4 Important Tax Documents for All Small Businesses
Are you running your own small business? Make sure you’re familiar with these four important tax documents so you don’t run into trouble with the IRS.
With many small business owners working long hours trying to perform many roles, it’s easy to overlook important tax documents that the IRS requires. If this happens to you, you could inconvenience your employees and also end up with expensive penalties and headaches during tax time.
Staying compliant means completing documents needed to file taxes as well as identify your company with the IRS. You need to keep these documents for seven years in case you get audited or some agency requests them.
Read on for four IRS documents your small business must-have.
If your small business hires part-time or full-time employees, then you need to complete Form W-2 every year prior to tax time. This form goes both to the IRS and employees. While the IRS uses it to verify information, your employees need it to report their wages.
This form will show information for both your company and the employee. It lists gross wages along with the federal, state, Medicare, and Social Security taxes withheld during the tax year. You also report additional items like retirement plans and any special deductions like health insurance premiums.
You should get access to a W2 creator if you want an easy way to handle this tax document.
- Form 1099-MISC
If you hire independent contractors for your business, then add Form 1099-MISC to your tax document checklist. This document has a similar purpose as Form W-2 for employees, and both the IRS and your contractors will need copies.
This document includes company and contractor info along with information about any income paid or taxes withheld. For example, it asks about topics such as rental income and royalties as well as large direct sales made. You can also report miscellaneous income paid.
- Forms W-4 and W-9
For your business to know how to handle taxes for workers, you need to have these important forms completed as soon as you hire staff. Without them, you can get fined, and your workers can run into issues when it comes to tax withholding.
You have employees fill out Form W-4 to explain their tax situation and select options that determine how much taxes you’ll take out of their checks. Form W-9 is the alternative form for independent contractors where they provide their tax identification number and classification.
Unless you operate as a one-person business with no staff or partners, you should have completed Form SS-4 as part of your startup process.
This form requests an employer identification number from the IRS, and you use that number on tax documents and other business-related forms. You can easily complete this step online or by phone if you’d rather not mail forms to the IRS.
Keep These Tax Documents in Mind
Now that you know about these important tax documents, come up with a plan to create them in a timely manner so you can avoid problems come tax time.
Once you have these documents, organize them in your business’s files safely or even archive them electronically. Try to avoid throwing them away, although the IRS says it’s OK to dispose of most old tax documents after seven years. You’ll want to keep your Form SS-4 indefinitely, though.
Check our other articles for more business advice.