1 Form W-2 Filing Requirements INTERNAL REVENUE SERVICE Federal, State & Local Governments.
-
Upload
samantha-walker -
Category
Documents
-
view
220 -
download
4
Transcript of 1 Form W-2 Filing Requirements INTERNAL REVENUE SERVICE Federal, State & Local Governments.
1
Form W-2 Filing Requirements
INTERNAL REVENUE SERVICE
Federal, State & Local Governments
2
Topics Employment Tax Reporting Overview Reporting Requirements Form W-2 Reporting Methods Name/SSN Verification Form W-2 Income Items Just for Governments Common Errors Form W-2/ 941 Reconciliation
3
Employment Taxes Defined Federal income tax withholding
– Income– Filing status– Exemptions
Social security tax– 12.4% (employer and employee contribution)
Medicare tax– 2.9% (employer and employee contribution)– No wage cap
4
Reporting to SSA and IRS
SSA– Determines eligibility for benefits– Keeps individual accounts– Pays benefits
IRS– Collects taxes and returns
Both Agencies
– Receive and match Form W-2 form information
5
Employment Tax Reporting Cycle
Have employee complete W-4
Identify applicable taxes
Withhold taxes from each paycheck
Periodically make tax deposits
File quarterly tax returns
Issue Forms Form W-2
6
Form W-4 Employee’s Withholding Allowance
Certificate Name & social security number
– ask for social security card
Marital status
Withholding allowances
Employers no longer send questionable W-4 forms to IRS – the IRS will notify the employer to withhold income tax from
an employee by issuing a lock-in letter.
7
Identify Applicable Taxes Section 218
– State administrators– SSA
Post-June 1991 and no retirement plan– Social security mandatory
Hired after March 1986– Medicare coverage mandatory
8
Withhold Taxes From Each Paycheck
Use W-4 info from employee
Use Pub 15 withholding tables
Spot-check payroll software calculations
9
Deposit Rules Pay with 941 if you know taxes for quarter will be less
than $2,500 (pay annually with Form 944) Lookback period – 4 quarters comprising
– Begins July 1st ending June 30th of preceding yrs– For 2007: July 1, 2005 thru June 30, 2006
Monthly deposits– Reported taxes in lookback period $50,000
Semiweekly deposits– Reported taxes in lookback period $50,000
Next day deposit if $100,000 or more taxes on any day
Use EFTPS in 2007 if deposits were $200,000 in 2005
10
File Quarterly Tax Returns Form 941 – Employer’s Quarterly Federal
Tax Return
Report wages, liabilities and deposits for– Federal income taxes
– Social security taxes
– Medicare taxes
Four quarters totals should match
Forms W-3
11
File Annual Tax Returns Form 944 – Employer’s Annual Federal
Tax Return
Annual tax liability must be $1000 or less
Report wages, liabilities and deposits for– Federal income taxes
– Social security taxes
– Medicare taxes Annual totals should match Forms W-3
12
Issue Form W-2s Due to employee by January 31st
Due to SSA by February 28th
– Extended to March 31st for electronic filers
Employees leaving or terminated before December 31st can get Form W-2 in mid-year
Due within 30 days of request by employee whose employment ended in mid-year.
13
Form W-2 Reporting Methods
Electronic– Your Best Choice!
Magnetic Media no longer accepted beginning 2007
Paper Copy A
14
Electronic W2 Filing
Business Services Online– www.ssa.gov/employer
Register for PIN and Password Upload W2 files Form W-2 Online
– Create Form W-2 Online– Print Employee Copies
15
Electronic Filing (cont.)
Automatic Electronic Receipt Compressed Files Accepted Check Status of Submissions
– Displays Some Errors and Notices Test Transmissions (Connectivity Only) Fully Electronic-No Paperwork
16
Form W-2c
If 250 or more Forms Form W-2c during the calendar year, then must file electronically
File Form W-2c with SSA to correct SSN, Name and Dollar Amount.
Do not file Form W-2c with SSA only to correct an employee’s address– Update employment record for employee
17
Paper Form W-2 Copy A
If You Can’t File Electronically… IRS Copy A, Pub. 1141 Compatible, or
SSA-Approved Laser Forms Sent to Wilkes-Barre Data Operations
Center via Form W-3 by Feb. 28 Forms are Machine Scanned NO Staples and/or Form Folding
– Machine reading error can occur
18
IRC Section 6721 PenaltyFailure to File by Due Date Correctly file by March 30 $15/return
Correctly file after March 30 but by August 1 $30/return
Correctly file after August 1 $50/return
Intentional disregard $100/return
19
IRC Section 6722 PenaltyFailure to Furnish to Payee
$50 per information return
$100 per return for intentional disregard
20
Name / SSN Mismatches
Form W-2 Name and SSN Need to Match SSA Records
No Wage Credit If Data Mismatches 95% of Form W-2s Have Valid Information Unable to Match Several Million
Forms Form W-2 Notices to Employer and Employee
21
Prevent Mismatches
Ask to See SSN Card at initial hire
Record Name and SSN as Shown on SSN Card– OK to Use Middle Initial Only
– Use Care With Compound Names
Use Employee Verification Service!
Employee Verification Service
Verifies Employee Supplied Data Name, SSN, DOB, Gender Telephone: 800-772-6270 (5) Local SSA office (50) Paper List (300), Tape or Disk (any size)
– Registration Required Details at www.ssa.gov/employer
23
Form W-2 Income Items Elective deferrals
– Includes employee retirement contributions except for section 501(c)(18) contributions
– Do not include in Box 1– Do include in Boxes 3 and 5– Include in Box 12 with identifying code
Group-term life insurance– Do not include in any box up to $50,000– Include excess in Boxes 1, 3 and 5
24
Completing Form W-2 Fringe benefits excluded from all taxes
– Health insurance
– Tuition reductions
– Meals & lodging for employer’s convenience
– Cafeteria plan contributions by salary reduction – Educational assistance
– Dependent care assistance
– Noncash employee achievement awards for length of service or safety
– Nominal holiday/ special occasion awards (Noncash) – Certain awards transferred to charities before receipt
25
Completing Form W-2 (Cont.) Fringe benefits excluded from all taxes (cont)
– No additional cost service
– Working condition fringe
– De minimis fringe
– Qualified moving expenses
– Qualified employee discounts (20% of service price, property price at cost)
– Qualified transportation expenses (commuter highway vehicle, transit pass, parking)
26
Completing Form W-2 (Cont.) Fringe benefits excluded from all taxes (cont)
– Paid under an accountable plan» Business connection» Adequate accounting within reasonable time» Return excess reimbursement within reasonable time
– Work clothes (condition of employment and unsuitable for everyday wear)
– Safety equipment– Professional license– Per diem travel allowances & mileage federal rate– Meals away from home overnight on business– Nonpersonal automobile expenses if records are kept
27
Completing Form W-2 (Cont.) Fringe benefits subject to all taxes
– Cash awards
– Performance awards (fair market value of noncash)
– Bonuses
– Back pay
– Severance pay
– Value of personal use of employer’s vehicle
– Expense reimbursements under a nonaccountable plan
– Cash benefits from a cafeteria plan
– Employee’s taxes paid by employer
See Pub 15-B, Employer’s Guide to Fringe Benefits
28
Completing Form W-2 (Cont.) Archer Medical Savings Account
– Employer contributions not subject to taxes » Do not include in Boxes 1, 3 or 5
» Show in Box 12 with code R
– Employee’s contributions are subject to all taxes» Show in Boxes 1, 3 and 5
» Employee can deduct on their 1040
– See Pub 969 Medical Savings Accounts for tax details
Advance earned income credit payments– Report in Box 9 only
29
Just for Governments
“Medicare govt. emp.” box B on W-3
Options for reporting wages subject only to Medicare tax for part of year and full social security and Medicare taxes for rest– Combine all wages on one Form W-2 (SSA
preference)– Report different wages on separate Forms Form W-2
Report § 457 plan distributions on 1099-R
30
Just for Governments cont: Report election worker payments $600
– $600 if required by a 218 agreement
( also see Revenue Ruling 2000-6)
Elected and appointed officials – are generally employees of the governments they serve.
Emergency workers- employees hired on temporary basis in response to disaster
( not permanent government employees)
31
Common Form W-2 Reporting Errors Print Too Small/ Large/Too Light
Wrong format in boxes
Name/SSN Mismatches
Wrong EIN
Add dollar signs to money amount boxes
Inappropriately check “Retirement Plan” checkbox in box 13– See “Retirement Plan” in Form W-2 instructions
32
Reconciliation
Compares Totals from Form W-2s with 941s– Income Tax Withheld (Box 2)
– Social Security Wages (Box 3)
– Medicare Wages and Tips (Box 5)
– Social Security Tips (Box 7)
– Advance EIC Payments (Box 9)
33
Reconciliation Notices Forms Form W-2 Less Than Forms 941:
SSA Sends Notice Forms Form W-2 More Than Forms 941:
IRS Sends Notice SSA Notices Mailed Nov-Feb for Prior
Tax Year Check Actual Data Sent to SSA & IRS Reply to Avoid IRS Penalty Call If Help Needed
34
For More Information Instructions: Forms Form W-2, W-3, W-4 & 941 Pub 15 Employer’s Tax Guide Pub 15-A Employer’s Supplemental Tax
Guide Pub 15-B Employer’s Tax Guide to Fringe
Benefits Pub 963 Federal-State Reference Guide Pub 969 Health Savings Accounts and Other
Tax-Favored Savings Accounts
35
Need Help? www.ssa.gov/employer
– “Employer services”
www.irs.gov/govt
– “Tax information for Federal State and Local governments”
– “Public Employer’s Toolkit”
– “Email us at “[email protected]”