Reporting Taxes
Remitting & Reporting Payroll Taxes
Federal Payroll Reporting (Monthly and Quarterly)
North Carolina Payroll Reporting (Quarterly)
Federal Payroll Reporting (Year-End)
North Carolina Payroll Reporting (Year-End)
North Carolina Unemployment Tax Reporting (Quarterly)
Federal Form's 1099 (Year-End)
Remitting & Reporting Payroll Taxes
After applying for and obtaining withholding identification numbers, businesses with employees will be required to periodically remit amounts withheld from employees and remit employer payroll taxes. Specific payroll tax reports are required with each type of tax remitted.
It is recommended that businesses with employees establish a payroll checking account separate from the operating account, and regularly fund the payroll account with an amount that equals gross pay plus employer payroll taxes. The recommended minimum funding rate is 107.65% of gross wages. The additional 7.65% represents employer FICA matching taxes.
Small businesses with several employees should consider engaging a payroll service firm. These firms are quality providers of payroll disbursement checks, monthly & quarterly payroll reports, and year-end compliance filings.
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Federal Payroll Reporting (Monthly and Quarterly)
Federal payroll withholding amounts are determined from the IRS Publication 15, Circular E, Employer's Tax Guide. This publication is used in conjunction with the employee completed Form W-4, Employee's Withholding Allowance Certificate, to compute Federal withholding amounts.
Small employers must remit to a local depository bank on or before the 15th of each month their Federal payroll liability for the preceding month. Form 8109, Federal Tax Deposit Coupon is required with the remitted deposit amount. "Federal payroll liability" is the sum of employee Federal withholdings and employer FICA matching taxes.
On or before the 30th of the month following the end of each calendar quarter employers must file Form 941, Employer's Quarterly Federal Tax Return. This form summarizes the preceding three monthly deposits, and if necessary, determines any deficiency or overpayment.
At the end of each calendar quarter employers must calculate and remit Federal unemployment taxes to a local depository bank. This tax is also referred to as the "FUTA" tax. The tax rate is .8% (i.e. the tax is .008 x gross wages). Form 8109, Federal Tax Deposit Coupon, is required with the remitted deposit amount. After an employee's gross pay exceeds $7,000, no further tax is due for that employee's wages for that calendar year.
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North Carolina Payroll Reporting (Quarterly)
North Carolina payroll withholding amounts are determined from Publication NC-30, Income Tax Withholding Tables and Instructions for Employers. This publication is used in conjunction with the employee completed Form NC-4, Employee's Withholding Allowance Certificate, to compute the North Carolina withholding amounts.
Use Form NC-5, Employer's Report of North Carolina Income Tax Withheld, to remit quarterly or monthly employee payroll withholdings to the North Carolina Department of Revenue.
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Federal Payroll Reporting (Year-End)
At the end of each calendar year, employers must summarize on Form W-2, Wage And Tax Statement, payroll information for each employee. This information must be remitted to the employee by January 31st. This information must also be separately remitted to the Social Security Administration with Form W-3, Transmittal Of Wage & Tax Statements, by February 28th.
At the end of each calendar year employers must complete and file Form 940, Employers Annual Federal Unemployment Tax Return. This form summarizes the FUTA tax deposits and determines deficiency or overpayment.
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North Carolina Payroll Reporting (Year-End)
Use form NC-3, Employer's Annual Reconciliation of NC Income Tax Withheld. This form and "State" of the Form W-2 is filed before February 28th.
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North Carolina Unemployment Tax Reporting (Quarterly)
North Carolina quarterly unemployment taxes are computed and reported on Form NCUI 101, Employer's Quarterly Tax And Wage Report. This tax is also known as the "SUTA" tax. For new employers the rate is 1.20% (i.e. the tax is .012 x gross pay). After an employee's gross pay exceeds $13,900, no further tax is due for that employee for that year. No annual reconciliation report is required. The tax is remitted to the Employment Security Commission of North Carolina.
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Federal Form's 1099 (Year-End)
At the end of each calendar year businesses must summarize and report certain information on various Form 1099's. Common items requiring reporting are;
- Rent paid to landlords
- Interest paid on debt
- Dividends Paid on stock
- Amounts paid for nonemployee compensation (e.g. contractors)
All Form 1099's require that the business indicates the identification number and address of the recipient. A Form 1099 must be sent to each recipient by January 31st. Use Form 1096 Annual Summary and Transmittal of U.S. Information Returns to summarize similar 1099's. Form 1096 is due by February 28th.
Nonemployee compensation paid during any calendar year in the amount of $600 or more to a recipient will require a form 1099. Dividends paid by corporations to individuals in the amount of $10 or more will require a Form 1099.
Businesses should collect the identification number and address of the recipient as soon as possible, and not later than the time for remittance (i.e. Use form W-9, Request for Taxpayer Identification Number Certificate). No small amount of grief is incurred at year-end tracking down missing information. Additionally, businesses that fail to obtain Identification Numbers are required to withhold 20% of the total for federal income tax purposes.
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