FS#6: End-of-Year Tax Reporting Requirements for Child Care Providers with Employees

End-of-Year Tax Reporting Requirements for Child Care Providers with Employees

At the end of the year, you must prepare a summary of the wages you paid and the total taxes you withheld and set aside. See the other side for a checklist of the forms you will need. You can obtain federal tax forms by calling the Internal Revenue Service (IRS) at 1-800-829-3676. Note that you cannot download, print, or photocopy certain federal tax forms, as indicated below. If you need any state tax forms, call the New York State (NYS) Tax Department at 1-800-462-8100.

Here are the steps you will need to take:

1) Give your employee and the Social Security Administration (SSA) a summary of the wages and payroll tax withholdings paid.

You must give your employee Form W-2, Wage and Tax Statement, a summary of the wages you paid to her during the year. The W-2 also shows the total income taxes you withheld and paid on her behalf to the IRS and to NYS. When you send Form W-2 to the SSA, you must also attach cover sheet Form W-3.

You must use an original Form W-2. Do not photocopy or print the form from the Internet, or else you can face a penalty from the IRS. The IRS automatically sends blank copies of Form W-2 to you. See the instructions from the IRS, online at www.irs.gov to learn more about the process for delivering Forms W-2 and W-3.

2) Report to the IRS the payroll taxes you paid throughout the year, and pay any federal payroll taxes you owe for the final quarter.
To report the total FUTA tax you were responsible for throughout the year, you must submit Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. For more information, see the instructions to Form 940, available online at www.irs.gov.

You must also submit Form 941, Quarterly Federal Tax Return, along with Form 941-v, if you owe any payment of FICA and federal income tax. For more information on completing Forms 941 and 941-v, see the instructions available online at www.irs.gov.

3) Report to NYS how much you paid in wages, state payroll taxes (State and City income taxes), and state unemployment taxes throughout the calendar year, and pay any state payroll taxes you owe for the final quarter.

Complete Form NYS-45-MN, NYS Quarterly Combined Withholding, Wage Reporting and Unemployment Insurance Return, for the final quarter of the year. On the bottom right of Form NYS-45-MN, complete the section titled “Annual wage and withholding totals” to report the total wages you paid and taxes you withheld throughout the year.

If you owe any state payroll taxes for the fourth quarter, send your payment along with Form NYS-45-MN. For more information on completing Form NYS-45-MN, please read the form’s instructions online at www.nystax.gov.

4) Give a summary of the fees you paid to any independent contractor who worked for you to the contractor and the IRS.

If you paid more than $600 during the year to an independent contractor (e.g., your substitute), you must provide Form 1099-MISC, Miscellaneous Income to her. The form must show the amount of fees you paid to her.

Submit Form 1099-MISC to the IRS along with Form 1096, Annual Summary and Transmittal of U.S. Information Returns. As with W-2s, you cannot photocopy or print these forms online.

Remember: on your own tax return’s Schedule C form, the wages you pay your employees are reported separately from the fees you paid any independent contractor, such as your substitute. You should report any money paid to independent contractors as “other expenses,” not “wages.” Describe those amounts as “outside labor” or “independent contractor” on your Schedule C.

Failure to meet any of your end-of-the-year tax requirements on time can lead to penalties and interest!

END-OF-YEAR REPORTING FORMS: A CHECKLIST

Form W-2 (Wage and Tax Statement)

Purpose: Summary of the wages you paid and FICA and income taxes withheld per employee throughout the year.
When: Give the form to your employee no later than January 31 (and to the SSA by February 28) of the following year. For example, send Form W-2 for year 2010 to your employee no later than January 31, 2011.

Form W-3 (Transmittal of Wage and Tax Statement)

Purpose: Cover sheet for all Forms W-2.
When: Send Forms W-2 and W-3 no later than February 28 of the following year.

Forms 940 (Annual FUTA Tax Return) and 940-v (Payment Voucher)

Purpose: Summary of the federal unemployment tax (FUTA tax) you have set aside throughout the year.
When: If you owe less than $500 in FUTA tax, submit this form along with your payment by January 31 of the following year.

Form 8109 (Federal Tax Deposit Coupon)

Purpose: If you owe more than $500 in the last calendar quarter (Oct. 1 to Dec. 31), use this coupon to deposit your payment at a commercial bank. The bank will then send your payment to the IRS. Give this form to a commercial bank allowed to accept FUTA tax payments on behalf of the IRS.
When: Bring the deposit coupon and FUTA tax payment to a commercial bank by January 31 of the following year.

Forms 941 (Quarterly Federal Tax Return) and 941-v (Payment Voucher) for 4th Quarter

Purpose: Summary of wages you paid, federal income tax withheld, and FICA tax withheld and set aside.
When: Send by January 31 of the following year.

Form NYS-45-MN (NYS Quarterly Return) for 4th Quarter

Purpose: Summary of wages, New York State and City income taxes withheld, and state unemployment insurance taxes set aside. Give this form to New York State.
When: Send by January 31 of the following year.

Form 1099-MISC (Miscellaneous Income)

Purpose: Summary of the fees you paid throughout the year to an independent contractor.
When: Give the form to your independent contractor by January 31 of the following year.

Form 1096 (Annual Summary and Transmittal of U.S. Information Returns)

Purpose: Serves as a cover sheet for information returns, such as Form 1099-MISC. Give this form to the IRS.
When: Send the form, along with Form 1099-MISC, by March 1 of the following year.

If you have any questions about end-of-the-year reporting responsibilities, call the Child Care Project hotline at 718-237-5540.

This article was posted March 10, 2010