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Tax Reporting. Fundamental Payroll Certification Chapter 5 2011. 2011 Tax Reporting – TEST UPDATE. Test will be using 2010 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

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tax reporting

Tax Reporting

Fundamental Payroll Certification

Chapter 5

2011

2011 tax reporting test update
2011 Tax Reporting – TEST UPDATE
  • Test will be using 2010 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
depositing federal taxes
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 4.2% to Limit
  • Medicare 1.45% No Limit
  • Employer Federal Taxes
  • No Federal Income Tax
  • FICA 6.2% to Limit
  • Medicare 1.45% No Limit
depositing federal taxes1
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
depositing federal taxes2
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 2011:
    • 3rd and 4th quarters of 2009 (July – December)
    • 1st and 2nd quarter of 2010 (January – June)
depositing federal taxes3
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 5-5
    • Annual < $1,000 for the Year
    • Quarterly < $2,500 for the Quarter
    • Monthly $50,000 or Less
    • Semiweekly >$50,000 and < $100,000
    • One-day Deposit $100,000 or more
clarification annual 1 000
Clarification –Annual $1,000
  • If aggregate annual is less than $1000 – may file by 1-31 with the Form 944 Employer’s Annual Tax Return
  • If annual is greater than or equal to $2500 can file 944 for this year but must file 941 for following years
  • If liability exceeds $100,000 on any day —deposit is due the next day and the company becomes a semi-weekly depositor
clarification quarterly 2500
Clarification– Quarterly $2500
  • If less than $2500 liability per quarter deposit with the quarterly filing (941)
  • If probability of exceeding the deposit liability of $2500 then it’s prudent to make deposits using monthly depositor’s rules

This will avoid the interest on late deposits

100 000 one day rule
$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
depositing federal taxes4
Depositing Federal Taxes
  • Monthly depositor status change-see previous slide
  • Holiday deposit rules
  • Quarter ends
  • Manual checks
holiday deposit rules
Holiday Deposit Rules

When a deposit is required on a day that is not a banking day:

Monthly & one-day depositors -by the close of the next banking day after the holiday

Semiweekly depositors-at least 3 banking days

State holidays are not banking days

11

quarter end liability
Quarter end liability
  • When a semiweekly deposit period overlaps quarters – multiple deposits may be required to accommodate the appropriate payment in the correct quarter.
manual checks
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
depositing federal taxes5
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
depositing federal taxes6
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 or EFTPS Direct
    • ACH Credit -- Financial Institution initiates
depositing federal taxes7
Depositing Federal Taxes

ACH Credit-done through your bank

  • EFTPS- Tax Payer tells bank to make the payment
  • Issuance of PIN to verify completed transactions
  • Payment deadlines are set by the bank that initiates the payment
  • Payments due on holiday- must be initiated day prior for availability the day after the holiday
depositing federal taxes8
Depositing Federal Taxes

ACH Debit-EFTPS Direct

  • IRS instructs ER’s bank to withdrawal funds from ER’s account
  • 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
depositing federal taxes9
Depositing Federal Taxes

ETA– Electronic Tax Application

  • Allows for same day deposit to Federal Reserve System-via Fedwire transfer
  • Must be completed by 2:00 pm their time
depositing federal taxes10
Depositing Federal Taxes

Non- EFTPS –Beginning 1/1/11 this is no longer an option!!

  • 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
quarterly tax return 941
Quarterly Tax Return 941

Form 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
    • COBRA Subsidy
quarterly tax return 9411
Quarterly Tax Return 941

Filing 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
quarterly tax return 9412
Quarterly Tax Return 941
  • Ensure efficient processing-
    • No dollar signs or commas
      • 1000.00
    • Negative numbers entered with the negative sign -1000.00
  • Utilize the pre-printed labels!
quarterly tax return 9413
Quarterly Tax Return 941

Look at Form 941

quarterly tax return 9414
Quarterly Tax Return 941

Header Section

  • EIN – Employer Identification Number
  • Employer Name and Address Information
  • Report for this Quarter of 2010 – check box
quarterly tax return 9415
Quarterly Tax Return 941

Part 1

  • Line 1- Number of employees
  • Line 2 Total wages, tips & other compensation subject to withholding
  • Line 3- Total income tax withheld
  • Line 4- check box if no wages subject to Social Security and Medicare
quarterly tax return 9416
Quarterly Tax Return 941

Line 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
quarterly tax return 9417
Quarterly Tax Return 941
  • Line 6- Hire Act Information
  • Line 7- Tax adjustments
  • 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 12c & 12d Hire Act for Q2 2010
  • Line 13 Total Adjusted Deposits
  • Line 14 Balance Due
  • Line 15 Over Payment – check box on how to handle
quarterly tax return 9418
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
quarterly tax return 9419
Quarterly Tax Return 941

Part 4 – Authorization for Third Party Designee

  • Associate authorized to work with IRS

Part 5 - Sign here

  • Must be Owner, President, VP, Corp. Officer, etc. . .
  • Any others require a Power of Attorney- Form 2848

Paid Preparer’s Use Only Sec 5 – unless already listed with IRS as filing agent with Form 8655

alternative forms
Alternative forms
  • Form 941-X – Adjusted Quarterly Federal Tax Return or Claim for Refund
  • Form 943 - Employers annual Federal tax return for agricultural employees
  • Form 944 – Annual Employers Federal Tax return<$1000
  • Form 945 - Annual Return of withheld Federal Income tax- non payroll
state unemployment
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)
state unemployment1
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
futa federal unemployment tax act
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 (6.2% - 5.4%)
  • Some states don’t qualify for the full credit
      • Example: MI FUTA Tax Rate 1.4%
      • 6.2% - 4.8% = Paid 1.4% instead of .8%
futa federal unemployment tax act2
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:
  • Q1- April 30
  • Q2- July 31
  • Q3- October 31
  • Q4- January 31
futa federal unemployment tax act3
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
futa 940 annual return
FUTA- 940 Annual Return
  • Must file if Wages of $1500 pd in any qtr of 10 or 11, or
  • At least one employee employed for any part of a day in any of 20 different weeks in 10 or 11
  • 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 5-59 in your book to view Form 940)
futa 940 annual return1
FUTA- 940 Annual Return
  • Line by Line- Section by Section
  • Type of return
    • A. Amended
    • B. Successor employer
    • C. No payments to ees in 2010
    • D. Final Business Return
futa 940 annual return2
FUTA- 940 Annual Return

Part 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
futa 940 annual return3
FUTA- 940 Annual Return

Part 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
futa 940 annual return4
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
futa 940 annual return5
FUTA- 940 Annual Return

Part 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
futa 940 annual return6
FUTA- 940 Annual Return

Part 4- Determine FUTA tax for 2010

  • Line 12- Total FUTA after adjustment (8+9+10+11 = Line 12)
  • Line 13- FUTA tax deposited
  • Line 14- Balance due
  • Line 15- Overpayment
futa 940 annual return7
FUTA- 940 Annual Return

Part 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)
futa 940 annual return8
FUTA- 940 Annual Return

Part Six – Authorization for Third Party Designee

  • Associate authorized to work with IRS

Part Seven - Sign here

  • Must be owner, president, VP, corp. officer, etc. . .
  • Any others require a Power of Attorney- Form 2848

Paid Preparer’s Use Only – unless already listed with IRS as filing agent with Form 8655

futa 940 annual return9
FUTA- 940 Annual Return

Schedule A– state unemployment paid to multiple states

  • Part one- Check state boxes that are applicable
  • Part 2-Information for states with credit reductions
futa 940 annual return10
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 940
wage and tax statement form w 21
Wage and Tax Statement- Form W-2
  • (Go to Page 5-36 in your book)
  • W2 provides
    • Employee documentation to file their Form 1040
    • IRS to 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
wage and tax statement form w 22
Wage and Tax Statement- Form W-2

Filing 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
wage and tax statement form w 23
Wage and Tax Statement- Form W-2
  • Ensure efficient processing
  • No erasures, strikeouts or whiteouts
  • Do not use dollar signs or commas
  • Use black ink only
  • Legibility a must
wage and tax statement form w 24
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
wage and tax statement form w 25
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
wage and tax statement form w 26
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
wage and tax statement form w 27
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
wage and tax statement form w 28
Wage and Tax Statement- Form W-2

Box 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
wage and tax statement form w 29
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
wage and tax statement form w 210
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
wage and tax statement form w 211
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
  • CC=Hire Exempt Wages & Tips
  • DD=Cost of ER Health Coverage –Note 2011 Optional
wage and tax statement form w 212
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
wage and tax statement form w 213
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
wage and tax statement form w 214
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
wage and tax statement form w 215
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 5-52 & 53.
1099 misc trade or backup withholding1
1099 Misc., Trade or Backup Withholding
  • (Go to Page 5-68 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 proceeds
1099 misc trade or backup withholding2
1099 Misc., Trade or Backup Withholding
  • Non profit organizations, trusts , farmers cooperatives
  • Exceptions to Reporting:
    • 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
1099 misc trade or backup withholding3
1099 Misc., Trade or Backup Withholding
  • - Payment for merchandise
  • - Payment of rent for real estate agents
  • - Wages paid to employees-Use W2
  • - Business travel allowances pd to employees-Use W2
1099 misc trade or backup withholding4
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.
form 4070
Form 4070

Employee’s Report of Tips to Employer

EE provides the total tips rec’d in a time frame

Time frame can be no longer than a month but can be more frequent

No reporting for $20 in tips in a month

ER’s not required to provide the form; can use other methods for reporting

69

tax reporting1
Tax Reporting

Study!

Collecting & Depositing Federal Taxes

Quarterly Tax Return Form 941

Federal Unemployment & Form 940

Wage & Tax Statements Form W2s

Form 1099 Misc

70

tax reporting2
Tax Reporting

Thanks For Attending!