Three tips for wage tax do-it-yourselfers

Here are three tips if you prepare your own W2 and 1099 forms for your small business:

The first tip is that there is no need to purchase the stock forms from an office supply store. The forms are available for free from IRS at https://www.irs.gov/Businesses/Online-Ordering-for-Information-Returns-and-Employer-Returns .

The second tip is don’t do this again! If you had a logical conversation on this topic it would be easy to arrive at the conclusion that it is cheaper (just in terms of the time you save alone) to use a service that does this task than do it yourself. In may cases this function is already build into or can be easily added to your existing accounting software. Besides the immediate cost factor, you should consider the risk of penalties for improperly prepared wage tax forms. IRS says that 40% of small businesses eventually mess up and have to pay these fines. Penalty relief is limited. I’ve worked on several cases recently where businesses with only one employee paid thousands in fines for improper or delayed wage tax filings. If you are unconvinced, you owe it to yourself to have a one-on-one accountant conversation on why do-it-yourself wage tax reporting is not a smart idea.

Finally, tip #3, don’t forget that 2015 is the first year that small businesses are subject to the changes in health benefits reporting on W2s. The bottom line: most employer-paid uninsured heath benefits must be reported on the W2 and this coverage along with individual insurance is subject to an excise tax for 2015. See my annotated bibliography on this topic.


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