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[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 occurs:
1. Your sole proprietorship incorporates.
2. Your sole proprietorship takes in partners and operates as a partnership.
3. Your partnership incorporates or your partnership is taken over by one of the partners and operated as a sole proprietorship.
4. Your corporation changes to a partnership or sole proprietorship.
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 spouse.)
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 COUPONS.
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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