Reporting & Recordkeeping (8)
The Form W2 is the summation of all of an employees payroll data for the year. It is sent with all other W2s and a summary form called a W3 to the Social Security Administration by January 31st of the following year. It must also be supplied to the employee by the same date.
According to state abandoned property laws, unclaimed paychecks (wages) become a form of “abandoned property” and the employer (you) must pay it over to the appropriate state treasury agency if they remain unclaimed for a certain number of months or years.
The state abandoned property laws governing abandoned property are known as escheat laws, because the property “escheats” or reverts property to the state.
There are certain steps you need to take when you have an unclaimed check. Head on over to our blog post for details on what you need to do next.
Unclaimed checks from past employees fall under state abandoned property law. The state abandoned property laws governing abandoned property are known as escheat laws, because the property “escheats” or reverts property to the state.
Here’s what you need to do.
Step 1: Document every contact you made to the ex-employee.
Most states require employers to contact employees in an attempt to keep unclaimed wages from becoming abandoned property.
Step 2: File an annual report with your State.
States also generally require the employer to file an annual report with their State that includes each employee’s full name, last known address, amount and payment date of the unclaimed checks, and the date of the last contact with the employee.
Step 3: Send the unclaimed wages with the report.
With that report, the wages need to be sent to the State Treasury which will “hold on” to the money indefinitely for the individual. As an employer, your responsibility for paying those wages is over when you have submitted those funds and complete information to the State.
Some States put a minimum amount such as $50.00 and below in which the unclaimed wages DO NOT have to be reported or sent to the State.
Check with your State on whether this rule applies to you. If, in fact, you don’t have to send it to the State because it is too small it needs to be reported as income to the employer and is subject to federal income tax.
Head on over to our blog post to learn more on this subject and also see when unclaimed wages become abandoned in your state.
The Schedule C is used for the typical single owner business (sole proprietorship). If you have an LLC set up in your state, your filing status may be determined by state laws. For instance, in CA, single-member LLC’s can’t use Schedule C for sole proprietorship. They must file as a C or S corporation.
If your state doesn’t dictate how you can file, LLC’s can choose their tax status. For single owners, you can choose a Schedule C sole proprietorship on your personal return, or you can be taxed as a C or S corporation. If there are 2 or more owners, you can choose between a Partnership or a C or S corporation.
Partnerships file on a form 1065. C corporations file on a form 1120. S corporations file on a form 1120S. Business returns are generally due by March 15th each year, unless you have a fiscal year end other than the calendar year. K-1’s are required to be issued to the owners from the business in a partnership or S corporation to report the income earned from the business. The K-1 is then reported on the owner’s personal return to pay taxes on the business income. C Corporations pay taxes directly on their returns, so no K-1 is necessary.
If you’re unsure about what to file, or what will be best for you and your business to choose as a business and tax entity, you should consult with a tax professional. I often help small businesses figure out their best route and then I assist them with their accounting and taxes to keep them compliant.
What’s the best way to keep track of the many deadlines related to tax withholding, reporting, and payments?
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