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Employer Responsibilities and Required Tax Forms


Part 3 of 3: How to Pay Employees

Most state and federal agencies require employers to report employer and employee wage and tax information each quarter using payroll tax returns. These usually include the employee’s name, social security number and gross wages paid for the quarter.

This information is used to verify an employee's eligibility for state unemployment insurance and the amount of compensation benefits to be paid. Payroll tax returns are also used to reconcile the tax deposits remitted.

The primary federal forms are the following:

  • Form 941, Employer’s Quarterly Federal Tax Return. It reports wages and taxes for federal income tax, employee social security and Medicare tax, and employer social security and Medicare tax. Form 941 is filed quarterly.
  • Form 940, Employer’s Annual Federal Unemployment Tax Return. This form reports wages and taxes for FUTA. Deposits are made quarterly. If over $500, the return is filed annually.
  • Form W-2, Wage and Tax Statement. This form is used to report individual employee wages and taxes. Filed annually, one copy is given to employees and another is filed with the Social Security Administration.
  • Form W-3, Transmittal of Wage and Tax Statements. The W-3 summarizes information reported on Form W-2. It goes annually to the Social Security Administration along with Form W-2.

Quarterly state-specific unemployment insurance forms report wages and SUI taxes.

Various withholding forms report wages and taxes for state and local withholding.

Business owners may decide to hire an accountant, tax professional, or outside vendor to deal with payroll tax filing. It is important, however, that owners have an understanding of the tax system. The responsibility for fulfilling business tax obligations is ultimately theirs.

This has been an abbreviated version of one chapter in the free e-book 7 Questions Every Small Business that Hires Employees Will Have to Answer.

For more details on this topic, download the free e-book at paychex.com/7questions.

Part 2 - How to Pay Payroll Taxes and Deposits

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.