[excerpted from 1995 Social Security Admin. material]
o Helpful Information Sources
The Federal Government's Small Business Administration (SBA)
has a variety of publications and technical assistance
resources available for employers. For more information about
this, you may call SBA's toll-free number 1-800-827-5722.
In additional, useful sources for new employers are IRS
publications No. 334, "Tax Guide for Small Business", No. 583,
"Taxpayers Starting a Business", No. 15, (also called
Circular E), "Employers' Tax Guide", and No. 937, "Employment
Taxes." To order these IRS publications, call 1-800-829-3676.
o Setting Up Federal Tax Records for A Business
Under IRS laws and regulations, employers must set up and
maintain a system of business records that support wage and
employment tax reports. These records must be retained for
4 years. However, some States may require a longer retention
period; contact your State taxing agency for more information.
As an employer, you are required to obtain an employer's
identification number for employment and tax reporting
purposes. You do this by obtaining and completing Form SS-4,
"Application for Employer Identification Number", and then
filing the form with IRS. Blank copies of the SS-4 can be
obtained from either SSA or IRS offices. After your Form SS-4
is filed with IRS, IRS will assign a nine-digit number for you
to use on your business wage and tax reports. If the way you
organize your business changes from a sole proprietorship to a
partnership or corporation (or vice versa), you must file a
new SS-4 and obtain a new number.
You should apply for a new EIN when any of the following
1. Your sole proprietorship incorporates.
2. Your sole proprietorship takes in partners and operates as
3. Your partnership incorporates or your partnership is taken
over by one of the partners and operated as a sole
4. Your corporation changes to a partnership or sole
5. You purchase or inherit an existing business that you
will operate as a sole proprietorship. (You cannot use
the EIN of the former owner, even if he or she is your
6. You represent an estate that operates a business after
the owner's death.
7. You terminate an old partnership and begin a new one.
EMPLOYERS MUST USE THEIR IDENTIFYING NUMBER ON ALL ANNUAL WAGE
AND QUARTERLY EMPLOYMENT TAX REPORTS AND ON ALL TAX DEPOSIT
o Choosing an Annual Wage Reporting Method
Annual wage reporting consists basically of filing quarterly
Form 941 reports, "Employer's Quarterly Federal Tax Return",
with IRS and of filing annual Form W-2, "Wage and Tax
Statement" for each employee plus Form W-3, "Transmittal of
Income and Tax Statements" with SSA. Agricultural employers
must file Form 943, "Employer's Annual Tax Return for
Agricultural Employees", while employers of household workers
file Form 942, "Employer's Quarterly Tax Return for Household
Employees"--instead of Forms 941.
Under the law, employers who file 250 or more wage reports
(W-2s) must file them on magnetic media. Upon request, this
requirement may be waived by IRS for one year. Such requests
should be filed with IRS on Form 8508, "Request for Waiver
from Filing Information Returns on Magnetic Media." Any
employer may file W-2 wage reports on magnetic media
regardless of the number of employees.
Magnetic media reports must be processable by SSA's computer
systems. SSA accepts W-2 reports on 1/2" magnetic tape, 3480
cartridges (IBM compatible), and MS-DOS compatible, 8",
5 1/4", and 3 1/2" diskettes. If you choose to prepare and
file wage reports on magnetic media yourself, you should
request SSA publication No. 42-007, TIB-4, "Magnetic Media
Reporting", Submitting Annual W-2 copy A Information to the
Social Security Administration (see page 24). You must still
provide paper copies of Form W-2 to your employees for their
use in filing their income tax returns.
If you choose to have someone else prepare your magnetic media
reports, you may wish to consult the listings of such
service providers in the telephone directory. These are often
listed under the headings "accountants", "bookkeeping
service", "tax return preparation", or "return preparation".
Note that even though an employer uses a service provider to
file wage reports with SSA on magnetic media, the employer is
still responsible for both the accuracy of the reports and for
any penalties assessed by IRS.
Employers who are not required to file wage reports on
magnetic media and choose to file paper form reports, must
obtain and file Forms W-2 that meet IRS requirements set
out in their Publication 1141. Forms W-2 may be obtained free
from IRS by calling toll-free 1-800-829-3676.
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