Tax compliance is something every employer knows is important…but nobody really thinks about until January rolls around.
When the deadlines creep up is when mistakes are made. Errors in filing, missed deadlines, incorrect employee forms. You name it. The penalties for getting tripped up add up quickly. Did you know W-2 penalties can range from $60 – $680 per form?!
There is good news though.
With tax form management software, staying compliant is:
- Easier than you think
- Much cheaper than paying fines
…all while saving your business thousands each year.
Here’s what you’ll learn:
- Why Tax Form Compliance is Important for Employers
- The Important Employee Forms Every Employer Should Know
- Common Mistakes Employers Make When Filing
- How Tax Form Management Software Helps
Let’s jump in!
Why Tax Form Compliance is Important for Employers
The IRS is not forgiving of filing errors. Every single employee that has an incorrect or late information return is going to cost your business a penalty. Multiply those penalties by however many people you have on your payroll and you’re looking at some serious numbers.
There are tools that can help employers simplify the process. Take the time to find the best W-2 software for your business. The right tax form management software will calculate withholdings automatically, catch errors before they get filed and store everything easily in one location.
But besides not getting hit with fines.
Proper tax form filing also shows your employees that you’re a responsible employer. When people receive their W-2 and 1099 forms with accurate information in a timely manner, workers know you care about your obligation as a business. Not only that, but correct forms mean your employees won’t run into unnecessary problems with their tax returns.
Here’s another fun fact for you…
The IRS reported $120.2 billion dollars in unpaid assessments in fiscal year 2024. Just FYI, that is the number the IRS collected for not complying with tax law. They are cracking down on non-compliance. You can’t afford to be sloppy with employee tax forms.
The Important Employee Forms Every Employer Should Know
Not all employee forms are created equal. There are a handful of key forms that every employer should know inside and out. Let’s dig into the most common ones.
Form W-2
By now every employer knows about the W-2. It’s the form used to report wages paid to an employee and taxes withheld from their paycheck. Employers are required to submit a W-2 for each employee to the SSA by the deadline.
The deadline for 2025 tax year forms is February 2, 2026.
Failure to meet this deadline will result in a minimum penalty of $60 per form.
Form W-4
When someone starts a new job they fill out a W-4. This form informs the employer how much federal income tax to withhold from the employee’s paycheck.
What employers tend to not realize is when an employee’s personal situation changes, so should their W-4. Marriage, new child, second job; these are just a few of the life events that can impact how much tax should be withheld. When employers fail to account for this, payroll teams face a mess come tax time.
Form 1099-NEC
Employees aren’t the only people employers have to submit forms for. Businesses are required to submit a Form 1099-NEC to anyone who is classified as an independent contractor and was paid over $600 in the tax year.
Misclassifying employees as contractors is one of the biggest compliance pitfalls. When a worker is accidentally filed as a contractor, it can trigger an audit as well as hefty penalties.
Form I-9
As mentioned earlier, the IRS isn’t going to let inaccuracies slide. That goes for the Department of Homeland Security too.
Employers are required to verify an employee’s identity and authorization to work in the U.S. through the Form I-9. Like most information returns, these have to be filed ASAP and kept on file for future auditing.
Common Mistakes Employers Make When Filing
So what mistakes are employers making that can cost them money?
Simple errors.
Most penalties against employers are due to simple mistakes that can easily be prevented. The most common culprits include:
- Social Security numbers not matching payroll records
- Deadlines being missed by a day
- Incorrect wage amounts being reported
- Using incorrect forms
- Filing on paper when electronic methods are available
All of these mistakes can be avoided by using tax form management software.
How Tax Form Management Software Keeps You Compliant
Tax form software takes the stress out of tax filing. Instead of scrambling to meet deadlines and double/triple checking employee information, software can do all of that for you.
Look for a tax form solution that will:
- Automatically populate employee info to prevent manual entry errors
- Verify Social Security numbers and Employer Identification Numbers prior to submission
- Calculate Federal, State, and local taxes to be withheld from employee paychecks
- Track deadlines and send notifications before they’re due
- Offer electronic submissions straight to the IRS and SSA
Tax form software should act as a safety net for your business. The fees you pay are nothing compared to what you’ll spend in penalties and fines if you go it alone.
Oh, and one more thing…
Modern tax form solutions handle more than just W-2s. Employees, 1099-NEC, and even state equivalents can be managed from the same platform. No more switching between software, no more exporting and importing data into spreadsheets. One tool. Done.
Tax Form Software is a game changer for small businesses. When payroll teams have access to the same technology as big corporations with entire departments dedicated to payroll, everyone can stay compliant yearly.
Bringing It All Together
Tax compliance isn’t optional. It’s the law.
Employers have to understand which employee forms they need to send where and when. If you don’t meet deadlines and fill out the forms correctly, you’re going to be fined.
Key points to take away:
- Each form has a purpose. W-2s are not W-4s, they’re not 1099s, and they’re certainly not I-9s.
- Deadlines are hard. But the penalties only get more expensive the longer you wait.
- Pay attention to details. Make sure withholdings are calculated correctly and matched to payroll records.
- Stay organized with tax form management software.
Businesses that take the time to set up workflows and use the right tools will thank themselves come tax time. Don’t wait for the IRS to catch you. Take action today and get compliant.
