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Preparing for 2016: Payroll taxes

The payroll process at your company falls on the shoulders of either your human resources or finance department. Now is the time for both departments to work together to prepare payroll for the end of year. Coordinating the departments to get them collaborating can cut down on paperwork for both toward the end of the year, according to small-business section of The Houston Chronicle.

Here are some dates and tips companies large and small should keep in mind when preparing for payroll compliance at the end of the year:

1. Consult your state and local tax laws
Check for any local or state changes besides federal regulations that could affect your employees’ salaries, such as new health care provisions and tax breaks, CPA Practice Advisor reported. This year marked the start of new rollouts for the Affordable Care Act. Businesses who have 100 or more full-time staff members were required to offer health care coverage to their employees this year and must report it to the IRS using either form 1095-C or 1094-C no later than February 28, 2016, or by March 31, 2016, if filing electronically.

One crucial document payroll, finance and human resource departments should use is the IRS’ Circular E, Employer’s Tax Guide. The pamphlet gives employers up-to-date information they need regarding any changes in the federal tax code and any recent laws that could affect them. For example, companies with 50 or more full-time staff members are now classified as large-scale employers by the U.S. government and, just like those businesses with 100 or more full-time workers, must comply with the Employer Shared Responsibility Provisions under the Affordable Care Act.

Businesses also need to be aware of the new provisions for married same-sex couples, according to CPA Practice Advisor. When preparing for the end-of-year payroll, a finance department should familiarize itself with the new tax implications.

2. Reporting dates
January 31:
Payroll also has a number of due dates when it comes to reporting to the IRS. Here’s a list of the most important ones for businesses.

  • Employers must file form W-2 for all staff members, the report that details salary, tips and other forms of compensation for an employee.
  • The last day of January is also the date to file form 940, otherwise known as the Employer’s Annual Federal Unemployment Tax Return.
  • Businesses must also file form 941 by this date to report any federal income taxes they withheld.

February 28:

  • A copy of your 1099s and 1096s must be filed with the IRS.
  • Employers must also mail out or electronically file employee’s W-2 and W-3 wage earning statements to the Social Security Administration.

3. Act fast
Luckily, employers can receive a tax deduction if they act before December 31. Business expenses on items such as computers, software and office furniture made before the last day of the calendar year can be written off under Section 179 of the tax code, CPA Practice Advisor reported. According to Section, large vehicles used for business and any physical personal property used in the line of work fall under the section.

As of the beginning of this year, businesses could receive a maximum of $25,000 back, Section reported.

4. Keep your files
After a company files it’s payroll taxes, it’s always advisable to keep records of the taxes you paid. An employer should keep everything well organized including copies of the tax returns and a copy of each paycheck an employee received along with the corresponding dates and times of that work. Every staff members’ pertinent information such as their name, physical address and Social Security number should be on file, BizFilings noted.

Businesses also need copies of form W-4, the withholding exemption certificate for every employee along with any W-2 wage earning statements that didn’t reach an employee.

5. Teamwork
Figuring out payroll taxes can be a long and arduous process, but individuals from both human resources and finance departments collaborating together can provide their knowledge and expertise to prepare a company for a busy end of the year.

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