BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM.

BIA PROVIDERS CONFERENCEDecember 4, 2013

COMMON PAYROLL ERRORSand HOW TO AVOID THEM

Indian Tribal Governments Specialists in Alaska

• Call: Customer Account Services toll-free (877) 829-5500

• Visit: Indian Tribal Governments Web site at

www.irs.gov/tribes

Judy Pearson Phone 907-271-6949

Mary Jo Audette Phone 907-271-6874

Why do you get PENALTIES on your Form 941?

Didn’t make Federal Tax Deposits!

– You must deposit ALL federal payroll taxes (withheld from employees pay and matched by employer) for every payday/paycheck

– You must use EFTPS (Electronic Federal Tax Payment System) to make your deposits

– On EFTPS, select “Federal Tax Deposit”: do not select any other type of payment


Didn’t fill out Form 941 correctly!

– Fill out line 16 (page 2) completely

– Check proper box in line 16 and follow instructions:Taxes owed on return are less than

$2500Monthly depositor – fill out monthly

liabilitySemi-weekly depositor – fill out

Schedule B and attach it to Form 941

– How do you know which type of depositor you are???


Didn’t FILE Form 941 with IRS by DUE DATE

– Quarter 1 (Jan, Feb, March) – due 4/30– Quarter 2 (April, May, June) – due 7/31– Quarter 3 (July, Aug, Sept)– due 10/31– Quarter 4 (Oct, Nov, Dec) – due 1/31

– IMPORTANT NOTE: If you make all required federal tax deposits on time, in the correct amount and use EFTPS, you will NOT get a late filing penalty even if you file Form 941 late!

Trends & ErrorsDiscussion of items that often have errors, i.e., trends

Reconciliation notices from SSA or IRS– 941 & W-2 wages do not match– Notice asks you to explain and/or fix– If you do not respond

1. Tax assessment or

2. Civil penalty

Remedy– Open all notices and follow up– Respond to notices


Reconciliation notices from SSA or IRS• Reasons 941 & W-2 do not match

– Did not reconcile before filing – Did not file all W-2s with SSA– Did not file all 941s with IRS– Sent in duplicate W-2s– Did not use “void” box when applicable

• Remedy– Change “did not” to do for all the above

Check “void” box so W-2 will be ignored

Tribal Government EPO Box 123Village E, AK 99999

XX-0000001

XXX-78-1234

PO Box 006 ¾Village E, AK 99999

CouncilmemberIrma

1100.00

1100.00

100.00

X

This W-2 has errors. What can I do?

Check the “void” box so SSA will ignore it.


Reconciliation notices from SSA or IRS• Reasons 941 & W-2 do not match

1. Council Member pay reported incorrectly– Not subject to SocSec/Med taxes – W-2: Box 1 only– 941: Line 2 only

2. If the wages are higher on Forms 941:– Are you missing one or more Form W-2s ?

3. If the wages are higher on Forms W-2:– Are there one or more duplicate W-2s?– Was a payroll omitted from the 941?


More that one 941 filed for quarter– Multiple programs/departments– Each program/department is responsible for

their own payroll– Single employer identification number - EIN

• Each makes their own deposits (fine) • Each files their own 941 (bad)

– Service Center may not post as intend

Remedy– Combine information and file a single 941


Form 940 Federal Unemployment Tax - FUTA– Newly hired bookkeeper files 940– Newly hired 3rd party payroll service files 940

Tribes are exempt from FUTA tax as long as they are current with State of Alaska Quarterly Contribution Reports

Remedy– Stop filing Form 940– If you filed and paid Form 940

• file an amended Form 940 for refund


Deposits posted to wrong quarter• Often happens the last payday of the quarter• Example:

– Payday was September 27th (3rd quarter) – Deposit is due Wednesday, October 2nd – Deposit is made on October 1st – 4th quarter is selected in error

• Remedy– When using EFTPS to make deposit, choose the

correct quarter– Contact IRS/ITG and request payment movement

Form W-3 Transmittal not filed with W-2s

When an error is found on a W-2• no action (wrong)• filing a second W-2 (wrong)• filing a W-2c (correct)


Council Members pay• Not reporting (wrong)• Setting up as a vendor (wrong)• Reporting on Form 1099-MISC (wrong)

Harms the Council Member 15.3% Self-employment tax now due


Council Members pay• Set up as QuickBook payroll item (correct)• Report on Form W-2 (correct)

– $$ entry in boxes 1, 3, 5 (wrong)– No memo entry in box 14 (wrong)

– $$ entry in box 1 only (correct)– Memo entry in box 14 (correct)

» Rev Rul 59-354


W-2 for Tribal Council Member

Tribal Government EPO Box 123Village E, AK 99999

XX-0000001

XXX-78-1234

PO Box 006 ¾Village E, AK 99999

CouncilmemberIrma

Rev Rul 59-354

1100.00

Tribal Council Member Pay

Do NOT withhold any federal income tax, Social Security tax or Medicare Tax

However, a tribal council member may request VOLUNTARY federal income tax withholding

See Revenue Rule 59-354

Do not issue Form 1099 Harms the Council Member Self-employment tax due at 15.3%

Form W-4 for Council Member who wants VOLUNTARY income tax

withholding

15.00

Form W-9• Not securing from vendors (wrong)

Remedy:• Secure Form W-9 from vendors (correct)• Keep copies in vendor file (correct)• Use W-9 to prepare accurate Forms 1099 MISC,

when required – Correct EIN or SSN – Correct name – Correct address


Form 1099 MISC• Not issuing Forms 1099 MISC when required (wrong)• Not preparing Forms 1099 MISC to report rent payments or

childcare payments, in particular (wrong)

Remedy:• Educate yourself on 1099s filing requirements• Review all vendor payments (correct)• Identify those that require Form 1099 MISC (correct)

– $600 or more total for year – For services, rents & prizes– Note: 1099’s not required to report payments to

corporations except for medical and legal service payments

– Secure W-9’s for accurate payee information


If your tribe is “in trouble” with IRS If you owe unpaid taxes

If you have unfiled tax returns

Don’t ignore the problem—it won’t go away!

If you are overwhelmed, start by making federal tax deposits for current quarter

File and pay current tax returns

Work your way backwards for filing and paying

Ask for assistance from IRS (ITG)

Trends & ErrorsForm 11-C not being filed

Occupational Tax & Registration Return for Wagering

used to register:

A tribe who is in the business of accepting taxable wagers for their own account (aka the Principal)

An agent (seller) who accepts taxable wagers for the tribe

Taxable wagers include sales of pull tabs & raffle tickets

Trends & Errors

Form 11-C is due:

Initially, before wagers are accepted

By July 1 of each year thereafter

Amount of Tax

$50 if all wagers accepted are authorized under state law

or…

$500 for all other wagers

Form 11CTribeExample

Seller’s Form 11-C Entity Info and Part I

Form 11-C Occupational Tax and Registration Return

Part III and Signature for Agent

Wagering Taxes

Form 730 Monthly Tax Return for Wagers

due monthly, by the last day of the following month

must be filed if you are in the business of – selling pull tabs– conducting a raffle

Pull tabs which are manually dispensed are subject to the wagering tax

Wagering Taxes

Amount of Tax .25% of the wager if authorized

under state law 2% of the wager if it is not

authorized under the state

Form 730 – Tribe

Where to file

Mail the return and payment as follows:

Form 11-C:Internal Revenue ServiceCincinnati, OH 45999-0101

Form 730:Internal Revenue ServiceCincinnati, OH 45999-0100

Questions?

BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM.

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Transcript of BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM.