Best Practices for Filing Your Taxes
Review the W-2
Did you know that producing a corrected W-2 form (Form W2-C) after year end can result in additional fees from the IRS, your accountant, and/or your payroll provider?
Avoid the added expense and be sure to have your employees verify that the information in their employee record is accurate and up to date. They should review all details on their record, and be sure to pay specific attention to critical details such as:
- Full name
- Social security number
- Tax form set-up (W-2 or 1099)
- Bank information and details for direct deposit
- Changes or updates to employee deductions and withholding
TIP: Things can change throughout the year. Consider proactively sending out a communication in December or at the start of January to your employees, provide instructions in the form of a poster or announcement where you display your Employer Compliance posters, or include this step as part of your annual review or one on one meetings.
Set it and forget it? Don’t we wish.
You’ve likely already gotten the sense that payroll and taxes are not a once and done activity, but something you’ll need to be on top of throughout the year. The level of involvement you’ll need to plan for will depend on how you process payroll, whether DIY or outsourced.
And don’t worry, it’s not all on you, your employees share some responsibility as well.
What’s on you? Staying up to date on new tax legislation and rate adjustments (including SUI rates) and addressing any communications from federal, state, or local tax agencies—either on your own if you DIY payroll, or with the assistance of your financial advisor or payroll provider.
What’s on your employees? Reviewing each paystub to ensure everything is accurate. You may want to consider adding a line on the pay stub or in your employee handbook stating it is the employees’ responsibility to inform you if there are any changes that should be made such as address and withholding information. That way it cannot be said the employee was not informed of their responsibility.
Some common abbreviations used on paycheck stubs:
- Gross: Earnings before deductions
- Net: Earnings after deductions
- Current: Pay period earnings
- YTD: Year-To-Date
- REG: Regular hours worked
- OT: Overtime hours worked
- HOL: holiday hours worked
- VAC: Vacation time paid
- SICK or FL: Sick or family leave time paid for
- FICA: Employee’s portion of Social Security paid
- FICA-MED: Medicare deductions
- FWT or Fed: Federal withholding Income Tax deductions
- SWT or State: State Tax withheld
- LT or Local Tax: County and/or City Tax deductions
- WC or Work Comp: Workman’s comp contribution, usually paid by employer
- INS or MED: Insurance or medical savings account deductions
- Life: Life insurance deductions
- 401K or Ret: Tax deferred retirement contribution
- Garnish: garnishment being taken from employee’s check due to money owed
Let’s synchronize our watches
Ready to get going on 2018? There’s one more step: calendaring.*
Download the Small Business
2018 Tax Filings Calendar
In addition to keeping track of these dates, you’ll also want to add in filing deadlines for 2018 to stay on top of them. You should also communicate important dates to your employees, including payroll dates, bank holidays, and any other dates critical to your business.
TIP: The recent tax reform bill passed by the government is packed with changes that could affect dentists' financial planning. Read the ADA News article on the changes and find out what dentists may need to do this year to get ready.
Small Business Payroll Resources
IRS Small Business Resources:
To apply for an EIN
For current FICA rates
Tips on creating a payroll schedule
Considerations for DIY Payroll
How to run payroll checklist
*The information provided is current as of January 2, 2018. Note that this material is educational only and reflects the opinions of the authors. It is not meant to constitute legal or tax advice. Always contact a qualified tax professional or other financial legal advisor in your area for complete tax or legal advice.
This information is provided courtesy of SurePayroll, the only payroll company endorsed by ADA Member Advantage. Learn more about SurePayroll or call 866.535.3592.