Tax Season: What It Means for Employers and How to Handle It Smoothly
Tax season is busy for both employees and employers. Employers juggle payroll, year end filings, and multiple deadlines, all while employees ask questions about their forms and withholdings.
Below is a practical guide to what typically happens during tax season from the employer side and concrete steps to handle it efficiently and compliantly.
1. Core Federal Tax Season Responsibilities
Wage and tax reporting (employees and contractors)
Around January and early February, employers handle year end reporting for the prior calendar year:
Form W 2 (Wage and Tax Statement)
What it is: Reports each employee’s annual wages and tax withholdings.
Typical timing:
Provide a completed W 2 to each employee.
File copies with the IRS and Social Security Administration (SSA), often by early February (check the IRS site for the exact date each year).
Reference: IRS W 2 information – https://www.irs.gov/forms-pubs/about-form-w-2
Form W 3 (Transmittal of Wage and Tax Statements)
What it is: A summary of all W 2s issued.
Filed with the SSA along with the W 2s, typically by early February.
Reference: SSA W 3 information – https://www.ssa.gov/employer/
Form 1099 NEC (Nonemployee Compensation)
What it is: Reports payments of $600 or more to independent contractors or freelancers.
Typical timing:
Furnish 1099 NEC to each contractor.
File with the IRS usually by early February (paper and electronic deadlines can differ; verify annually).
Reference: IRS 1099 NEC info – https://www.irs.gov/forms-pubs/about-form-1099-nec
Form 1099 (other types)
If you paid at least b in certain other payments (e.g., some rents, prizes, or other income), you may need to furnish the applicable 1099 variant.
Employer federal tax filings
Form 940 (FUTA Tax Return)
What it covers: Federal Unemployment Tax Act (FUTA) taxes for the prior year.
Typical timing:
File and pay any FUTA due by late January or early February.
If you deposited all FUTA tax on time, the due date can extend about one week (often around February 10).
Reference: IRS Form 940 info – https://www.irs.gov/forms-pubs/about-form-940
Form 941 (or 944) – not strictly “tax season” only
Quarterly (or annual) payroll tax returns for income tax withholding, Social Security, and Medicare.
These continue on their regular schedule, but year end reconciliations often happen during tax season.
Reference:
Form 941 – https://www.irs.gov/forms-pubs/about-form-941
Form 944 – https://www.irs.gov/forms-pubs/about-form-944
2. Setting Up Withholding Correctly from the Start
Accurate withholding throughout the year makes tax season easier for both employer and employees.
Collect Form W 4 from every US employee
Employees use Form W 4 to tell employers much federal income tax to withhold.
Best practices:
• Obtain a completed W 4 before or at the time of hire.
• Encourage employees to update it after major life changes (marriage, divorce, new child, second job, etc.).
• Store W 4s securely and be prepared to produce them if requested.
State income tax withholding accounts and forms
Many states require employers to:
• Register for a state income tax withholding account.
• Obtain a state specific withholding form (like a state W 4) from each employee in that state.
Examples of state registration portals:
• New York: https://www.tax.ny.gov
• California: https://edd.ca.gov/Payroll_Taxes/Enroll_Employer_e-Services_Business.htm
• Massachusetts (MassTaxConnect): https://mtc.dor.state.ma.us/mtc/_/
A few states (Florida, Texas, Washington, Nevada, New Hampshire, Tennessee) do not impose traditional wage income tax, so state income tax withholding is not required there, but other taxes and filings may still apply.
Check state rules
• Every state has its own requirements and forms.
• Look up your state revenue or tax department site and search for “employer withholding” or “withholding registration.”
3. ACA and Benefits Related Tax Season Filings
Employers thatprovide health coverage or retirement plans, tax season may include additional federal filings.
Affordable Care Act (ACA) information reporting
Employers offering certain health plans must report coverage information:
Forms 1094 B/1094 C and 1095 B/1095 C
• Form 1095 (B or C) is provided to employees to show their health coverage details.
• Form 1094 B or 1094 C is the transmittal/summary employers file with the IRS.
Employers with:
• Fewer than 50 full time equivalent (FTE) employees typically file the B series.
• 50 or more FTEs typically file the C series.
Deadlines often look like:
• Furnish 1095 forms to employees by early March.
• File the 1094 transmittal and associated 1095s with the IRS by early March (paper) or end of March (electronic).
Reference: IRS ACA information returns – https://www.irs.gov/affordable-care-act
ERISA and Form 5500 (retirement and welfare plans)
For employers sponsoring retirement or certain welfare benefit plans:
Form 5500
Reports information about retirement and welfare benefit plans, including 401(k) and certain health plans.
For calendar year plans, the standard deadline is July 31 of the following year.
Employers may request a one time extension by filing Form 5558 before the due date.
Applies to many plans with 100 or more participants, including some Health Reimbursement Arrangements (such as ICHRAs).
Reference: Form 5500 – https://www.dol.gov/general/topic/retirement/form5500
4. Special Employee Notices During Tax Season
Some states require specific notices related to tax credits or withholding.
• Earned Income Tax Credit (EITC) notices (example: Texas)
• Texas employers must notify employees about the federal Earned Income Tax Credit (EITC) by March 1 each year.
• Employers may use IRS Notice 797 as the template: https://www.irs.gov/pub/irs-pdf/n797.pdf
Other states may have similar notice requirements; check your state’s Department of Labor or tax agency.
5. New Hire Reporting and Multi State Employers
Year end and tax season tasks are easier if you’ve been handling new hire reporting properly throughout the year.
Federal new hire reporting framework
All employers must report newly hired employees for child support enforcement purposes.
If you operate in multiple states, employers can register as a multistate employer and choose one state to receive all new hire reports.
Employers must notify the US Department of Health and Human Services (HHS) of:
• Employer legal name, FEIN, address, contact info
• The state where you will report all new hires
Registration options:
• Online: https://ocsp.acf.hhs.gov/csp/home/employer
• By form or by letter (see instructions on the HHS site).
State specific new hire reporting
States set their own timeframes and methods.
Examples:
• New York: Report new hires and certain contractors within 20 calendar days of hire via https://www.nynewhire.com/#/login
• Massachusetts: Report new or recalled employees and some contractors within 14 days; employers with 25+ employees must report electronically – https://www.mass.gov/how-to/report-new-hires
Staying current on new hire reporting helps align wage data used for tax credits, unemployment insurance, and benefits.
6. Direct Deposit, Payroll Logistics, and Employee Access
Clean payroll operations reduce errors that can snowball into tax issues.
Direct deposit rules differ by jurisdiction
At the federal level, direct deposit is allowed, and employers may require it if employees can choose their own financial institution or you provide a compliant alternative.
Federal EFT rules: https://www.consumerfinance.gov/compliance/supervision-examinations/electronic-fund-transfers-act/
States vary:
• Some allow mandatory direct deposit, subject to conditions (e.g., Tennessee can require direct deposit or payroll cards, with fee disclosures).
• Some require voluntary consent, such as:
• New York – written consent, clear non coercion rules, and no fees to access wages.
• District of Columbia and Delaware – voluntary authorization only.
• Oregon and Vermont – allowed with specific opt out and fee rules.
Always verify the rules where your employees work.
Practical tips for payroll operations
Maintain accurate employee addresses, Social Security numbers, and work locations.
Provide accessible pay stubs showing:
• Gross pay
• Tax withholdings (federal, state, local)
• Deductions for benefits, retirement, etc.
Give employees a simple way to:
• Update W 4 and state withholding forms
• Update addresses and direct deposit details
• Request copies or corrections of W 2s or 1095s
7. Practical Tips for a Smoother Tax Season
A. Prepare early
Create a tax season calendar with key dates:
• W 2 / 1099 distribution and filing deadlines
• FUTA Form 940 deadline
• ACA 1094/1095 deadlines
• State wage and tax report due dates
• EITC or other notice deadlines
Coordinate with your payroll provider, CPA or PEO:
• Confirm who is responsible for:
• Generating and filing W 2s, W 3s, 1099 NEC, and ACA forms
• Handling corrections
• Multi state withholding and reports
B. Check data quality
Before year end, run audit reports to confirm:
• Names and SSNs match official records
• Addresses are current
• Pay codes are mapped correctly for tax purposes
• Fix errors before forms go out.
C. Communicate clearly with employees
Provide internal guidance covering:
• When and how they’ll receive W 2s/1095s
• How to update their W 4 and address
• What to do if they lose or never receive a form
• General information about the Earned Income Tax Credit (and any required state specific notices)
Encourage employees to review their pay stubs throughout the year so surprises are minimized at tax time.
D. Manage corrections efficiently
If a W 2 is wrong use Form W 2c (Corrected Wage and Tax Statement) and Form W 3c when needed.
Reference: https://www.irs.gov/forms-pubs/about-form-w-2c
Track a simple change log:
• Who requested the correction
• What changed
• When and how the corrected forms were sent and filed
8. Helping Employees Help Themselves
Even though employees are responsible for filing their own personal returns, employers can ease the process:
• Prompt them to verify address and email in December so tax forms go to the right place.
• Remind them they can adjust withholding during the year using:
• IRS Tax Withholding Estimator – https://www.irs.gov/individuals/tax-withholding-estimator
• A new Form W 4 or state equivalent.
Provide links to federal and state resources on:
• EITC (Earned Income Tax Credit): https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc
• State tax agencies: https://www.taxadmin.org/state-tax-agencies
This kind of education and communication reduces confusion and employer workload when employees start asking W 2 questions in late January.
9. How a PEO Like In2America Simplifies Tax Season
For growing businesses, particularly international companies expanding into the US, tax season can feel overwhelming. Federal filings, multi-state withholding, ACA reporting, new hire compliance, and benefits-related forms all converge within a narrow window of time. Missing a deadline or filing incorrectly can trigger penalties, interest, and unnecessary stress.
Partnering with a Professional Employer Organization (PEO) like In2America fundamentally changes this dynamic.
As a co-employer, In2America assumes responsibility for payroll processing, tax filings, issuing notices and employment-related reporting under our EIN. That means W-2s, W-3s, Form 940, Form 941 (or 944), and applicable state filings are generated, reconciled, and filed accurately and on time by us as part of our fully managed service.
Instead of reacting to tax season, our clients experience it as a structured, controlled process. Tax season should feel predictable. With the right partner, it is.