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HEAVEN’S HARVEST

MINISTRIES – FINANCE NIGHT

Tax Withholdings and Estimated Payments

Presented by: Jennoa R. Graham, Ph.D.

Friday, March 8, 2013

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KEY TERMINOLOGY Income – Money that is received in

exchange for a product, service or contract agreement

Tax Withholding – Installment payments that are deducted from the total income earned (gross) prior to issuing employee paycheck

Estimated Tax – Installment payments made by independent contractor from the total income received for services

Small Business is not included in this presentation

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KEY TERMINOLOGY Allowances (Exemptions) - A point

system based on IRS Form 1040 filing status and number of dependents, that reduces the dollar amount deducted from the total income earned (gross) prior to issuing employee paycheck

Withholding Calculator – an application that determines IRS Form W-4 allowances and estimated tax liability. Does not calculate state estimated tax liability.

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KEY TERMINOLOGY (CONT.) IRS Form W-4 – used to determine the

dollar amount to withhold from a payroll check for federal income tax installments.

IRS Form 1040-ES – voucher used to submit estimated federal income tax installment payments

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KEY TERMINOLOGY (CONT.) GA Form G-4 – used to determine the

dollar amount to withhold from a payroll check for Georgia state income tax installments.

GA Form 500ES - voucher used to submit estimated Georgia state income tax installment payments

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OVERVIEW Determine whether tax withholding or

estimated tax is applicable

Determine applicable forms for tax withholding and estimated tax processes

Calculate the number of tax withholding allowances or dollar amount of estimated tax

Determine when and how to submit applicable forms/payments

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EMPLOYEE OR CONTRACTOR Traditional Employee – Payer controls what

work is assigned and how it is completed

Independent Contractor – Worker controls what work is assigned and how the work is completed

There are exceptions to these general rules under statutory and common laws guidelines: Form SS-8, Determining of Worker Status for

Purposes of Federal Employment Taxes and Income Tax Withholding

See www.irs.gov for more information

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TAX WITHHOLDING Traditional Employee – Payer controls what

work is assigned and how it is completed

Payroll Tax Withholding - Mandatory With Consent (W-4) Without Consent (highest rate)

Withholding Allowance W-4 Personal Allowances Worksheet Withholding Calculator – Complicated; See

www.irs.gov or tax professional for more information

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W-4Rule of Thumb:

Number of Allowances Form W-4 < Form1040

Submitted at time of employment; update at anytime

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1099Rule of Thumb:

Number of Allowances Form W-4 < Form1040

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ESTIMATED TAX Independent Contractor – Worker controls

what work is assigned and how the work is completed

Estimated Tax Installments - Voluntary Prepay (1040-ES) Tax Season (1040-V, may include penalty fees)

Installment Amounts 1040-ES Estimated Tax Worksheet Withholding Calculator – Complicated; See

www.irs.gov or tax professional for more information

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1040-ESPayments are made once every 4 months

(quarterly)

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STATE OF GEORGIA Payroll Tax Withholding - Mandatory

G-4, Employee Withholding Allowance Certificate

G-4, Allowance Worksheet

Estimated Tax Installments – Voluntary 500-ES Individual and Fiduciary Estimated Tax

Payment Voucher (Prepay) GA-9465 Installment Agreement Request (Tax

Season) Send request if full payment cannot be made at time

of filing Penalties may be applied if request is deniedSee www. etax.dor.ga.gov or tax professional

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G-4Rule of Thumb:

Number of Allowances Form G-4 = Form W-4

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GA 500-ESPayments are made once every 4 months

(quarterly)

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GA-9465

Repayments are due monthly not to exceed 36

months

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SUMMARY Determine whether tax withholding or

estimated tax is applicable Tax withholding applicable to Employees Estimated tax is applicable to Contractors There are exceptions to every general rule

Determine applicable forms for tax withholding and estimated tax processes W-4 Employee Withholding Allowance Certificate G-4 Employee Withholding Allowance Certificate 1040-ES Estimated Tax 500-ES Individual and Fiduciary Estimated Tax

Payment Voucher

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SUMMARY (CONT.) Calculate the number of tax withholding

allowances or dollar amount of estimated tax Allowances Worksheet Estimated Tax Worksheet Withholding Calculator (Federal only)

Determine when and how to submit applicable forms/payments W-4 & G-4 submitted at time of employment

and can be updated at any time during the year ES payments submitted quarterly

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REFERENCES IRS (2013). Tax forms and definitions.

Internal Revenue Code, Retrieved March 5, 2013, from http://www.irs.gov

GA Dept of Revenue (2013). Tax forms and definitions. Office of Tax Policy, Retrieved March 6, 2013, from http://etax.dor.ga.gov