December 26, 2011 Leave a comment
Small businesses dread this time of the year. Heck, I dread it… I’ve seen enterprises of all shapes and sizes put off this crucial task as long as they can, hoping it would somehow go away. However, year-end reconciliations, for both IRS compliance and internal records and P&L purposes, don’t need to hurt as long as you stay organized.
Key compliance tasks for year-end reconciliation of federal and state tax matters include:
- Employee Wages and Taxes – each quarter, you should have sent the federal government a Form 941-SS, which summarized your employees’ wages and withholdings. At the end of the year, you will need to send the Social Security Administration a W-2 form showing how much each employee was paid, and how much was withheld, in addition to W-3, which is a summary of all the W-2 forms. Lastly, if your state has an income tax, you must send in an annual reconciliation along with copies of the W-2s.
- Contractor 1099 Payments – similar to W-2 employees, each contractor gets a 1099 at year-end, and you will need to send a 1096, which is summary of all 1099s, to the federal government.
Regardless of how independent or self-reliant you may be, bear in mind that the market provides you with a sound way to avoid creating a year-end rush and a long-term operating issue. For a minimal fee your payroll services provider will file all compliance paperwork and mail W-2s and 1099s for you. You will simply need to verify transactions and documentation with your agent. Stay organized through the year and leave the hard work to payroll provider at year-end.
Year End Reconciliation for SMBs – A Three Part Series