Payroll Forms: A Complete Guide for Employers and Employees

Payroll forms are various documents used to communicate different transactions (e.g., wages, tax withholdings, benefits) between employers, employees, and the IRS. Employers and employees are legally mandated to use these forms to ensure regulatory and tax compliance. Failure to do so risks payroll errors, audits by government bodies, and significant penalties.

This article explains what payroll forms are before diving into the commonly used ones. We’ll go through numerous examples of payroll forms to explain their use case and clarify why employers and employees need them. Additionally, we’ll also touch on the importance of keeping accurate payroll forms and point out what mistakes to avoid when managing them.

What Are Payroll Forms?

Payroll forms are official documents used to record, report, and verify employment-related information, including employment eligibility, compensation, and tax withholdings. Federal and state governments use these forms to ensure businesses and employees are compliant with tax and labor laws by tracking employment data, tax liabilities, worker benefits, and more.

Employers primarily use payroll forms to calculate, remit, and report federal income tax, Social Security tax, Medicare tax, and Federal Unemployment Tax (FUTA). By using appropriate forms, employers verify that they are hiring legal workers, classifying them correctly, and withholding the right amounts from their paychecks.

Employees mainly use these forms to determine how much take-home pay they receive and verify the amounts. They also use payroll forms to file their annual tax returns accurately to avoid overpaying or underpaying taxes. Lastly, various payroll forms can be used as proof of income when applying for loans, mortgages, social security benefits, etc.

9 Most Frequent Types of Payroll Forms

There are more than 100 different types of payroll forms, each serving a unique purpose and being used in specific circumstances. Below, we have outlined the most critical ones that the majority of businesses and employees use:

Now, let’s examine each form in more detail.

Form 941

Form 941, Employer’s Quarterly Federal Tax Return, is used to report income, Social Security, and Medicare taxes withheld from employees’ paychecks. It’s one of the most frequently completed forms by employers, since they have to file it quarterly for every employee.

Here is the key information relevant to the Form 941:

• Who uses it: Most employers who pay wages and withhold federal income tax or Social Security and Medicare from employees’ paychecks.
• When to file: Four deadlines per year (April 30, July 31, October 31, January 31).
• What it contains: Total wages paid, federal income tax withheld, and the employer’s and employee’s portions of FICA taxes.

Form W-2

Form W-2, Wage and Tax Statement, is used to report an employee’s annual wages and total taxes withheld from their paychecks. It’s one of the most widely recognized employee payroll forms and the main document employees use when filing their tax returns.

Here are the most important details about Form W-2:

• Who uses it: Employers create one Form W-2 for every employee they paid at least $600 in a year, or for whom they withheld taxes from their paychecks.
• When to file: The annual filing deadline is January 31 of the following year. Employers must send Copy A to the SSA and Copies B, C, and 2 to employees. Copy 1 may also be sent to the state, city, or local tax department, depending on relevant laws.

Here is what it contains:

• Total taxable wages, tips, bonuses, and other compensation.
• Federal, state, and local income tax withholdings.
• Social Security and Medicare withholdings.

Form W-4

Form W-4, Employee Withholding Certificate, is a document filled out by employees to tell employers how much federal income tax to withhold from an employee’s paycheck. This is one of the most common payroll forms for employees. It isn’t sent to the IRS but is instead kept by employers in their records.

Here are the details to know about Form W-4:

• Who uses it: New employees fill out the form upon being hired. Existing employees are also required to provide an updated Form W-4 when their financial circumstances change, or they want to change the amount that’s being withheld from their paychecks.
• When to file: Filled out and submitted before or on an employee’s first day of work. A new form is filed when needed.

Here is what it contains:

• Filing status (e.g., Single or Married Filing Jointly).
• Adjustments for additional income (e.g., multiple jobs or spouse’s income).
• Claimed dependents and credits.
• Other deductions or requests for extra withholding.

Form I-9

Form I-9, Employment Eligibility Verification, is used to confirm that a person is legally allowed to work in the United States. This form is mandatory under the Immigration Reform and Control Act of 1986.

Here is the vital information about Form I-9:

• Who uses it: Employees and employers both fill out the form. It’s the employer’s legal obligation to complete and retain it.
• When to file: Employees must fill out Section 1 after accepting a job offer and, at the latest, on their first day of employment. Employers must fill out Section 2 and complete the form within three business days after the employee’s first day at work. The form is not filed, but it’s kept on record by the employer for inspection.

Here is what it contains:

• General information about the employee (name, address, Social Security Number, citizenship or immigration status, etc.) and their attestation, under penalty of perjury, that it is accurate.
• The confirmation that the employer reviewed and verified the form and the additional documents the employee provided.

Form 940

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is used to report FUTA taxes paid by employers. FUTA is paid solely by employers and is not deducted from employees’ paychecks.

Here is the information to know about Form 940:

• Who uses it: The form is filed strictly by employers.
• When to file: The filing deadline is usually January 31. This deadline can be extended by February 10 if all FUTA taxes have been deposited on time.
• What it contains: Total payments to all employees, payments exempt from FUTA tax, payments in excess of $7,000, total taxable FUTA wages, etc.

Form 1099-NEC

Form 1099-NEC, Nonemployee Compensation, is a form used to report payments that businesses make to other businesses or freelancers and independent contractors. It differentiates nonemployee payments from employee wages.

Here are the details to know about Form 1099-NEC:

• Who uses it: Businesses must file Form 1099-NEC for every contractor or business (not corporation) to which they paid at least $600 in a tax year.
• When to file: The form must be filled out and submitted to the IRS and the receiving contractor or business by January 31.

Here is what it contains:

• Payer’s and recipient’s TIN and other information.
• Total compensation.
• Federal and state income tax withheld (if applicable).

Form W-3

Form W-3, Transmittal of Wage and Tax Statements, represents a compilation document for all your Forms W-2. It summarizes the totals from all W-2s that you’re submitting to the Social Security Administration (SSA), verifying that the sum matches your payroll documentation.

Here’s additional information about Form W-3:

• Who uses it: Any employer who submits at least one Form W-2 must also submit Form W-3.
• When to file: The filing deadline is January 31 (the same as for Form W-2).

Here is what it contains:

• The number of Forms W-2 submitted.
• Total wages, tips, and other compensation, as well as taxes withheld.
• Information about the employer (e.g., name, Employer Identification Number, address, etc.).

Form W-9

Form W-9, Request for Taxpayer Identification Number and Certification, is provided by vendors and contractors to businesses so that they can file Form 1099-NEC when paying them. It provides the information about the contractor while verifying they are not subject to withholding.

Let’s see what the most important information is about Form W-9:

• Who uses it: Businesses request and collect this form from contractors to whom they need to pay at least $600 in a year.
• When to file: There is no filing deadline. Businesses should collect the form and keep it on file before issuing the first payment to the contractor.

Here is what it contains:

• The payee’s name or business name, federal tax information, and address.
• Taxpayer identification number (TIN).
• Certification under penalties of perjury that the information is correct.

Form 1096

Form 1096, Annual Summary and Transmittal of U.S. Information Returns, is used to transmit various forms, including Form 1099. It works similarly to how Form W-3 summarizes W-2s. However, it’s only used when submitting paper forms. If you file 1099s electronically, you don’t need Form 1096.

Here is the rest of the information you need to know about Form 1096:

• Who uses it: Employers who file paper Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.
• When to file: The deadline matches that of the accompanying documents (e.g., January 31 when accompanying 1099-NEC or May 31 when accompanying Form 5498).
• What it contains: The number of forms submitted, along with total amounts reported on the forms and federal income tax withheld.

The Importance of Keeping Accurate Payroll Forms

Keeping accurate payroll forms is not just a recommendation or a way to streamline payroll processing, but a legal requirement for any business that operates in the United States.

Here are the main reasons for keeping accurate payroll paperwork:

• Audit protection. The IRS and the Department of Labor, Wage and Hour Division, have strict requirements when it comes to keeping payroll forms and other audit documentation. Payroll records need to be kept on file for at least three years. If you can’t provide them during an audit, you may face legal scrutiny and severe penalties.
• Financial accuracy. Payroll forms force businesses to check and double-check their information about wages, tax withholdings, liabilities, and more. Properly maintaining these records helps employers and employees budget better, prepare for the tax season, and optimize their finances.
• Employee trust. Employees rely on employers to handle various forms, including Form W-2 and Form I-9. Mismanagement can induce unnecessary stress in employees, make their tax return filing complicated, and even affect their future retirement benefits.

Here are some tips to help you keep accurate payroll forms:

• Use payroll software to streamline processes and ensure accuracy.
• Conduct regular internal audits.
• Educate your staff (especially HR and payroll administration) on compliance requirements.
• Stay updated with the latest regulatory changes.

4 Critical Payroll Form Mistakes to Avoid

Here are the four biggest and most common mistakes you need to avoid to ensure compliance with payroll forms:

1. Incorrect inputs. It’s easy to make a mistake when manually entering an employee’s name, SSN, or other information. That’s why you should always copy them from another official document.

2. Misclassification. Make sure not to mix up independent contractors and employees. For instance, it’s a critical mistake to send Form 1099-NEC to a worker who is legally classified as an employee, or to issue a contractor a Form W-2.

3. Missed deadlines. Filing deadlines for most payroll tax forms are strict, and missing them can result in penalties. These penalties can ramp up quickly, as they are generally issued per form.

4. Outdated forms. Forms like I-9 and W-4 don’t have filing deadlines and can be kept on record for extended periods of time. Still, the information in them can get outdated, or they can expire. That’s why it’s important to verify their accuracy and always use updated forms for your administrative operations.

Generate and Manage Payroll Forms with Paystub.org

In addition to making it easy to generate pay stub forms, Paystub.org also allows you to create several other essential payroll forms.

Our software offers ready-made templates, built-in calculators, autosaving features, and more. This makes the generation process quick and intuitive, minimizing the chances of making mistakes and streamlining your recordkeeping.

Here are the tools that you can use:

• Form W-2 generator
• Form 1099 generator
• Pay stub generator

Final Thoughts

Filling out, handling, filing, and keeping payroll forms may seem like tedious administrative work, but it is essential for tax reporting, legal compliance, and financial management. These documents are essential tools that enable the proper functioning of the tax system.

By understanding how every form works and having the right systems in place, you can maintain accuracy every step of the way. Turning payroll form management into a structured and predictable process protects you and your workforce and enhances your operations instead of being a risk and a burden.

Payroll Forms FAQs

#1. Can I generate payroll forms online?

Yes, you can generate most payroll forms online. The IRS provides editable PDFs for many forms and encourages the use of e-filing and the IRIS system. Many payroll software solutions facilitate the generation of these forms. Paystub.org allows you to generate Form W-2 and Form 1099 with ease.

#2. How often should payroll forms be updated?

How often payroll forms should be updated depends on their use and filing deadlines. For example, Form 941 is filed quarterly and needs to be updated every time. On the other hand, Form W-4 should only be updated if an employee’s circumstances change (which can be every few years).

#3. What forms do I need for a new employee?

For a new employee, you generally need Form W-4 and Form I-9 at a minimum. Form W-4 gives employers information required for accurate tax withholding, while Form I-9 verifies the employee’s eligibility to work legally. Keep in mind that you may need other forms as well, depending on the situation.