How do I report withholding to the IRS?

On: July 12, 2019

Reporting Employment Taxes Generally, employers must report wages, tips and other compensation paid to an employee by filing the required form(s) to the IRS. You must also report taxes you deposit by filing Forms 940, 941 and 944 on paper or through e-file. Federal Income Tax and Social Security and Medicare Tax In general, employers who withhold federal income tax or social security and Medicare taxes must file Form 941, Employer’s Quarterly Federal Tax Return each quarter. This includes withholding on sick pay and supplemental unemployment benefits File Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees if you are filling to report agricultural wages. File Form 944, Employer’s Annual Federal Tax Return if you have received written notification about the Form 944 program. File Form 945, Annual Return of Withheld Federal Income Tax if you are filing to report backup withholding. Federal Unemployment Tax Act (FUTA) Only the employer pays FUTA tax; it is not withheld from the employee’s wages. Report your FUTA taxes by filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. Preparing and Filing Form W-2 At the end of the year, the employer must complete Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee. File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, to the Social Security Administration (SSA). File Copy 1 to an employee’s state or local tax department.

Backup Withholding (Withholding on Non-Employee Income)

When it applies, backup withholding requires a payer to withhold tax from income not otherwise subject to withholding. You may be subject to backup withholding if you fail to provide a correct taxpayer identification number (TIN) when required or if you fail to report interest, dividend, or patronage dividend income. Banks or other businesses that pay you certain types of income must file an information return with the IRS on Form 1099 showing payments that you received during the year. A Form 1099 includes your name and TIN such as a social security number (SSN), employer identification number (EIN), or individual taxpayer identification number (ITIN). The Form 1099 will also report any amounts withheld under the backup withholding rules. Payments subject to backup withholding: Backup withholding can apply to most kinds of payments reported on Form 1099, including:

• Interest payments (Form 1099-INT (PDF));
• Dividends (Form 1099-DIV (PDF));
• Patronage dividends, but only if at least half of the payment is in cash (Form 1099-PATR (PDF));
• Rents, profits, or other income (Form 1099-MISC (PDF));
• Commissions, fees, or other payments for work performed as an independent contractor (Form 1099-MISC (PDF));
• Payments by brokers and barter exchange transactions (Form 1099-B (PDF));
• Payments by fishing boat operators, but only the part that’s in cash and that represents a share of the proceeds of the catch (Form 1099-MISC (PDF));
• Payment Card and Third-Party Network Transactions (Form 1099-K (PDF)); and
• Royalty payments (Form 1099-MISC (PDF)).

Backup withholding also may apply to gambling winnings (Form W-2G (PDF)) on winnings that aren’t subject to regular gambling withholding. There is no withholding on K-1 (partnership, pass-through entity) income.