Federal Employment Taxes: Filing and Payment Requirements for Employers (Part 1)

Employers that pay wages and other forms of compensation to their employees must comply with federal tax return filing and payment/deposit requirement. Employers that receive services from non-employee contractors and make payments to these contractors must also separately report these payments.

  1. Federal Employment Tax – Form 941

a. Employers are required to collect federal employee income withholding taxes and the employee’s share of Federal Insurance Contributions Act taxes (FICA), from wages paid to employees, match the employee’s share of FICA, and deposit these combined taxes periodically with the IRS.[1] Federal employment tax deposits must generally be made electronically through the “Electronic Federal Tax Payment Systems” (EFTPS).[2]

b. The employer must file a quarterly return with the IRS, Form 941, Employer’s Quarterly Federal Tax Return, reporting wages paid, and taxes deposited during the quarter.[3] Form 941 may be filed electronically.[4]  Form 941 must be filed by Apr. 30, July 31, Oct. 31 and Jan. 31 for the calendar quarters ending Mar. 31, June 30, Sept. 30 and Dec. 31, respectively, unless monthly filing is required. However, the returns may be filed ten days later if timely deposits in full payment of the tax are made.[5]

c. Employers with annual employment tax liabilities of $1,000 or less who have received written notification from IRS they qualify for the program can file Form 944 annually, if they choose, instead of Form 941.[6]

  1. Federal Unemployment Tax – Form 940

a. Employers are also required to annually pay Federal Unemployment Tax Act taxes (FUTA) on wages paid to employees.[7] Employers are required to annually file Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, reporting taxable wages and paying the tax.

b. Taxes imposed by states for contributions to state unemployment compensation funds (SUTA) are creditable against the Employer’s annual FUTA liability.[8]

c. FUTA is the sole liability of the employer and not the employee.[9]

  1. Forms W-2/W-3

a. Form W-2, Wage and Tax Statement, must be filed annually by each employer reporting wages paid to employees. Form W-2 is filed by the employer with the Social Security Administration and transmitted to SSA through the Form W-3, Transmittal of Wage and Tax Statements. The employer is required to provide a copy of the Form W-2 to each employee. The date by which Forms W-2 must be filed with SSA and provided to each employee is January 31st.[10]

b. SSA transmits wages and tax information from the Form W-2 to the IRS.

  1. Forms 1099

a.Anyone who has paid for services from a non-employee for $600 or more must file a Form 1099-MISC, Miscellaneous Income, annually with the IRS and provide the service-provider with a copy by January 31st.[11]

 

[1] IRC §§§ 3101, 3111, 3121(a); IRC §§ 3401(a), 3402(a); Treas. Reg. § 31.3402(a)-1(b); IRC § 3403; Treas. Reg. § 31.3403-1.

[2] Rev, Proc. 97-33, 1997-2 CB 371,

[3] Treas. Reg. §§ 31.6011(a)-1, 31.6011(a)-4.  See also Instructions for Form 941 at www.irs.gov/forms-pubs.

[4] IRS Publication 3283.

[5] Treas. Reg. §§ 31.6071(a)-1(a).

[6] Treas. Reg. §§ 31.6011(a)-4(a)(4)(i).

[7] IRC § 3301, et. seq.

[8] IRC § 3302.

[9] IRC § 3301.

[10] See Instructions for Forms W-2 and W-3 at www.irs.gov/forms-pubs

[11] See Instructions for Form 1099-MISC at www.irs.gov/forms-pubs.

About the Author

Erik P. Doerring
Erik leads the firm's economic development and tax practices. He is a business lawyer, with the skills of a tax litigator. Prior to joining McNair, Erik was an attorney with the IRS Office of Chief Counsel and the U.S. Department of Justice, Tax Division.