The year 2020 is finally over, but that doesn’t mean you can put it all behind you. There are still those pesky tax forms to take care of for the previous year. If you’re a Canadian company employing workers in the US, then tax time can be especially stressful. As a Canadian employer, you might not be familiar with the intricacies of tax forms for US employees. You might not know what you need to do right now to ensure compliance. What do you take care of? What will your employer of record (EOR) handle? 

Here's a simple breakdown that will make tax forms for US employees easier for you this year. 

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Your Employer of Record (EOR) Will Handle Tax Forms for US Payrolled Employees

There are many benefits to partnering with an employer of record if you’re employing workers in a different country. You don’t have to worry about payroll regulations and legislative requirements in a foreign country—the EOR will handle all of that for you, and they have the expertise required to ensure compliance. 

Fortunately, if you work with an EOR, you don’t have to worry about tax forms for your payrolled US employees at all. The EOR will handle all this paperwork for you for all regular employees who get a paycheque, whether they’re part time or full time. The EOR will do it all, from creating the W2s to sending the tax forms to employees by the deadline. 

As the employer, you’ll be responsible for reviewing the W2 drafts before they’re sent and updating employee names, SSN, and addresses as required. It will also be up to you to double-check that all employees you’ve paid this year, including those who no longer work for you and those who are furloughed, are included in the list of employees receiving W2s.

By the end of January, Form W2s will be mailed to employees. Your EOR will then complete your federal and state tax filings and payments with the appropriate agencies. 

You Will Likely Have to Handle Forms for Contractors

Depending on the payroll partner you work with, it’s possible and likely that you will need to handle 1099 forms for your contractors yourself. That’s because many EORs only manage payrolled employees, not contractors. 

If this is the case, you’ll need to ensure all contractors who have received over $500 from you get a 1099 form. 

If your outsourced partner has been paying contractors for you as an agent of record (AOR), then it’s likely they will also handle these 1099s. Check with them to ensure who will be responsible for this task. These Form 1099-NECs should be mailed to contractors by the end of January. 

US Employees and Contractors Will File Their Taxes

Once your tax forms are sent out to employees and contractors, they’ll take it from there. It’s their responsibility to file their taxes by April 15, 2021. 

Business owners often dread tax time. After all, it comes with significant stress over strict deadlines, strict tax form rules, and regulatory compliance. If you’re a Canadian business that employs US employees, this stress is compounded by the fact that you’re less familiar with US payroll and tax regulations. Fortunately, working with an employer of record for US payroll like The Payroll Edge can reduce this stress. They’ll take over tax forms for your payrolled employees, so you don’t have to worry about it. 

Looking Forward to 2021

With 2020 tax forms out of the way, you can now look forward to 2021. Now is a good time to update the State Unemployment Insurance tax rate, as well as update benefits, sick, and paid time off. 

Make taxes easier in 2021. Contact The Payroll Edge for US payroll and tax services.