The minimum wage rate is determined by the government. Some states adhere to the federal guidelines, while others set their own minimum wage rates. Because of this, it can be challenging for businesses with employees across multiple states to stay on top of all the minimum wage changes.

Minimum Wage Guidelines

The federal minimum wage is currently $7.25 an hour. This rate has been in place since July 24, 2009, when it was increased from $6.55 an hour.

Regardless of the federal rate, each state can set its own minimum wage for workers, and sometimes these wages can even vary by city and county. State minimum wage rates are typically governed by each individual state’s legislative activities.

According to the Department of Labor (DOL), states have to adhere to the federal minimum wage law if their state minimum wage is lower than the federal rate.

If a state, city, or county has a minimum wage greater than $7.25, employers are required to pay that higher rate to employees.

Here are some minimum wage increases to be aware of for 2026.

2026 Minimum Wage Increases

Looking for detailed State Minimum Wage & Tax Details? Select Your State below.

Please read our disclaimer here.

The post 2026 State Minimum Wage<br> & Tax Facts appeared first on PrimePay.

As you know, staying on top of employment tax due dates is just as imperative as paying your employees on time. However, if you forget to pay your employees, they’ll be right there to remind you. The Internal Revenue Service (IRS) operates a bit differently.

Keep employment tax information and deposit due dates handy to stay ahead of the compliance curve. The information below helps remove complexities to better organize your payroll and tax calendars for 2026. Remember: Employment tax forms are filed on dates independent of tax deposit deadlines. 

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Bonus: Click below to keep a copy of our federal holiday payroll calendar so you don’t miss a payroll beat. 

Download the full 2026 payroll calendar here. 

Employment Tax Due Dates

The IRS requires employers to file particular employee tax return forms with specified due dates throughout the year. The documents are used to report taxable wages and employment taxes:

• Income tax withholding
• Tips
• Social Security Tax
• Federal Unemployment Tax Act (FUTA)
• Medicare tax
• And an additional Medicare tax (if applicable)

Employment tax return filings are due quarterly or annually, depending on the filed form. The form can be filed the next business day if the deadline falls on a Saturday, Sunday, or legal holiday.

The federal tax deposit is based on what’s reported on the tax return, and its due date may not correspond with the tax form’s deadline. To simplify, we’ll start with the quarterly form most employers must file.

Quarterly Forms

Form 941, Employer’s Quarterly Federal Tax Return, is the quarterly form employers use. It’s used to report the employment taxes withheld from employees’ paychecks and the amount the employer will pay for their portion of Social Security and Medicare taxes. 

To comply with the regulations, employers must file Form 941 by the month’s conclusion following the quarter’s end. In other words, this form must be filed on the last day of the month, approaching the end of a quarter. The due dates fall on April 30, July 31, October 31, and February 2, 2027 for the fourth quarter of the previous calendar year.

If tax deposits were made before the deadline, the IRS allows an extra ten calendar days to file the return form. Please make sure to remember that it’s calendar days, not business days!

Annual Forms

There are two central employment tax due dates for annual forms, and which form you’re filing determines the deadline.

Forms due by February 2, 2026:

• W-2, Wage and Tax Statement, with Form W-3, Transmittal of Wage and Tax Statements
• Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
• Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees
• Form 944, Employer’s Annual Federal Tax Return

Form due by March 2, 2026:

• Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, is the main form for employers due on this date. If filed electronically, this form has until March 31 to be filed.

Tax Deposit Due Dates

Even though the employment tax return is filed, the taxes must be deposited. Deposit due dates may sometimes align with deadlines for tax return filings. The tax deposit due dates are determined by the return used to report your employment taxes, past filing history, and other factors.

The Electronic Federal Tax Payment System (EFTPS) must be used to make all federal tax deposits. Making a deposit does not remove the responsibility of filing the appropriate tax return form; it’s still a requirement.

If the tax deposit due date lands on a Saturday, Sunday, or legal holiday, the deposits can be made via the EFTPS on the next business day. 

Two deposit schedules for taxes are reported on Forms 941, 943, 944, or 945: monthly or semi-weekly. 

• Monthly Depositor: For monthly depositors, employment taxes are due by the 15th day of the following month.
• Semi-Weekly Depositor: Deposit deadlines for semi-weekly depositors depend on the day employment wages are paid out. Wages paid on Wednesday, Thursday, or Friday employment taxes must be made by the following Wednesday.

Wages paid on Saturday, Sunday, Monday, or Tuesday are required to be deposited by the following Friday.

Next-Day Deposit Rule

The Next-Day Deposit Rule is an exception to the due dates above. If $100,000 or more is accumulated in taxes on any day during the monthly or semi-weekly deposit period, a deposit must be made by the next business day.

FUTA Deposits

FUTA deposits are based on the amount of your tax liability from quarter to quarter. FUTA tax liabilities of $500 or less can be carried over to the next quarter. FUTA taxes for the fourth quarter can be deposited or paid when Form 940 is filed by February 2, 2026. 

The entire FUTA tax liability totaling $500 or more for that quarter has to be deposited by the last day of the first month following that quarter.

There are guidelines to help you understand how to calculate FUTA liabilities.

Having a clear idea of what’s expected of you as an employer is essential to complying with regulations of any kind. Knowing when to file which employment tax return and when to make a federal tax deposit makes your payroll schedule easier for your payroll department to stay within those guidelines.

These due dates are necessary to avoid costly penalties and high interest charges. Add these vital employment tax dates to your 2026 payroll calendar to keep track, stay organized, and ensure your business complies with IRS regulations.

All Wage and Tax Info, in One Place

Read our Quick Wage and Tax Resources today for federal wage and tax rates, FICA, federal minimum wage updates, and more. 

The post 2026 Payroll Calendar & Employment Tax Due Dates appeared first on PrimePay.

The good news is that reciprocity agreements can simplify life for your people and reduce the tax administration headaches for you. 

Below we discuss what tax reciprocity means, which states are involved, and how it impacts your small business in 2026 and beyond.

What Is Tax Reciprocity?

If you have employees who live in one state but work in another, reciprocity agreements may apply. For example, if your business is in Pennsylvania and your employee lives in New Jersey, that worker might qualify to pay income tax only in their home state.

Put simply: Tax reciprocity allows employees to avoid double taxation at the state level. Instead of filing returns in both states, they only file in their state of residence.

A few quick notes:

• Reciprocity applies to state income tax, not federal or other state and local payroll taxes.
• Employees must usually submit a specific exemption form to you, the employer, so you can withhold correctly.
• Without that form, you’re required to withhold tax for the state where the work is performed.

What Is a Reciprocal State?

A reciprocal state is simply a state that has an agreement with a neighboring state to recognize each other’s residents for income tax purposes.

Employees benefit by filing just one state tax return, and employers benefit by knowing exactly which state’s withholding applies. For example, New Jersey and Pennsylvania have a reciprocal agreement. That means a New Jersey resident working in Pennsylvania only pays income tax to New Jersey, not both states.

States With Tax Reciprocity in 2026

These are the states (plus Washington, D.C.) that currently have reciprocity agreements, the states they have agreements with, and the required exemption or non-residency form employees must file.

What Small Businesses Need to Know 

Businesses of every size adhere to tax reciprocity, but staying compliant can be extra challenging if you’re a small business with limited staff. That’s one reason why planning benefits small companies: there will be less stress and asking Where’s that paper, again? come tax season.

Below are ten strategies to use so your filing is error-free. 

1. Onboard properly. When you hire someone who lives in a different state, part of your onboarding checklist should include figuring out whether reciprocity applies. Ask where they live and where they work, then check the chart above.
   
2. Get the right exemption/non-residency form early. The employee must submit the proper form before you can stop withholding state tax for the work state. If you don’t have the form, you keep withholding as though there’s no reciprocity.
   
3. Register for withholding in the resident state if needed. Sometimes, if you’re withholding based on the employee’s state of residence, you’ll need to register with that state (you might need a withholding account there). If you don’t, there could be penalties or uncollected taxes.
   
4. Keep accurate records. Maintain copies of exemption or non-residency certificates. Track changes in residency or work location. If someone moves across state lines or starts working remotely, that might change which state’s tax rules apply. Good documentation helps with audits or resolving employee questions.
   
5. Be aware that remote and hybrid work adds complexity. With more employees splitting time between home and office (or working fully remote across state lines), state tax laws are adapting. Some states count work performed physically in the work state even if the person lives elsewhere; others look at the number of days in a non-resident state to trigger withholding. Stay current with the states where your employees live or report to.
   
6. Watch for conditional rules or exceptions. Some reciprocity agreements have special conditions. Examples:
   • In Kentucky, certain residency or commuting conditions may apply.
   • Ownership stakes (like being a major shareholder) may trigger different withholding rules in some agreements.
     
7. Communicate clearly with your employees. Many confusion points come from employees not realizing they need to fill out a form, or that their residency/work location changed. Clear directions during onboarding (and reminders) help avoid over-withholding, employee frustration, or correction work later.
   
8. Plan payroll systems for flexibility. Make sure your payroll software or provider can handle multiple state withholding settings, track exemption forms, and adapt if an employee changes states.
   
9. Consult with tax / payroll experts periodically. Sometimes tax reciprocity agreements are amended, or a state adjusts what counts as “working” in a state for withholding purposes (e.g. remote days). Checking in with a CPA or payroll specialist once a year (or whenever you have cross-state changes) is smart.
   
10. Note when no reciprocity exists. If there is no agreement between the state where an employee lives and the state where they work, you’ll likely have to withhold income tax in the work state. The employee will have to file tax returns in both states (resident state and nonresident work state) and may be eligible for credits in their home state for taxes paid elsewhere.
    

Navigate Payroll Taxes With Ease

Tax season is usually a stressful time of year, but that doesn’t mean you have to enter the season confused or ill-prepared. Knowing the ins and outs of tax reciprocity, along with other state and federal rules, will help make filing easier and faster.  

Want to know more about taxes? Visit the PrimePay Wage and Tax Portal, our one-stop-shop for minimum wage updates, tax rates, and benefit contribution limits.  

The post What Is Tax Reciprocity and What Does It Mean for Your Small Business? appeared first on PrimePay.

So when it comes to retaining employees and watching your bottom line, considering cost-of-living adjustments is a smart way to ensure the company and its people get the most out of the 2026 increases. 

Below, we provide background on COLA, how the adjustments are calculated, and any changes to the 2026 thresholds.

What is a COLA?

COLA, or Cost-of-Living Adjustments, are increases designed to help wages, salaries, or benefits keep pace with inflation. They’re most commonly associated with Social Security, but you’ll also see them in union agreements, pensions, and even some private-sector pay structures.

The idea behind COLA is simple: as the cost of goods and services rises—things like housing, food, and healthcare—people need their income to stretch just as far. These adjustments are usually tied to measures like the Consumer Price Index (CPI), which tracks changes in the cost of everyday essentials.

For example, if inflation bumps the cost of living by 3%, a 3% COLA ensures folks can still afford what they need. It’s especially important for retirees or anyone on a fixed income who can’t easily adjust their earnings to match inflation.

How Are Cost-of-Living Adjustments Calculated?

COLA aren’t one-size-fits-all; instead, they can be calculated using different methods depending on the audience and purpose. 

Here’s a breakdown of the most common approaches:

Consumer Price Index (CPI)

This is one of the most widely used tools for calculating COLA, especially in the private sector. The Bureau of Labor Statistics (BLS) determines the CPI based on a basket of goods and services that the average household uses, such as housing, groceries, transportation, and healthcare. They track the average prices of these items and calculate changes monthly and annually.

What’s helpful for businesses and HR teams is that CPI data isn’t just national—it’s broken down by region (South, West, Midwest, and Northeast). 

Worth Noting: The regional breakdown can be critical if your organization operates in multiple locations, giving you a more precise picture of cost-of-living changes in each area. Due to its comprehensiveness and accuracy, many consider the CPI the gold standard for cost-of-living calculations.

Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)

The Social Security Administration (SSA) relies on the CPI-W for its annual adjustments to Social Security and Supplemental Security Income (SSI) benefits. Like the CPI, the CPI-W measures changes in the prices of goods and services, but it focuses on a narrower audience: urban wage earners and clerical workers.

Worth Noting: The methodology is identical to the CPI, but the data set focuses on costs experienced by this targeted group. This calculation reflects the spending patterns of a specific subset of workers, which can be especially relevant for organizations with a similar workforce demographic. 

Consumer Price Index for All Urban Consumers (CPI-U)

Think of the CPI-U as the big-picture version of the CPI-W. It measures price changes for the same goods and services but casts a wider net, including retirees, self-employed professionals, temporary workers, and technical employees. The CPI-U represents about 93% of the total U.S. population, making it the broadest measure of cost-of-living changes.

Worth Noting: For organizations with diverse workforces, the CPI-U may be the most relevant index to consider when planning salary adjustments or budgeting for benefits. Its broader demographic coverage means it captures a more inclusive snapshot of how inflation impacts employees.

2026 COLA Adjustments and Thresholds

Over 72.5 million Americans’ Social Security and Supplemental Security Income benefits will increase by 2.8% in 2026. 

There are also other adjustments to benefits, including the following:

Health Savings Accounts (HSAs)

The contribution limits for HSAs for 2026 were announced earlier this year. The annual contribution limit for individual coverage is increasing by $100, to $4,400. The annual contribution limit for family coverage is increasing by $200, to $8,750. The catch-up contribution limit for those aged 55 and older will remain $1,000.

Health Flexible Spending Accounts (FSAs)

For 2026, the dollar limit on employee salary reduction contributions to FSAs is $3,400 (up from last year’s cost of $3,300). Additionally, 2026 health FSAs may permit a maximum rollover of up to $680 into the following plan year (up from $660).

Qualified Transportation Fringe Benefits

The monthly limit for transit/parking benefits is increasing to $340 in 2026 (up from $325). 

Qualified Small Employer Health Reimbursement Accounts (QSEHRAs)

For 2026, the maximum amount of payments and reimbursements under a QSEHRA can’t exceed $6,450 for individual coverage and $13,100 for family coverage.

Small Business Health Care Tax Credit

For 2026, the average annual wage level at which the tax credit begins to phase out for eligible small employers is $34,100.

Dependent Care Assistance Program (DCAP)

Parents and caregivers rejoice! The DCAP limit has increased to $7,500/$3,750 for calendar year 2026.

Leverage Technology for Financial Decisions

Want to ensure you’re making the right decisions for your organization and people, especially with COLA adjustments and other economic changes?

Look to your HR software. Specifically, it’s important to use a platform (if you aren’t already) that has forecasting features that allow you to reflect on the past and help predict the future to navigate any financial or human resource changes.

Suzanne Fohl, CFO of PrimePay, explains how she uses forecasting: “I can see Budget vs. Actual in real time. I can use our timeline model to model different scenarios, different headcounts, and different planning methodologies as our business continues to evolve.”

Make the Right Decisions For Your Company

It’s important to accurately apply annual cost-of-living increases for employee benefit amounts and determine any other impact these adjustments may have on your business. You can use these adjustments to your advantage, too, since companies often use COLAs to:

• Ensure competitive salaries to attract good employees.
• Help employees relocate to an area with a higher cost of living.
• Increase retirement benefits and other benefits. 

And if you have too much on your plate, or are having trouble navigating compliance issues, consider partnering with a solutions provider or specialist to get the guidance you need and help ensure you’re prepared for next year. 

The post Cost-of-Living Increases: What to Expect in 2026 appeared first on PrimePay.

One of those upcoming adjustments for 2026 is the out-of-pocket maximums and projected employer mandate penalties under the Affordable Care Act (ACA).

A Quick Review of the ACA

The Affordable Care Act (also referred to as Obamacare) is a healthcare reform law enacted in 2010 that makes health insurance coverage affordable and available to more people, expands Medicaid, and seeks to lower the cost of healthcare by supporting innovative medical care delivery methods.

The ACA mandates certain employer-sponsored coverage responsibilities and benefits that depend on the structure and size — i.e., the number of full-time employees and full-time equivalents — of the business.

If you have 50 or more full-time employees or full-time equivalents, your business is considered an Applicable Large Employer (ALE).

Two provisions of the ACA apply only to ALEs:

• Employer shared responsibility provisions. This provision means you must offer minimum essential health care coverage to your full-time employees and their dependents or make an employer shared responsibility payment to the Internal Revenue Service (IRS) — also referred to as the “employer mandate penalty” — if you fail to provide coverage.
• Employer information reporting for offers of minimum essential coverage. This provision means you also have to send annual reports to the IRS about the health care coverage you offered if any — and send a statement to employees with the same information that you provided to the IRS.

Note: Non-ALEs that sponsor self-insured group medical plans must also report offers of minimum essential employee coverage.

ACA Out-of-Pocket Maximums for 2026

In 2026, the ACA out-of-pocket maximum for employers with sponsored group health plans can impose on enrolled employees will be $10,600 for individual coverage (up from $9,200 from 2025) and $21,200 for family coverage (up from $18,400 from last year). The 2026 out-of-pocket maximum (OOPM) reflects a 10.3% increase compared to the 2025 limits.

This annual OOPM limit applies to most non-grandfathered group health plans, whether they’re fully insured or self-funded (administrative services only). However, it doesn’t apply to grandfathered plans, Transitional Relief plans, or retiree-only plans.

The OOPM includes costs like copayments, deductibles, and coinsurance for medical and pharmacy benefits.

It’s worth noting that high-deductible health plans (HDHPs) paired with health savings accounts (HSAs) follow different limits for OOPM, deductibles, and contributions.

The Different Types of ACA Penalties

Under the Affordable Care Act (ACA), there are different types of penalties that can be imposed on employers who fail to meet certain requirements regarding health insurance coverage for their employees. These penalties, often referred to as the “A” and “B” penalties, are designed to ensure that employees have access to affordable and adequate health coverage.

Understanding these penalties is important for employers to avoid potential financial liabilities and comply with the ACA provisions. In the following sections, we will dive into the details of each type of penalty and how they are calculated.

Understanding 4980H 2026 ACA Penalties

In 2026, under section 4980H of the Affordable Care Act (ACA), employers are subject to penalties for not offering affordable and comprehensive health insurance coverage to their full-time employees. There are two penalty provisions under this section: 4980H(a) and 4980H(b).

The 4980H(a) penalty is applicable to large employers with 50 or more full-time employees (including full-time equivalent employees) who do not offer minimum essential coverage to at least 95% of their full-time employees and dependents. If an employer fails to meet this requirement, they may be subject to an annual penalty.

Understanding these penalties is crucial for employers to ensure compliance with the ACA and to avoid substantial financial consequences.

What is the 2026 ACA Penalty 4980H(a) Amount?

The 2026 ACA penalty for 4980H(a) amount is $3,340. The 2026 ACA penalty for 4980H(a) is an important consideration for businesses that do not offer health insurance coverage to their full-time employees. This penalty is also known as the “hammer penalty” and is calculated based on the number of full-time employees a company has.

Example: In 2026, John’s Pizza Parlor has 75 full-time employees and doesn’t offer Minimum Essential Coverage (MEC) to its employees. The penalty is triggered when at least one full-time employee obtains a Premium Tax Credit through the marketplace.

For each full-time employee, John’s Pizza Parlor would be subject to a penalty of $3,340.

In the case of John’s Pizza Parlor, if 10 full-time employees obtain Premium Tax Credits, the penalty amount for the business would be roughly $33,400.

Note: It’s critical to consult with a professional to ensure the calculations for your unique situation are correct.

It’s important for businesses to be aware of the ACA penalty 4980H(a) amount and the potential impact on their organization. By offering health insurance coverage to their full-time employees, businesses can avoid these penalties while ensuring their employees have essential coverage.

What is the 2026 ACA Penalty 4980H(b) Amount?

The 2026 ACA penalty 4980H(b) is $5,010. The 2026 ACA penalty 4980H(b) amount is assessed on a per-violation basis when an employer offers unaffordable or non-Minimum Value coverage to their employees, and an employee receives a Premium Tax Credit (PTC) from a state or federal health exchange.

For each employee who receives a PTC, the penalty is roughly $418 per month or $5,010 annualized. This penalty is designed to incentivize employers to offer affordable and comprehensive health insurance coverage to their employees.

Example: ABC Company will have 100 full-time employees in 2026. Out of these employees, 20 obtain PTCs from a health exchange because the coverage offered by ABC Company is either unaffordable or does not meet the Minimum Value requirements.

In this case, ABC Company would be subject to a penalty of $5,010 per employee who receives a PTC. Therefore, the total penalty for ABC Company would be $100,200 ($5,010 multiplied by 20 employees).

It’s important for employers to ensure that their health insurance coverage meets the affordability and Minimum Value standards set by the ACA to avoid being subject to these penalties. Employers can consult with healthcare experts or insurance providers to navigate the complex regulations and ensure compliance with the ACA requirements.

Get the Right Guidance

It’s critical that you apply correct yearly adjustments for employee benefits and determine any other impact these adjustments may have on your business. Partnering with an HR solutions provider can help you get the guidance you need.

Please read our disclaimer here.

The post 2026 ACA Penalties: Out-of-Pocket Maximums and Employer Mandates (With Examples) appeared first on PrimePay.

The Internal Revenue Service (IRS) released the annual cost-of-living adjustments affecting the maximum contribution limits for several pre-tax benefits, including health FSAs, transit/parking accounts, and HSAs. 

FSA Contributions Limits: 2026

The IRS confirmed that for plan years beginning on or after Jan. 1, 2026, the contribution limit for health FSAs will increase another $100 to $3,400. For those plans that allow a rollover of unused funds, the maximum rollover amount will increase to $680 for 2026.

Additionally, the monthly contribution and reimbursement limit for transit and parking FSAs will increase to $340 per account in 2026.

Employees must use FSA funds within a plan year. Remember that health FSAs have a “use-or-lose” rule, meaning that any funds left unused at the end of the year are forfeited to the employer.

Employees should always know their contributions and benefits. When you equip your people with a self-service portal, they can easily access their specific benefit information without any back-and-forth with HR. 

Two Exceptions to the FSA Rule

Two exceptions to the use-or-lose rule permitted by the IRS are rollover and grace period. HR teams must communicate company policies to employees well in advance so people can plan accordingly.

1. Rollover: If funds are not used by the end of the year, up to $680 can be rolled over from the 2026 plan year into the next plan year. 
2. Grace Period: An employer can adopt a grace period for their health FSA. As explained by the IRS, “A grace period is a period of up to two months and 15 days immediately following the end of a plan year during which a participant may use amounts remaining from the previous plan year (including amounts remaining in a health FSA) to pay expenses incurred for certain qualified benefits during that two-month and 15-day period.” 

A health FSA may incorporate either of these features; however, a plan may not have a rollover and grace period. 

Plans may also include run-out periods that provide participants additional time to submit claims incurred during the plan year (typically 90 days). This can be in addition to either a rollover or grace period.

How Can PrimePay Help?

PrimePay provides pre-tax benefits administration of, including HRAs, HSAs, and FSAs. When you choose PrimePay’s pre-tax benefit plan administration, you receive a dedicated service team, access to our support portal, automated claims processing, and a PrimePay debit card and mobile app.

Schedule a call today

Please read our disclaimer here.

The post FSA Contribution Limits for 2026 appeared first on PrimePay.

Building benefits packages can be complex, so it’s essential to follow straightforward, actionable steps to determine which benefits matter most and how to offer them effectively.

The advice below focuses on how to build a benefits plan to enhance employee satisfaction and drive retention, all without compromising your company’s financial well-being.

Understanding Small Business Employee Benefits

Did you know that nearly half of your team might be eyeing the exit if they’re unhappy with company benefits? This fact may sound surprising, but it’s one to recognize as you build out benefits for your small business. 

That’s because, as a small business owner, your team is one of your most valuable assets. You don’t want your top talent (and their experience, knowledge, and skills) to walk out the door, especially over something in your control. Therefore, your benefits plan and other policies should acknowledge your employees’ needs, well-being, and financial future. 

Note: While a study by SHRM found that health care was the most important benefit to employees, it’s important to examine retirement, leave, additional disability coverage options, and mental health as well. In fact, business spending for mental health coverage has risen 53% since March 2020, which signals that more and more companies are recognizing the importance of mental wellness in the workplace.

The Role of Health Insurance in Benefit Packages

Most people immediately jump to group health insurance when they think of benefits, and for good reason. Health insurance provides a safety net for employees by covering qualified medical expenses and promoting regular healthcare access (BTW: have you scheduled your yearly physical yet?).

Selecting an appropriate health insurance plan for a small business entails weighing factors such as whether to offer a single plan or various health insurance plans for employees. Options include:

• Preferred Provider Organization (PPO) plans
• Health Maintenance Organization (HMO) plans
• Health Savings Account (HSA)-qualified plans
• Flexible Spending Account (FSA)-qualified plans
• Indemnity (AKA fee-for-service) plans

Retirement Savings Plans: A Key Employee Perk

Want to really step up your small business benefits package? Include a retirement savings plan. By doing so, your benefit offerings will help support employees’ present well-being and allow them to establish financial security for the future. 

Options for retirement savings plans among small businesses can include:

• SIMPLE IRA
• SEP IRA
• Traditional or Roth IRA
• Solo 401(k)

However, when selecting benefits for your small business, matching or contributing to retirement plans may not be in your current budget. If that’s the case, build out your other offerings, but put retirement benefits on your roadmap. 

Besides caring about your people’s financial well-being, including retirement benefits can:

• Give you the competitive edge. Only 22% of small and medium-sized businesses offer retirement benefits. Adding this option to your small business benefits package will make you stand out to candidates.
• Help attract top talent. If you want to tip the scale in your favor and secure top candidates, a retirement plan will help. A study by Businesswire found that 62% of candidates consider the availability of a retirement plan when deciding whether to accept a job.
• Increase retention rates. Regarding retention rates, many HR leaders focus on findings from the employee lifecycle. But financial planning has emerged as another contender to consider – 76% of employees are likely to be attracted to another company that cares more about their financial well-being. 

Additional Coverage: Disability and Life Insurance

Beyond health insurance and retirement plans, employees appreciate additional coverage options like disability and life insurance as part of their benefits package. Disability insurance, for instance, provides a safety net for employees with work incapacity, enabling them to meet financial responsibilities and provide for their families.

The associated costs for disability insurance for small businesses typically range from 1% to 3% of their income. This investment is invaluable in ensuring employees’ financial security and peace of mind, making it a key component of a competitive benefits package.

4 Steps To Creating and Rolling Out an Employee Benefits Program

Crafting a benefits package for small businesses is an intricate process. Below are four steps to set you in the right direction as you design and communicate your employee benefits plan. 

1. Design Your Small Business Benefits Program

The first – and arguably, the most complex – step is designing your benefits package. To develop a comprehensive package, execute the following four tasks:

1. Strategic planning
2. Careful budgeting
3. Selection of suitable benefits plans
4. Determining fair and competitive employer contributions

Yes, there are four steps within the first step… but these action items ensure that your benefits package is financially sustainable for the business and valuable and appealing to the employees.

Note: Your business size and financial runway are pivotal in the benefits you can afford to provide. Small and medium-sized companies should recognize which employee benefits attract and retain talent and tailor their benefits program to reflect their findings.  

Set Your Benefits Budget

Consider the average cost of health insurance premiums when establishing your benefits budget. These costs can range from $703 to $8,435 per year for single coverage and from $1,997 to $23,968 per year for family coverage. While expenses fluctuate based on your business’s size and the range of benefits provided, it’s recommended to allocate 15-30% of your revenue to pay your employees (this percentage includes both salaries and benefits). 

Determine Employer Contributions

To determine employer contributions to benefits plans, carefully assess the business’s financial resources alongside the needs and priorities of the employees. This process involves considering various benefits options – like medical insurance, retirement plans, and student loan repayment programs – while ensuring that the benefits align with employees’ expectations and provide meaningful value.

For health insurance, employers typically cover approximately 80% of premiums for single coverage and around 70% for family coverage. For retirement savings plans, the standard practice for employer contribution typically ranges from 3% to 6%. These contributions can significantly impact employee satisfaction by demonstrating the employer’s commitment to their well-being and future.

Note: As mentioned, tighter budgets may not allow for high employer coverage or retirement contributions. Until your budget increases, consider offering alternatives – such as free financial planning workshops – to demonstrate your prioritization of employee wellness. 

2. Implement Employee Feedback in Benefits Selection

What good is offering pet insurance if none of your employees own an animal? Needless to say, it’s crucial to incorporate employee feedback as you begin planning your benefit offerings. 

In short, by conducting employee surveys and customizing benefits options based on insights, small businesses can ensure their benefits package meets the diverse needs of their people.

Conduct Employee Surveys for Benefit Preferences

Administering employee surveys is an active way to grasp benefit preferences. This approach empowers employees to vocalize their needs in a constructive way and ensure the benefits package remains relevant and appealing. 

To gather valuable insights into what employees value most, select a suitable methodology, craft well-designed questions, and prioritize confidentiality. High employee participation is important, so it’s crucial to not only email out a link but also announce the timeline during an All Hands meeting and have department and team leads encourage direct reports to complete the survey.

Customize Benefits Options

You’ll want to brush up on your tightrope skills, as selecting suitable benefits plans is a balancing act between the business’s spending capacity and employees’ preferences. The key is to offer various benefits that employees value so they can choose the options that best suit their needs.

Customizing benefits options allow employees to select the coverage that aligns with their unique needs. While executing multiple options requires extra time, resources, and communication, the rewards are worth the effort– research shows that 40% of employees increase their loyalty to their employer if benefit options are customized to meet their needs. 

Luckily, HR software can facilitate the customization process. Benefit Administration functionalities during open enrollment can provide employees with a personalized experience, enabling them to explore and understand their benefits options at their own pace. 

HR software with benefit administration features, like Enrollment Wizards, makes choosing the right benefits a breeze and takes the lift off HR teams.

3. Communicate the New Benefits Package

You’ve spent months budgeting, researching, consolidating data, and finalizing your plan. Now comes step three, perhaps the most vital step of all: announcing the offerings to employees. 

To ensure your communication efforts go smoothly and equip people with the right information for open enrollment, craft a clear message, select multiple channels for notifications, and involve key stakeholders. 

Whether through email, video conferencing, or in-person meetings, communication should be straightforward, concise, and accessible to all employees. In this strategy, everyone receives the same message, understands the benefits, and learns how to maximize them.

Note: Transparency is important here. For example, let’s say 63% of employees desire commuter benefits but it’s not feasible for your budget. Communicate your reasons for not including it in your small business benefits package (and potentially offer other ways to offset commuter costs) so employees feel heard and respected. 

Create Clear Communication Materials

Insurance and benefits explanations are usually as clear as mud. It’s therefore important to use simple language and avoid technical jargon so employees understand their options for the year.  

Visual aids such as infographics and charts can further enhance comprehension, making the information more relatable and easily understood. Online tools and personalized benefits counseling can also contribute to a better understanding of the benefits and encourage employees to engage with their benefits actively.

Host Informative Sessions

Hosted informative sessions allow employees to ask questions and better understand their benefits package. These sessions can be organized as Q&A sessions, lunch and learn sessions, or virtual meetings to provide employees with easy access to information.

Make sure your sessions cover many topics, including health insurance coverage, retirement benefits, and employee assistance programs. They should also be well-organized, with speakers prepared to deliver concise and relevant responses to employee inquiries. 

4. Monitor and Adjust Your Benefits Offering Annually

You’ve designed your benefits plan. You’ve rolled it out company-wide. The process is over, right? Not so fast. 

You’ll want to regularly monitor and adjust the benefits you offer to continue meeting the needs of your people. 

Adapting to Employee Needs

You’ve most likely heard the quote, “The only thing constant is change,” which fortunately (or unfortunately) is incredibly applicable in the business world. Changes in work arrangements, economic fluctuations, and increased emphasis on work-life balance are some factors that can lead to shifting employee benefit offerings.

Some key indicators signaling the need for adjustment include a low benefits enrollment rate, frequent questions and complaints about benefits, and low employee morale. 

Regularly Review Benefits Utilization

You should also review benefits utilization within your comprehensive annual review. This process includes:

• Soliciting feedback from employees on their experiences with current benefits
• Reassessing plans to ensure ongoing value
• Adjusting the benefits package in response to usage data and market dynamics

By conducting employee surveys, tracking changes in benefits preferences, and disseminating updates through multiple communication channels, you can better adapt your small business benefits package to meet these evolving needs and continue to offer value. 

Critical signs of successful benefits usage include:

• High utilization rate
• Low emergency department use
• Minimal prescription drug utilization
• High employee capacity
• Low staff turnover rates
• High benefits utilization rate

Designing a People-First Small Business Benefits Package 

A well-rounded benefits package is vital for small businesses to attract and retain top talent and enhance employee satisfaction and productivity. To create a people-first benefits plan for your small business, set your budget, allow employee input, communicate your offerings, and adjust accordingly. 

By staying responsive to employee needs and preferences, small businesses can ensure their benefits package remains competitive, valuable, and fiscally responsible, contributing to the success of both their employees and the business.

The post Benefits for Small Businesses: How to Design and Implement Your Plan appeared first on PrimePay.

It’s no wonder 40% of small business owners believe managing payroll and taxes is the worst part of owning their business.

Whether you’re a company of 10 or 10,000 employees, getting payroll right every time is critical. That means adhering to payroll best practices, such as developing a solid compensation plan, maintaining compliance, and paying people equitably.  

Below are ten payroll tips to know so you can plan and manage payroll confidently.

10 Tips to Manage Payroll for Small Businesses

1. Put a Payroll Policy in Place

Want to avoid disorganized and inefficient processes? Start by putting a payroll policy in place. In short, a payroll policy serves as a single source of truth that payroll administrators can follow. Moreover, it provides preferred guidelines so your team can accomplish payroll tasks accurately and efficiently. 

That last part – efficiency – is a game-changer when managing payroll. According to Score, a mentoring service for businesses, 63% of small business owners underestimate the time payroll takes. As a result, leaders must shift priorities and potentially miss other deadlines to file payroll on time. It’s no wonder 50% of owners think this process is frustrating. 

Thus, when constructing your payroll policy, assess the process, time, and resources needed to draft your plan and pay your people each month. 

Consider including the following: 

• An outline of the payroll process
• Employee classification specifications
• Determining factors for salaries and wages
• Reporting obligations for employees
• Instructions and procedures for resolving payroll mistakes
• Levels of earnable vacation time 
• Guidelines on how to calculate wages and promotions

2. Set a Payroll Budget 

Payroll expenses shouldn’t be a surprise. Plan salaries, bonuses, and other payroll expenses accordingly so you have the proper financial runway needed to compensate employees. 

Employers are also legally responsible for certain employment taxes, such as Social Security and Medicare. For example, employers must match the Social Security and Medicare deductions from an employee’s compensation, which amounts to 7.65% of gross pay and the employee’s salary or hourly wage. Payroll taxes vary by state, so it’s critical to consider this information when budgeting. 

To ensure that the spending won’t harm the company’s finances, budget by calculating overall payroll costs as a proportion of revenue.

No more crunching numbers or using rough estimates – payroll software takes the guesswork out of payroll totals and deductions. 

3. Accurately Categorize Employees 

One crucial piece of payroll advice is to cross your t’s and dot your i’s. More specifically, you want to double (or triple) check everything, including accurately classifying your people.

Misclassifying people as employees or independent contractors is more common than you think. The Economic Policy Institute estimates that 10-20% of employers misclassify at least one employee. 

Proper classifications are important since state and federal agencies use tax revenue (income, Social Security, Medicare, and unemployment taxes) to provide public services and benefits.

Once you’ve accurately classified workers as employees, you should further categorize them by hourly or salaried employment. From a legal standpoint, you’ll need to know that:

• Hourly employees are entitled to protection under the Fair Labor Standards Act (FLSA) and must receive overtime pay if they work more than 40 hours per week.
• Salaried employees may not be subject to FLSA overtime regulations.

4. Develop a Payroll Calendar

Establishing a consistent payroll schedule ensures timely payments and provides predictability for finance teams and employees. Creating and maintaining a payroll calendar will help finance teams better handle unforeseen events, minimize errors, and enhance employee satisfaction with the service provided.

One payroll tip (that may sound old-school) is to keep a visual calendar. Visual calendars help you better anticipate the ongoing monthly payroll process stages and encourage you to identify upcoming federal holidays for an altered holiday pay schedule. 

Payroll software with scheduling functionalities lets you channel your best late-night infomercial impression – just set it and forget it. 

5. Educate Employees on Payroll Procedures

Another payroll best practice is to train and educate employees on payroll procedures. Finance teams should understand responsibilities and deadlines thoroughly and provide continuous training on the latest regulations, software updates, and payroll best practices.

Additionally, employees should know how to submit timesheets and update personal information. To mitigate frequent questions, make your payroll policy and supporting documents easily accessible. Consider:

• Discussing payroll procedures in All-Hands or Town Hall meetings so everyone receives the same information and message. 
• Uploading documents to the company intranet or self-service portal for easy access at any time.

6. Maintain Proper Compliance

Payroll and compliance go hand in hand. Therefore, you must abide by all federal, state, and local laws regarding employee compensation. 

Keep the agencies that regulate payroll laws – the Internal Revenue Service (IRS) and the Department of Labor (DOL) – top of mind and understand payroll laws and regulations. 

Some payroll laws to consider are:

• Fair Labor Standards Act (FLSA)
• Federal Insurance Contributions Act (FICA)
• Federal Unemployment Tax Act (FUTA)
• Equal Pay Act (EPA)
• Workers’ Compensation

7. Conduct Regular Audits

When was the last time you audited your compensation strategy and payroll process? If it’s been more than 12 months, add it to your to-do list. Regular audits of employee classifications, tax withholdings, and benefit calculations help finance teams identify and rectify errors promptly. 

But in addition to auditing for accuracy, it’s essential to analyze your current compensation strategy. Run reports to spot any trends or opportunities for improvement. Are specific demographics receiving more promotions than others? Are new hires earning more than seasoned employees? 

This payroll advice contributes to not only the company’s financial health but also its organizational health. Regular auditing practices help ensure fair and equitable compensation across teams, foster employee trust, and promote transparency. 

8. Equip Employees With a Self-Service Portal

We’re all guilty of sending the “where does that information live, again?” email. And it makes sense, as the average company has 15-35 different tools in their HR tech stack. 

One solution to the constant back-and-forth is to equip your people with an employee self-service portal. With one login, employees can access pay stubs, tax documents, PTO, time sheets, and other personal information. 

With the right software, employees can access company resources, complete tax forms, enroll in direct deposit, and elect benefits, all in one place.

9. Prepare for Year-End Reporting

Plan for year-end reporting requirements, including W-2 and 1099 forms, to avoid last-minute hassles and prevent potential issues with tax authorities.

Besides adhering to government requirements, there’s another reason to prepare your year-end reports: sound decision-making. When you have a clear and precise financial picture of the business, you can accurately plan for headcount, bonuses, and other financial decisions that align with your strategic goals. 

10. Invest in Reliable Payroll Software

You could spend five hours a month managing payroll, checking state and federal updates, chasing down missing information on time cards, and double-checking every data entry. But the better way is to invest in reliable software for payroll that handles payroll complexities so you don’t have to. 

Payroll software automates calculating and distributing employee salaries, taxes, and other compensation-related activities. It also ensures accurate and timely employee payment while managing deductions, benefits, and tax compliance. These benefits aren’t just helpful for finance teams; they’re also critical for employees. Because 58% of people live paycheck-to-paycheck, they can’t afford to wait on fixed payroll errors. 

If you’re in the market, consider payroll software that includes employee time management and HR capabilities. Why? Having connected time will remove the need for manual timesheet entry, which is prone to errors, and HR software centralizes all your data in one place so you can make the best decisions for your business and people. 

Manage Payroll Like a Pro

The payroll best practices above aren’t just steps – they’re a roadmap to transform payroll processes from status quo to exemplary.

Embrace scalable solutions, empower employees with self-service portals, and stay proactive with regular audits and staff training. 

By doing so, you’re not just managing payroll; you’re setting the stage for growth, fostering employee satisfaction, and ensuring your organization thrives in the long run.

The post 10 Payroll Tips Every Business Should Know appeared first on PrimePay.

First and foremost, employers must ensure that accurate and complete W-2s are provided to their W-2 employees. This includes reporting wages, tips, and other compensation, as well as any tax withholdings. It is essential to double-check all data before submitting the forms to avoid any errors or discrepancies.

W-2 Check Point

• Employers are required to provide both employees and the Social Security Administration with W-2 forms by January 31 of each year.
• Penalties commence at $50 for each erroneous or delayed W-2 for the tax year 2022, and they will increase to $60 as of 2023.
• In the case of late filers, there is an option to request an extension by submitting Form 8809 and awaiting a response from the IRS.
• For those who deliberately neglect the filing requirements, penalties amount to $580 per W-2 for 2022, and this figure will rise to $630 in 2023.

Timeliness is also key when it comes to Form W-2s. Employers must distribute the Form W-2s to their employees by January 31st of each year, giving them ample time to file their income tax returns. Additionally, employers must electronically file Form W-2s with the Social Security Administration by the end of February.

Failing to meet these requirements can result in penalties. The penalties vary based on the size of the employer and the duration of the delay. Some potential penalties include fines for incorrect or late filings, penalties for not providing forms to employees, and even criminal charges in extreme cases.

By understanding and fulfilling your responsibilities for filing Form W-2s, you ensure compliance with tax authorities and maintain a good relationship with your employees. Providing accurate, complete, and timely Form W-2s is essential for a smooth tax filing process and avoids potential penalties.

What is a W-2 Form?

A W-2 form, also known as the Wage and Tax Statement, is a document that summarizes employee’s annual wages, salary, and other forms of compensation. It also provides any federal income tax withholding made throughout the year.

Form W-2s provide the information needed for employees to report taxable income to the Internal Revenue Service (IRS) and state government.

Form W-2s consist of various sections, including the employee’s personal details such as name, address, and employee Social Security number. It also includes important financial information such as wages, tips, and other compensation earned by the employee.

Additionally, the form highlights the amount of federal income tax, Social Security tax, and Medicare tax withheld from the employee’s earnings.

It is important to note that a W-2 form differs from a 1099-NEC form, which is used for independent contractors rather than employees. Independent contractors receive a 1099-NEC form, which reports their non-employee compensation instead of wages and salary. Unlike employees, independent contractors are responsible for their own tax withholding and are often subject to different tax rules, such as imputed income.

In summary, the W-2 form is a critical document that ensures accurate reporting of an employee’s income for tax purposes. It provides employees with the necessary information to file their tax returns correctly and promptly. Employers must timely and accurately provide W-2 forms to their employees to meet regulatory requirements and assist in a smooth tax-filing process.

Employer Obligations for Sending W-2 Forms

As an employer, you have several basic responsibilities when it comes to W-2 forms.

• You must provide Form W-2 to each of your employees.
• You must submit copies of these forms to the Social Security Administration (SSA).
• You must comply with your state’s administration obligations in addition to the federal requirements.

The deadline for submitting these copies to the SSA is January 31st. Electronic file (E-File Form) is available and highly encouraged.

Some states may have additional requirements or deadlines for W-2 forms. It is important to familiarize yourself with these state-level obligations and ensure compliance to avoid any penalties or fines.

What Penalties Are There for Employers Not Sending a W-2?

Failure to accurately and timely file Form W-2 can result in severe penalties for employers. The penalties imposed by the Internal Revenue Service (IRS) vary based on the size of the company and the timing of the submission.

You generally receive penalties if:

1. You do not send completed Form W-2s to employees at all or before the January 31 deadline.
2. You provide incorrect information.
3. You fail to file Form W-2s and Form W-3s with the SSA by the January 31 deadline.

For employers with total annual gross receipts of $5 million or less, the maximum penalty for late submission of Form W-2 is $50 per form if filed correctly within 30 days of the due date.

If filed after the 30-day mark but before August 1st, the penalty increases to $110 per form. For submissions made after August 1st or not filed at all, the maximum penalty jumps to $270 per form.

For employers with annual gross receipts greater than $5 million, the penalties increase significantly.

The maximum penalty for late submission within the first 30 days is $110 per form, rising to $270 per form if submitted after 30 days but before August 1st. If filed after August 1st or not filed at all, the maximum penalty is $550 per form.

In cases where incorrect information is provided, a separate penalty of $270 per form may be imposed, with no maximum limit specified. This penalty applies when the employer fails to provide correct employee details or fails to provide forms that can be accurately scanned and processed.

It is crucial for employers to meet the January 31st deadline and ensure the accuracy of the information included in Form W-2 to avoid facing these costly penalties. Compliance with these filing requirements is essential to maintain a good relationship with tax authorities and avoid unnecessary financial burdens.

What are the Penalties for Submitting W-2s Late?

Penalties for submitting W-2s late vary based on the size of the business.

• For small businesses with annual gross receipts of $5 million or less, the maximum penalty for late submission within 30 days of the due date is $50 per form.
  • If filed after 30 days but before August 1st, the penalty increases to $110 per form. Submitting after August 1st or not filing at all incurs the maximum penalty of $270 per form.
• On the other hand, large businesses with annual gross receipts exceeding $5 million face higher penalties.
  • Late submission within the first 30 days results in a maximum penalty of $110 per form, which increases to $270 per form if filed after 30 days but before August 1st. Submitting after August 1st or not filing at all carries the maximum penalty of $550 per form.

It’s important to note that separate penalties of $270 per form may also apply for providing incorrect employee details or forms that cannot be accurately scanned and processed, with no specified maximum limit.

Failing to meet W-2 filing requirements can result in costly penalties for both small and large businesses. It is crucial for employers to ensure timely and accurate submission to avoid these financial consequences.

What Happens if I Make an Error by Mistake on a W-2?

Errors on Forms W-2 can cause processing delays and create headaches for both employers and employees. Common errors include:

• Omitting the decimal point in dollar entries.
• Using ink that is too light or faint.
• Misformatting the employee’s name.

These errors may seem minor, but they can lead to significant problems. For example, a missing decimal point could result in incorrect calculations and tax withholding amounts. Using light ink or misformatting the employee’s name may cause readability issues, making it difficult for the tax authorities to process the form accurately.

To prevent processing delays and potential penalties, it’s crucial to avoid these errors. Employers should carefully review each Form W-2 before submitting them to the tax department. Double-checking the accuracy of dollar entries, ensuring proper ink usage, and verifying the correct formatting of employee names can save time and eliminate potential errors.

By taking the necessary steps to avoid these common errors, employers can ensure that the Forms W-2 are correctly processed, and employees can receive their tax statements without unnecessary delays or discrepancies. It’s crucial for employers to prioritize accuracy and attention to detail when filing these important tax documents.

Remember, by avoiding these errors, employers can avoid processing delays and prevent any potential issues that may arise if incorrect information is reported.

What are Other Penalties for W-2 Non-Compliance?

Non-compliance with W-2 filing requirements can result in penalties and fines for employers. In addition to the errors mentioned earlier, there are several other violations that can lead to significant consequences:

• Filing more than 250 W-2s in paper form can incur penalties, as the IRS encourages electronic filing for efficiency.
• Submitting unreadable or incomplete forms may also result in fines, as it hinders the tax authorities’ ability to accurately process the information.
• Misclassifying employees is another serious violation.
  • If workers are misclassified as independent contractors instead of employees, employers may face penalties for evading payroll taxes and not providing certain benefits. Deliberately failing to submit a required W-2 is a severe offense and can result in substantial fines.

Penalties for non-compliance can vary based on the severity and intent of the violation. Employers may face fines ranging from a few hundred dollars for unintentional errors to thousands of dollars for deliberate non-compliance. It’s important for employers to understand and adhere to the guidelines set forth by the IRS to avoid these penalties and legal issues. By prioritizing accurate and timely W-2 filing, employers can ensure compliance and avoid unnecessary financial burdens.

How Can I Stay Compliant with W-2 Employer Responsibilities?

Staying compliant with W-2 employer responsibilities is crucial to avoid penalties and maintain a smooth running business. Here are key steps and actions that employers can take to stay on top of their obligations:

1. Accurate and Timely W-2 Preparation: Employers must accurately prepare W-2 forms for each employee, ensuring that all necessary employee details, wages, and tax withholdings are correctly reported. It is essential to review the information thoroughly to minimize errors.

2. Timely Distribution to Employees: Once W-2 forms are prepared, employers must distribute them to employees by the deadline, which is typically January 31st of the following year. Providing employees with their W-2 forms promptly allows them to file their own tax returns accurately.

3. Timely Filing with the Social Security Administration: In addition to distributing W-2 forms to employees, employers must also submit copies to the Social Security Administration (SSA). This can be done electronically using the SSA’s Business Services Online or by mailing paper copies. Employers must ensure that the SSA receives the forms by the deadline.

4. Consider Outsourced Solutions: To streamline the W-2 process, employers can seek help from professional payroll providers or outsourced solutions. These services specialize in accurate and timely preparation and distribution of W-2 forms, relieving employers of the administrative burden and ensuring compliance.

By following these steps and considering outsourced solutions, employers can stay compliant with their W-2 employer responsibilities, avoid penalties, and maintain good standing with tax authorities.

Can I Avoid Penalties with a File Extension?

Employers are required to timely file Form W-2, providing tax statements to their employees and the Social Security Administration (SSA). However, there may be circumstances where an employer needs additional time to prepare and file these forms. In such cases, it is possible to apply for a file extension.

As of 2016, the automatic extension for filing Form W-2 is no longer available. Employers can only apply for a 30-day extension if they have special circumstances that prevent them from meeting the original deadline. To request an extension, employers must file Form 8809, Application for Extension of Time to File Information Returns.

When applying for a file extension, it is crucial to provide a detailed explanation of the special circumstances that justify the need for an extension. The employer must also sign the form under penalties of perjury. This underscores the seriousness of the request and ensures compliance with tax regulations.

When granted, a file extension allows employers additional time to prepare and file accurate W-2 forms without incurring penalties for late filing. It is important to note that a file extension does not exempt employers from the requirement to distribute W-2 forms to their employees by the deadline. The extension only applies to the filing with the SSA.

In summary, employers who experience special circumstances that prevent them from meeting the original filing deadline for Form W-2 can apply for a file extension. By completing Form 8809 and providing a detailed explanation, employers can seek additional time to file without facing penalties for late submission.

The post Forgot to File Form W-2? What Penalties Does An Employer Face? appeared first on PrimePay.

What is Form W-2?

Form W-2, Wage and Tax Statement, shows the income and taxes withheld from an employee’s pay for the year. It is required for you to file your taxes. 

Don’t confuse a W-2 with Form W-4. A W-4 is a form individuals complete for withholding purposes; a Form W-2 is for employers to complete.

Employees should receive a Form W-2 from each of their employers where they worked during the prior year.

Typically, employers have until January 31st to send the prior year Form W-2 earnings statement to employees.  If an employer is mailing Forms W-2 to their employees, they must be postmarked by January 31st, so it may take a week or so to arrive t you. 

If you haven’t received Form W-2 from your employer by mid-February, follow these four steps:

1. Contact your employer. 

If you have not received your Form W-2, contact your employer to inquire if and when the Form W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS.

If you do not receive your W-2 by the end of February and you have already contacted your employer, you can call the IRS for assistance at (800) 829-1040.  You can also visit an IRS Taxpayer Assistance Center (TAC).  When you call or visit the IRS, you’ll need to provide the following information:

• Your name, address, Social Security number, and phone number.
• Your employer’s name, address, and phone number.
• An estimate of wages and federal income tax withheld in the prior year. Use a final pay stub for these amounts.

Based on the information you provide to the IRS, they will contact your employer for you, request the missing W-2 form and advise your employer of the penalties for failing to issue and file Form W-2. The IRS will also send you a Form 4852, a substitute for Form W-2. Form 4852 is completed by taxpayers when their employer does not give them a Form W-2 or when an employer has issued an incorrect Form W-2.

3. File your return. 

You still must file your tax return or request an extension to file, typically by April 15, even if you do not receive your Form W-2.  If you have not received your Form W-2 by April 15, and have completed steps 1 and 2, you may use Form 4852  which the IRS sent you. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

4. File a Form 1040X. 

On occasion, you may receive your missing Form W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return.  If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.  The Instructions for Form 1040X may provide you with additional details and guidance if you need to file an amended tax return.

The post 4 Steps To Take If You Don’t Receive Your W-2 appeared first on PrimePay.