent contractors

If you paid any independent contractor $600 or more in 2020, you must provide the worker Form 1099-NEC. This is a new form for 2020 payments; previously such payments were reported in box 7 of Form 1099-MISC.

The deadline for Form 1099-NEC is the same for W-2s. A copy of the form must be transmitted to the IRS by the same date used for W-2s.

4. Report distributions from qualified retirement plans

Did any employee receive a distribution from the company’s qualified retirement plan? Perhaps a qualified coronavirus distribution up to $100,000? All distributions, qualified or not, must be reported to employees on Form 1099-R.

There’s a new section for reporting distributions in 2020 up to $5,000 for qualified birth or adoption expenses. There’s also a new code (“BA”) for reporting a repayment of such distributions.

The 2020 Form 1099-R must be provided to the recipient by February 1, 2021. Transmittal of copies to the IRS are due by March 1, 2021, if filed on paper, or by March 31, 2021, if filing electronically.

5. Report company-provided medical coverage

If you are an applicable large employer (ALE) subject to the Affordable Care Act’s employer mandate, you must provide employees with Form 1095-C to inform them of health coverage particulars. Similarly, if you are not an ALE but have a self-insured medical plan providing minimum essential health coverage, such as an individual coverage health reimbursement plan (ICHRA), you must give covered employees Form 1095-B.

The deadline for providing employees with their forms is March 2, 2021. However, different dates apply for submitting copies to the IRS, along with transmittal forms 1094-C or 1094-B: March 1, 2021, if filing on paper, or March 31, 2021, if filing electronically.

Conclusion

The sooner you begin preparations for meeting information return responsibilities, the easier it will be to meet the deadlines and avoid penalties.

Image: Depositphotos.com

This article, "5 Tips to Get Ready for Filing W-2 and More" was first published on Small Business Trends

No comments

Note: Only a member of this blog may post a comment.

Powered by Blogger.