PAYROLL TAX REPORTING AND PAYMENTS SUMMARY

FEDERAL

FORM 941 - EMPLOYER’S QUARTERLY FEDERAL TAX RETURN

Employers are required to withhold social security tax and Medicare tax from wages paid to all employees.  The social security tax rate is 6.2% of the first $90,000 of each employee’s 2005 wages and the Medicare rate is 1.45% of all wages for a combined rate of 7.65% on wages up to $90,000 and 1.45% thereafter.  The employer must match this amount withheld from the employees’ wages.   The total of these taxes withheld, plus the employer match amount, plus the amount of federal income taxes withheld from each employee’s wages represent the amount of federal employment taxes that must be reported and remitted to the IRS. 

TAX PAYMENTS are due as follows:

A.    If your accumulated tax liability for these taxes exceeds $2,500 at the end of any month during a calendar quarter, you are required to deposit the accumulated tax amount at your bank, along with coupon Form 8109, before the 16^th day of the following month.  Special rules apply if your annual tax liability exceeds $50,000.

B.    If your accumulated tax liability for these taxes is less than $2,500 for any calendar quarter, the balance is payable by the last day of the month following the end of the calendar quarter along with Form 941.

REPORT FILINGS - QUARTERLY.  Form 941 must be filed with the IRS by the last day of the month following the end of each calendar quarter.  A Form 941 MUST be filed even if you have no wages or taxes to report in a quarter.

FORM 940 - EMPLOYER’S ANNUAL FEDERAL UNEMPLOYMENT (FUTA) TAX RETURN

This is a payroll tax paid ONLY by the employer.  This tax cannot be withheld from an employee’s wages.  This federal program interfaces directly with the Colorado Unemployment Insurance Tax (see below) and is owed on the first $7,000 of wages paid to each employee each year.  The effective FUTA tax rate owed depends upon the rate paid by an employer to the state of Colorado, which means that the effective rate paid for FUTA varies by employer and from year-to-year for the same employer.

TAX PAYMENTS are due as follows:

A.    If your accumulated liability for this tax exceeds $500 at the end of any month during the year, you must deposit the accumulated amount owed, along with coupon Form 8109, at your bank by the end of the following month.

B.    If your accumulated liability or your remaining accumulated unpaid liability for this tax is less than $100 at year-end, the balance is payable by January 31 of the following year along with Form 940.

REPORT FILINGS - ANNUALLY.  A Form 940 must be filed with the IRS by January 31 of the following year.  A Form 940 MUST be filed even if you have no wages to report during a year.

FORM W-3 - TRANSMITTAL OF WAGE AND TAX STATEMENTS

This form is used to report the annual earnings of each employee to the social security administration.  The information on this form must agree to the amounts reported on Forms 941 filed during the year.

TAX PAYMENTS due NONE.  This is only an information return.

REPORT FILING - ANNUALLY.  Form W-3 must be filed with the Social Security Administration by February 28 of the following year along with Copy A of each Form W-2 issued to your employees.

FORM W-2 - WAGE AND TAX STATEMENT

This is the annual statement of earnings that you must provide to each employee.

TAX PAYMENT due NONE.  This is an information form for the employee and the government.

REPORT FILING - ANNUALLY.  

A.    A Form W-2 must be provided to each employee by January 31 of the following year.

B.    Copy A of each Form W-2 must accompany the Form W-3 (see above).

C.    A copy of Form W-2 may also need to be sent to the state (see Form DR 1093 below).

D.    You should retain the employer copy of each Form W-2.

STATE OF COLORADO

FORM DR 1095 - COLORADO WITHHOLDING TAX

The state of Colorado income tax that you withhold from your employees’ wages is reported on this form.

TAX PAYMENTS are due the following the end of each calendar quarter or monthly, as determined by the state of Colorado depending on your level of accumulated tax liability, along with Form DR 1094.  Special rules apply where state withholding is in excess of $50,000 per year.

REPORT FILING - MONTHLY OR QUARTERLY.  The Form DR 1095 must be filed by either:

A.    The last day of the month following the end of each calendar quarter if filing quarterly.

B.    Before the 16^th day of the following month if filing monthly.

C.    Form DR 1094 MUST be filed even if you have no withholding during a reporting period.

FORMS UITR-1 and UITR-1(a) - COLORADO UNEMPLOYMENT INSURANCE TAX REPORT

This is a payroll tax paid only by the employer and you CANNOT withhold any of the amount owed from an employee’s wages.  The rate is assigned to each employer by the Colorado Department of Labor and varies depending upon unemployment claims made by your employees and by business tenure.  The amount of tax is based upon the first $10,000 of each employee’s wages times the employer rate.  A credit for the amount this tax that has been paid is credited toward the amount owed to the IRS for FUTA taxes (see above).

TAX PAYMENTS are due by the end of the month following the end of each calendar quarter. 

REPORT FILING - QUARTERLY.  Reports UITR-1 and UITR-1(a) must be filed with the state of Colorado by the last day of the month following the end of each calendar quarter.  You MUST file a report each quarter even if you had no employees and paid no wages during the quarter.

FORM DR 1093-ANNUAL RECONCILIATION OF INCOME TAX WITHHELD

If you withheld any Colorado income tax from any employee and filed Form DR 1094 (see above), you must also file this annual report.  No report is required to be filed if you DID NOT withhold any Colorado income tax from ANY of your employees during the year.  You also must attach each Form W-2 on which there was any state of Colorado income tax withheld.

TAX PAYMENTS due NONE.  This is only an information return.

REPORT FILING - ANNUALLY.  This report, along with copies of any Form W-2 on which state of Colorado income tax was withheld, must be filed with the state by March 15 of the following year.

PREPARATION FOR HIRING AND PAYING EMPLOYEES

EMPLOYER IDENTIFICATION NUMBER, KNOWN AS “ EIN” OR “FEIN”

Any corporation , partnership, or household employer must obtain an EIN from the IRS by completing and filing Form SS-4 with the IRS.  Sole proprietorships typically also obtain an EIN, although this is not mandatory.  All payroll information is reported to the IRS and Social Security Administration under this number.

COLORADO UNEMPLOYMENT AND STATE INCOME TAX WITHHOLDING NUMBERS

Each employer needs to obtain a Colorado Unemployment number by registering with the Colorado Department of Revenue, and this number is used on the UITR filing.  Each employer who will be withholding Colorado Income Tax from employee salaries must also obtain a Colorado Withholding number from the same agency, and this number will be used on the Colorado withholding filing.

**WORKERS COMPENSATION INSURANCE ***MANDATORY***

All employers are required by Colorado law to maintain workers compensation insurance.  This can be obtained through most insurance brokers or directly through Pinnacol Insurance.

**NEW HIRE REPORTING TO STATE OF COLORADO  ***MANDATORY***

Every employer must report the name, address and social security number of each new employee hired to the State Directory of Hew Hires (SDNH) within 20 days after the employee’s date of hire.  The information will be matched with the Colorado Automated Child Support Enforcement Division and will be sent to the federally operated National Directory of New Hires.

OTHER INFORMATION RETURNS AND FORMS

FORMS 1099 - U.S. INFORMATION RETURNS

These forms are used to report non-employee payments of more than $600 annually to individuals and unincorporated companies.  The forms do not have to be issued to corporations, except for attorney firms.  The Form 1099-MISC is the form most widely used by a business and is used to report payments by a business for services rendered to the business, rents paid, attorney fees paid, etc.  There are other numerous Forms 1099 that are used to report other specific activities. 

TAX PAYMENTS due NONE (NORMALLY).  If the IRS requires that taxes be withheld on a certain person or company, then the amounts withheld are payable to the IRS quarterly.

REPORT FILING - ANNUALLY. 

A.    Forms 1099 must be provided to each recipient by January 31 of the following year.

B.    A copy of form 1099 must be submitted to the IRS along with Form 1096 (see below).

NOTE!  No filing of Forms 1099 with the state of Colorado is required.  There is no similar state form.

FORM 1096 - ANNUAL SUMMARY AND TRANSMITTAL OF U.S. INFORMATION RETURNS

This form is used to summarize and remit copies to the IRS of all Forms 1099 issued by a business.

TAX PAYMENT due NONE.  This is only an information return.