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Tax Reporting
Fundamental Payroll CertificationChapter 5
20091
2009 Tax Reporting – TEST UPDATE Test will be using 2009 forms that are PRE ARRA
American Recovery and Relief Act 2009 Enacted February 13, 2009 Form 941 Change due to COBRA Credit
COBRA Premium Assistance EE Pays 35% of COBRA Premium ER Pays 65% COBRA Premium for EE and gets Credit
on 941 Return Subsidized for reduction in hours and involuntary
terminations between September 1, 2008 and December 31, 2009
Subsidy extended to March 31, 2010
2
Depositing Federal Taxes The size and frequency of payroll tax
liability determines the compliance dates for deposits
Penalties assessed for noncompliance What are Total Federal Taxes?
Employee Federal Taxes Federal Income Tax FICA 6.2% to Limit Medicare 1.45% No
Limit
Employer Federal Taxes No Federal Income
Tax FICA 6.2% to Limit Medicare 1.45% No
Limit3
Depositing Federal Taxes IRS tracks deposits and filings by EIN EIN- Employer Identification Number Form SS-4 request for EIN to IRS EIN utilized on all:
Tax Deposits Tax Return filings Responding to IRS notices
4
Depositing Federal Taxes Total Federal taxes reconciled on Form
941 Employer Quarterly Tax Return
Tax deposit requirements based on the lookback period
4 Quarters For 2009:
3rd and 4th quarters of 2007 (July – December) 1st and second quarter of 2008 (January – June)
5
Depositing Federal Taxes Deposit schedule – ER Responsible for Correct
Timing Based on Lookback period
If Deposit Status Changes IRS Notifies You in November
See and know chart on 5-2 Annual < $1,000 for the Year Quarterly < $2,500 for the Quarter Monthly $50,000 or Less Semiweekly>$50,00 and < $100,000 One-day Deposit $100,000 or more
6
Clarification –Annual $1,000 If aggregate annual is <$2500 /
annual tax history shows <$1000– may file by 1-31 with the Form 944 Employers Annual Tax Return
If liability exceeds—deposit is due the next day and the company becomes a semi-weekly depositor
7
Clarification– Quarterly $2500 If less than $2500 liability per quarter
deposit with the quarterly filing (941) If probability of exceeding the deposit
liability then prudent to make deposits on semiweekly basis
This will avoid the interest on late deposits
8
$100,000 One day rule Regardless of current deposit
frequency- Once liability hits $100,000 that deposit must be made within one business day.
Monthly depositors then become semi-weekly for all future deposits in current and following year
9
Depositing Federal Taxes Monthly depositor status change Fixed deposit liability Holiday deposit rules Quarter ends Manual checks
10
Quarter end liability When a semiweekly deposit period
overlaps quarters – multiple deposits may be required to accommodate the appropriate payment in the correct quarter.
11
Manual Checks In the eyes of the IRS– Manual
checks are viewed as regular payroll checks
liability and deposit rules apply based on the check date and constructive receipt
12
Depositing Federal Taxes Safe Harbor rule (98% rule) Must deposit timely at minimum 98% of
liability—cannot exceed 2% or $100 whichever is larger
Make up deposits – Monthly– by due date of Form 941 Semiweekly- on the first Wednesday or
Friday after the 15th of the month – no later than the Form 941 due date
13
Depositing Federal Taxes EFTPS—Electronic Federal Tax Payment System
Two designated Treasury Financial Agents (TSA) Chase (Bank One) and Bank of America
ACH network ACH Debit – direct to TSA ACH Credit -- Financial Institution initiates
14
Depositing Federal TaxesACH Credit Issuance of PIN to verify completed
transactions Payments due on holiday- must be
initiated day prior for availability the day after the holiday
15
Depositing Federal TaxesACH Debit Issuance of a PIN to make
payments via PC or phone– 24 hours –seven days a week
Must be made by 8:00 pm EST to be effective the next business day
PIN allows for payments and confirmations
16
Depositing Federal TaxesETA– Electronic Tax Application Allows for same day deposit to
Federal Reserve System-via Fedwire transfer
Must be completed by 2:00 pm their time
17
Depositing Federal TaxesNon- EFTPS Immediate credit item – cash-money
order- check from Federal Reserve city
Accompanied with Form 8109 --Federal Tax Deposit Coupon Name, address, EIN Legible as they are scanned
18
Quarterly Tax Return 941Form 941 used for reconciliation of Federal
Tax Payments Due end of month following end of quarter
Wages, tips and other comp (including nontaxable income)
Fed income tax from wages and tips Total wages & tips subject to SS/ MED Total deposits for the quarter& any balance due Advanced earned income credit pd to ees
19
Quarterly Tax Return 941Filing timely– acceptable mediums USPS- return receipt requested-
postmarked date due PDS-Private delivery services
DHL- same day or overnight by 10:30 FedEx- Priority or Std Overnight-2day –
International Priority or First UPS-Next day or 2 day Air A.M.- worldwide
or worldwide Express
20
Quarterly Tax Return 941 Ensure efficient processing-
No dollar signs or commas 1000.00
Negative numbers in parentheses (1000.00)
Utilize the pre-printed labels!
21
Quarterly Tax Return 941
22
Look at Form 941
Quarterly Tax Return 941Header Section EIN – Employer Identification
Number Employer Name and Address
Information Report for this Quarter of 2009 –
check box
23
Quarterly Tax Return 941Part 1 Line 1- Number of employees Line 2 Total wages & tips subject to
withholding + other compensation Line 3- Total income tax withheld from
wages, tips & sick pay Line 4- check box if no wages subject
to Social security and Medicare24
Quarterly Tax Return 941Line 5 – Taxable Soc Sec & Medicare Info Line 5a-
Column 1 Taxable Social Security Wages Column 2 Social Security Tax
Line 5b Column 1 Taxable Social Security Tips Column 2 Social Security on Tips
Line 5c- Column 1- Taxable Medicare Wages & Tips Column 2 Medicare Tax
25
Quarterly Tax Return 941 Line 6- Total taxes before adjustments Line 7- Tax adjustments (7a+7b+7c = 7d) Line 8 – Total Taxes after Adjustments Line 9 – Advanced EIC Payments Made to employees Line 10 – Total Taxes After Adjustments Line 11 – Total Deposits for this Quarter Line 12a & 12b COBRA Adjustments Line 13 Total Adjusted Deposits Line 14 Balance Due Line 15 Over Payment – check box on how to handle
26
Quarterly Tax Return 941 Line 15 Over Payment – check box on how to handle
Part 2 Line 16 State or MU Line 17 – Decide which box to check
If first box, go directly to Part 3 If 2nd box, fill in Monthly Deposit Amounts If 3rd box, Complete Schedule B; file with this form
Part 3 Line 18 – complete if business closed Line 19 – complete if a seasonal employee
27
Quarterly Tax Return 941Part 4 – Authorization for Third Party Designee Associate authorized to work with IRS Part 5 - Sign here Must be owner, president, VP, corp. officer,
etc. . .Paid Preparer’s Use Only – unless already
listed with IRS as filing agent with Form 8655
28
Alternative forms Form 943 - Employers annual Federal
tax return for agricultural employees Form 945 - Annual Return of withheld
Federal Income tax- non payroll Form 941-X – Adjusted Quarterly
Federal Tax Return or Claim for Regund Form 944 - Employers Federal Tax
return<$1000
29
State Unemployment• All states must have a plan • Utilized to pay the unemployed• Employer tax• 3 states allowing ee taxation
• Pennsylvania, Alaska, New Jersey (PAN)
30
State Unemployment Calculations vary per state More than half need to be by mag media Commonalities
Total wages paid Taxable wages paid Nontaxable wages paid Number of ees each month Gross wages for each ee Breakdown of taxable & nontaxable wages
per ee Number of weeks worked by each employee
31
FUTA- Federal Unemployment Tax Act Assistance via loans to subsidize federally
mandated state UI programs Rate 6.2% of initial $7,000 Credit of 5.4% -- Not Automatic!
Timely state deposits Not be in arrears in borrowed FUTA funds
Effective rate is .8% with the Credit Some states don’t qualify for the full credit
Example: In 2005, NY FUTA Tax Rate 1.4%
6.2% - 3.7% = Paid 1.4% instead of .8% 32
FUTA- Federal Unemployment Tax Act
33
Look at Form 940
FUTA- Federal Unemployment Tax Act
Calculating Federal UI Tax each Quarter Up to Wage Base $7,000 Deposit Using EFTPS by Deposit Due Date With full credit max withheld per ee is $56.0
$7,000 x .8% = $56.00 If liability for quarter is under $500 it can be
carried forward Due dates for Deposits:
34
Q1- April 30 Q2- July 31
Q3- October 31 Q4- January 31
FUTA- Federal Unemployment Tax Act Annual filing – Form 940 – Federal
Unemployment Tax Return Due by January 31 unless all
deposits were made by the due dates—extension to February 10
Penalties are the same as other Federal taxes
35
FUTA- 940 Annual Return Must file if Wages of $1500 pd in any qtr of 08 or 09,
or At least one employee employed for any part of a day
in any of 20 different weeks in 08 or 09 Business Owner changes
Taxes re-start with each employer meeting either test;
Must file separately Non profit organizations do not pay FUTA
Section 501 (c)(3) of IRC (Go to Page 5-55 in your book to view Form 940)
36
FUTA- 940 Annual Return Line by Line- Section by Section Type of return
A. Amended B. Successor employer C. No payments to ees in 2009 D. Final Business Return
37
FUTA- 940 Annual ReturnPart 1 Tell about return Line 1a- State unemployment
postal code Line 1b- SUI to multiple states-
check and complete schedule A Line 2- check if credit reduction
state
38
FUTA- 940 Annual ReturnPart 2 Determine FUTA tax before adj Line 3-Total payments for all employees Line 4-Payments exempt from FUTA tax
4a- Fringe Benefits 4b- GTLC- 4c- Retirement Pension 4d- Dependent care 4e- Other amounts
39
FUTA- 940 Annual Return Line 5-Payments made to each ee
in excess of $7,000 Line 6- Subtotal Line 7- Total taxable FUTA wages Line 8- FUTA tax before
adjustments
40
FUTA- 940 Annual ReturnPart 3- Determine your adjustments
Line 9- FUTA wages exempt from SUI(all)
Line 10- Some FUTA wages exempt from SUI
Use the Tax x 5.4% Line 11- Credit reduction- copy line 3
amt
41
FUTA- 940 Annual ReturnPart 4- Determine FUTA tax for 2009 Line 12- Total FUTA after adjustment
(8+9+10+11 = Line 12) Line 13- FUTA tax deposited Line 14- Balance due Line 15- Overpayment
42
FUTA- 940 Annual ReturnPart 5- Report FUTA Liability by
Quarter only if Line 12 is < $500. If not, skip and go to Part 6
Line 16- FUTA liability per quarter on lines 16a-16d
Line 17- Total liability for the year (16a+16b+16c+16d = Line 17)
43
FUTA- 940 Annual ReturnPart Six – Authorization for Third Party
Designee Associate authorized to work with IRS Part Seven - Sign here Must be owner, president, VP, corp.
officer, etc. . .Paid Preparer’s Use Only – unless
already listed with IRS as filing agent with Form 8655
44
FUTA- 940 Annual ReturnSchedule A– state unemployment
paid to multiple states Part one- Check state boxes that are
applicable Part 2-Information for states with
credit reductions See information pg. 5-63– not
applicable for this year (good to know)
45
FUTA- 940 Annual Return The lines for credit reduction states will
be listed and if FUTA wages were paid to these states the amount needs to be listed and the additional percentage, known as the credit reduction needs to be calculated.
This is done for each applicable state Total amount is calculated and entered
on line 11 of the 94046
Wage and Tax Statement- Form W-2
47
Look at Form W2
Wage and Tax Statement- Form W-2 (Go to Page 5-33 in your book) Employee documentation for filing Form 1040
IRS track tax obligations, and Social Security Administration SSA to provide
Social Security benefits Form W-2 – Wage & Tax Statement Form W-2c - Corrected Wage & Tax Statement Form W3 – Transmittal of Wage & Tax
Statements Form W3c – Corrected Transmittal of Wage &
Tax Statements
48
Wage and Tax Statement- Form W-2Filing Deadlines Copy A – SSA– last day of February or if
electronic –March 31 Copy 1- State/ Local- state regulations Copy B- Employees- January 31 Copy C- Employees for personal file- January 31 Copy 2- Employees filed with state- January 31 Copy D- Employers for files – none Former ees – w/company unless requested in
writing-then 30 days from request Business ceasing operation – by final 941 filing Extension of 30 days if filing form 8809
49
Wage and Tax Statement- Form W-2 Ensure efficient processing No erasures, strikeouts or
whiteouts Do not use dollar signs Use black ink only Legibility a must
50
Wage and Tax Statement- Form W-2
Box A– Employee SS # -- if none use all 0’s
Void- check box if error in processing & do not include in the Form W3
Box B- EIN Box C- Employer name, address and
zip code Box D- Control number
51
Wage and Tax Statement- Form W-2 Box E- Employees name
Use full first name, middle initial and full last name, and suffix if appears on SS card
Do not use titles or degrees Compound- hyphenated no -
Box F- Employees address and zip code
52
Wage and Tax Statement- Form W-2 Box 1- Wages, tips & other
compensation Box 2- Federal Income tax Withheld Box 3- Social Security wages Box 4- Social Security tax withheld Box 5- Medicare wages & tips Box 6- Medicare tax withheld
53
Wage and Tax Statement- Form W-2 Box 7- Social security tips Box 8- Allocated tips Box 9- AEIC Box 10- Dependent care benefits Box 11-Nonqualified plans
54
Wage and Tax Statement- Form W-2Box 12- multiple codes A= Uncollected ss tax on tips B =Uncollected Medicare on tips C= Cost of GTL over $50,000 D= 401k Contributions E=403B Contributions F= 408k6 Contributions G= 457 b Contributions H= 501c18D Contributions
55
Wage and Tax Statement- Form W-2 J= Sick pay not included in income K=Tax on golden parachute L= Nontaxable part of employer
business expense reimbursements M= Uncollected SS tax on GTL N= Uncollected Medicare on GTL P= Excludable Moving expense
reimbursements Q= Nontaxable combat pay
56
Wage and Tax Statement- Form W-2 R=Archer Medical Savings Account
Contributions S= Simple retirement account
contributions T= Adoption benefits V=Income from exercise of
nonstatutory stock options W= Health savings accounts
57
Wage and Tax Statement- Form W-2 Y= Nonqualified Deferred Comp
Deferrals Z= Income from 409A-Nonqualified
Deferred Comp Plans AA= Roth 401(k) deferrals BB=Roth 403(b) deferrals
58
Wage and Tax Statement- Form W-2 Statutory Employee – check if
earnings are subject to soc sec and medicare but NOT subject to FIT
Retirement plan box – check if in plan even part of year
Third Party sick pay box- check if vendor providing separate payments or noting employer paid
59
Wage and Tax Statement- Form W-2 Box 14- Other usually for lease
value method of company vehicle- state clearly
Box 15- Employers state tax ID number
Boxes 16-20– state and local tax information
60
Wage and Tax Statement- Form W-2 Reconcile the 941’s to the W2’s The W3 is a summarization and must
accompany the W2s to SSA All companies with 250 or more W2s
must file electronically If electronic poses hardship – file at
least 45 days prior to due date form 8508- Request for Waiver from Filing Information Returns on Magnetic Media
61
Wage and Tax Statement- Form W-2 USPS- - Certified mail– PDS– street address necessary Due dates are the dates postmark
or delivery commitment of PDS Memorize the chart for penalties
on page 5-50.
62
1099 Misc., Trade or Backup Withholding
63
Look at Form 1099 Misc.
1099 Misc., Trade or Backup Withholding (Go to Page 5-65 in book)1099 Misc.
Filed to IRS by 2-28 or if electronic by 3-31
At least $10 in royalties, broker payments, or tax exempt interest
At least $600 in income, health care payments, rents, prizes
At least $600 in gross proceeds pd to an attorney
Any fishing boat proceeds64
1099 Misc., Trade or Backup Withholding Non profit organizations, trusts , farmers
cooperatives Exceptions:
Box 6- medical & healthcare payment Box 7- Services provided by attorney Box 7-payments by a federal executive agency Box 8- Substitute payments in lieu of dividends Box 14- gross procedures to attorney for legal
services
65
1099 Misc., Trade or Backup Withholding Box2- Payment for merchandise Box 3- Payment of rent for real
estate agents Box 4- Wages paid to employees Box 5- Business travel allowances
pd to employeesMust report if >= $5000
66
1099 Misc., Trade or Backup Withholding Company must withhold 28%
federal withholding on recipients of 1099 Misc that do not provide a TIN.
Payments made as previously stated
Lookback period is the 2nd preceding calendar year.
67
Tax ReportingStudy! Collecting & Depositing Federal
Taxes Quarterly Tax Return Form 941 Federal Unemployment & Form 940 Wage & Tax Statements Form W2s Form 1099 Misc
68
Tax Reporting
69
Thanks For Attending!