PAYROLL AND PAYROLL TAX GUIDE

                       2009 – 2010



 Presented By – Juanita Aubel, Tax Advisor
          ...
TABLE OF CONTENTS
                                                                      PAGE

PART A - CHARTS AND PAYROLL ...
TABLE OF CONTENTS -Continued


PART C - PAYROLL START UP GUIDE: NEW EMPLOYERS - NEW EMPLOYEES
        •       Employer Res...
PART A


Charts And Payroll
   Savings Tips
PART A - CHARTS AND PAYROLL SAVINGS TIPS

                                                                 Page

Charts:

...
PAYROLL AND OTHER TAX DATA - 2010

SOCIAL SECURITY:   Wage base $106,800          6.2%        Employee Max.             $6...
TAXABILITY OF COMPENSATION AND BENEFITS



T - Taxable                  Federal &                          PA      Local  ...
WITHHOLDING REQUIREMENTS FOR SPECIFIC PAYMENTS


                                                      Withholding Require...
WITHHOLDING REQUIREMENTS FOR SPECIFIC PAYMENTS
                                          continued



                    ...
HOUSEHOLD EMPLOYMENT TAXES ■ SCHEDULE "H"
          FORM FOR EMPLOYEES IN HOME

Schedule H, Household Employment Taxes, is...
LIST OF HELPFUL GOVERNMENT PUBLICATIONS
The following Publications are available from the Internal Revenue Service. You ma...
LIST OF HELPFUL GOVERNMENT PUBLICATIONS-continued

Publication
 Number                       Title                        ...
ESSENTIAL PAYROLL WEB SITES

Whether you're an expert on the Web or a novice, there are some sites that you should
visit r...
Essential Phone Numbers
                          Name                                          Phone Number

Internal Rev...
Essential Phone Numbers
                            Name                             Phone Number

PA Dept. of Revenue


F...
INDEXED EMPLOYEE BENEFIT LIMITS


              Employee Benefit Limit                   2010             2009

 Section 4...
USE INDEPENDENT CONTRACTORS

One way to save on payroll taxes is by using independent contractors. Independent
contractors...
What Factors Determine A Worker's Classification? - continued

                            Very Important - continued

8. ...
What Factors Determine A Worker's Classification? - continued

                            Less important - continued

19....
FILE REPORTS ON TIME - "AVOID PENALTIES"

One type of payroll administration expense for which there is no excuse is that ...
DIRECT DEPOSIT OF PAYROLL

Direct deposit of payroll can save time and money for the employer and employee.
On the employe...
PLANNING AHEAD - RETIREMENT & SOCIAL SECURITY-
                                             continued

Individuals may   a...
CUT LABOR COSTS BY WATCHING WAGE-HOUR
                                   EXEMPTIONS

For most employers the largest single...
HANDLE GARNISHMENT PROBLEMS SMOOTHLY

A busy payroll manager has never been fond of garnishment proceedings. But with
the ...
EMPLOY CHILDREN/SPOUSES/PARENTS

Taxability of Children/Spouses Wages for Sole Proprietorship




                        ...
OTHER WAYS TO SAVE - continued

   - Eligible wages include cash wages PLUS tax exempt amounts the employer
     pays for ...
OTHER WAYS TO SAVE - continued

FEDERAL BUSINESS CREDITS

•     Credit For Employer-Provided Child Care Facilities - Emplo...
PARTB


Processing And Reporting
PART B - PROCESSING AND REPORTING


                                                     Page

Federal Tax Deposit Require...
FEDERAL TAX DEPOSIT RULES

                 FORM 941 FEDERAL TAX DEPOSITS


Calculation of the Deposit

   1. Social Secur...
FEDERAL TAX RETURN DEPOSITS - continued


Deposit Rules - continued

 If any of the three weekdays following the close of ...
FEDERAL TAX RETURN DEPOSITS - continued


CREDIT CARD PAYMENT

Employers filing Forms 940 and/or 941 with a balance due ma...
AMOUNT OF DEPOSIT (Do tJOT type, please print.)
                                                                          ...
ELECTRONIC FEDERAL TAX PAYMENT SYSTEMS (EFTPS)


The North American Free Trade Agreement includes a provision which requir...
ELECTRONIC FEDERAL TAX PAYMENT SYSTEMS (EFTPS)
                                       - continued



EFTPS - OnLine: Taxpa...
Electronic Federal Tax Payment System




Tax Form 9779 with Instructions                                                 ...
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Stambaugh Ness Payroll Manual 2009 2010
Upcoming SlideShare
Loading in …5
×

Stambaugh Ness Payroll Manual 2009 2010

6,444 views

Published on

Annual Payroll Manual for Federal and Pennsylvania Guidance.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
6,444
On SlideShare
0
From Embeds
0
Number of Embeds
7
Actions
Shares
0
Downloads
12
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Stambaugh Ness Payroll Manual 2009 2010

  1. 1. PAYROLL AND PAYROLL TAX GUIDE 2009 – 2010 Presented By – Juanita Aubel, Tax Advisor E-mail: jaubel@stambaughness.com Phone: 717.757.6999 Fax: 717.840.5975 Contact Information: www.stambaugh-ness.com Phone 1-800-745-8233
  2. 2. TABLE OF CONTENTS PAGE PART A - CHARTS AND PAYROLL SAVINGS TIPS Charts Payroll and Other Tax Data - 2010 A -1 Taxability of Compensation and Benefits A -2 Withholding Requirements for Specific Payments A -3 Household Employment Taxes A -5 Agricultural and Household Employees A -5 List of Helpful Government Publications A -6 Payroll Web Sites A -8 Essential Phone Numbers A -9 Indexed Employee Benefit Limits A -11 Payroll Savings Tips Use Independent Contractors A -12 What Factor's Determine a Worker's Classification? A -12 File Reports on Time A -15 Direct Deposit of Payroll A -16 Keep Up To Date A -16 Planning Ahead - Retirement and Social Security A -16 Watch Wage-Hour Exemptions A -18 Handle Garnishment Problems Smoothly A -19 Tax Credit for FICA Paid on Tip Income A -19 Employ Children/Spouses/Parents A -20 Reduce the Number of Payrolls A -20 Other Ways to Save A -20 - Work Opportunity Credit A -20 - PA Employment Incentive Credit A -21 - PA Job Creation Tax Credit A -21 - Credit for Employer-Provided Child Care Facilities A -22 - Small Business Credit for New Retirement Plan Expenses A -22 - Saver's Credit A -22 PART B - PROCESSING AND REPORTING • Federal Tax Deposit Requirements B -1 - Form 941 Deposit Rules B -1 - Form 940 Deposit Rules B -3 Federal Tax Deposit Coupon B -4 Electronic Federal Tax Payment Systems (EFTPS) B -5 Sample EFTPS Enrollment Form 9779 B -7 Pennsylvania Withholding Filing Requirements B -9 PA Electronic Funds Transfers B -11 PA Authorization Agreement for Electronic Payments B -13 PAe-Tides B -15 PA Credit Card Payments B -16 Multi-State Reporting B -17 Bonuses/Supplemental Wages B -18 How and When to Use Cumulative Withholding B -19 Other Benefits Exempt from Taxes B -20 Group Term Life Insurance B -21 Cafeteria Plans B -23 Personal Use of Company Provided Vehicle B -25 Sick Pay (Disability Income) B -31 Form 1099 - Miscellaneous Income B -32 Business Expense Reimbursements B -35 Moving Expense Reimbursements B -39
  3. 3. TABLE OF CONTENTS -Continued PART C - PAYROLL START UP GUIDE: NEW EMPLOYERS - NEW EMPLOYEES • Employer Responsibilities C-1 • New Employer Packets C-2 • SS-4 Instructions (Application for EIN) C-2 • PA-100 Instructions C-3 • State Unemployment Tax C-4 • PA UC Withholding Tax C-4 • Form W-5 - Earned Income Credit - • Advance Payment Certificate C-5 • New Hire Reporting Requirements C-5 • Multi-State Chart C-7 • Local Tax Enabling Act C-20 • Local Tax Rates C-21 • Local Services Tax C-26 • LST Chart C-27 • Designing the Payroll System C-28 • Maintaining Payroll Records C-29 • Pennsylvania Income Tax C-30 • General Information C-30 • Reciprocal Agreements C-31 • PA Employer Withholding C-32 • York Adams Earned Income Tax C-32 PART D - PAYROLL REPORTING > 941 D-1 > UC-2 D-5 • UC-2A D-6 • UC-2X D-7 . UC-2AX D-8 • PA-W3 D-9 > 319 D-10 > 944 D-11 > W-2 D-13 • W-2, Box 12, Codes D-14 • W-2, Box 13 - Checkboxes D-15 • W-3 D-16 • » 940 D-17 • REV 1667 D-20 « • 322 D-21 4 • 1099 MISC D-22 1 • 1096 D-23 < • I-9 D-24 1 • PA New Hire Reporting Form D-25 1 • Schedule H D-26 ( • 8109-B D-28 • Employer Deposit Statement of Withholding Tax D-29 • W-2c D-30 • W-3c D-31 • W-4 D-32 . W-4V D-33 • W-4S D-34 • W-5 D-35
  4. 4. PART A Charts And Payroll Savings Tips
  5. 5. PART A - CHARTS AND PAYROLL SAVINGS TIPS Page Charts: • Payroll and Other Tax Data - 2010 A -1 • Taxability of Compensation and Benefits A-2 • Withholding Requirements for Specific Payments A-3 • Household Employment Taxes A-5 • Agricultural and Household Employees A-5 • List of Helpful Government Publications A-6 • Payroll Web Sites A-8 • Essential phone numbers A-9 • Indexed Employee Benefit Limits A -11 Payroll Savings Tips: • Use Independent Contractors A-12 • What Factors Determine a Worker's Classification? A -12 • File Reports on Time A-15 • Direct Deposit of Payroll A-16 • Keep Up To Date A-16 • Planning Ahead - Retirement and Social Security A -16 • Watch Wage-Hour Exemptions A-18 • Handle Garnishment Problems Smoothly A -19 • Tax Credit for FICA Paid on Tip Income A-19 • Employ Children/Spouses/Parents A-20 • Reduce the Number of Payrolls A - 20 • Other Ways to Save A-20 - Work Opportunity Credit A-20 - PA Employment Incentive Credit A - 21 - PA Job Creation Tax Credit A-21 - Credit for Employer-Provided Child Care Facilities A - 22 - Small Business Credit for New Retirement Plan Expenses A - 22 - Saver's Credit A-22
  6. 6. PAYROLL AND OTHER TAX DATA - 2010 SOCIAL SECURITY: Wage base $106,800 6.2% Employee Max. $6,621.60 MEDICARE: Wage base - NO LIMIT 1.45% Employee Max. Unlimited Example: 2010 WAGES TAX RATES $1 TO $106,800 7.65% OVER $106,800 1.45% SELF-EMPLOYMENT TAX: 2010 SELF-EMPLOYMENT INCOME TAX RATES $1 TO $106,800 15.3% OVER $106,800 2.9% PA WITHHOLDING: 3.07% LOCAL WITHHOLDING: 1.0% - 2.0%, depending on Locality STATE UNEMPLOYMENT: Wage base PA - $8,000 per employee Wage base MD - $8,500 per employee PA UC WITHHOLDING: 0.08% FEDERAL UNEMPLOYMENT: Wage base - $7,000 Rate - 0.8% SOCIAL SECURITY EARNINGS 62 - 65 - $14,160 $1 of benefits will be LIMITATIONS: withheld for every $2 in earnings over limit. Year of full retirement age - $37,680($3,140/month) Applies only Age 66 to earnings for months prior to attaining age 66. $1 of benefits will be withheld for every $3 in earnings over limit. Full retirement age and over - Eliminated STANDARD DEDUCTION: Single - $5,700 MFS - $5,700 Joint and Surviving Spouse - $11,400 HOH - $8,400 PERSONAL EXEMPTION: $3,650 MINIMUM WAGE: PA - $ 7.25 MD - $ 7.25 STANDARD MILEAGE RATE: _________ per mile A-1
  7. 7. TAXABILITY OF COMPENSATION AND BENEFITS T - Taxable Federal & PA Local State E - Exempt MD In Social Income Income Unemploy come Tax Security Medicare Tax Tax FUTA ment Company Automobile: Business Use E E E E E E E Personal Use T T T E E T T Awards and Prizes: Employee Achievement T T T T T T T Safety/Service (Qualified Plan) E E E E E E E Business Expense Allowance: (1) Accountable Plan E E E E E E E Non-Accountable Plan T T T T T T T Cafeteria Plan: Pre-Tax Benefits E E E E(3) E(3) E T Group Term Life Insurance: Up to $50,000 E E E E E E E Excess of $50,000 T T T E E E E Retirement Plans: Elective Deferrals 401(k)-403(b) E T T T T T T Simplified Employee Plans (SEP) Employer Paid E E E E E E E Salary Reduction E T T T T T T 408(k)(6) Simple Plans: Employer 2% Match E E E E E E E Salary Reduction E T T T T T T "S" Corp Health Insurance Premium 2% > Shareholder T E E E E E E Sick Pay: Salary Continuation T T T T T T T Insured-Third Party T T(2) T(2) E E T(2) T Tips: More than $30.00 T T T T T T T Less than $30.00 E E E E E E E (1) See pages B-35 and B-38. (2) Taxable only during first six months following month employee last worked. (3) Except child care benefits. A-2
  8. 8. WITHHOLDING REQUIREMENTS FOR SPECIFIC PAYMENTS Withholding Required Type of Income Fed IT F.I.C.A. F.U.T.A. Adoption Assistance - Up to $11,650 expense No Yes Yes Advances Yes Yes Yes Aircraft - Personal Use Yes Yes Yes Athletic Facilities (On Premises) No No No Awards and Prizes * Yes Yes Yes Back Pay Awards & Damages Yes Yes Yes Bonuses Yes Yes Yes Business Expense Reimbursements No No No Commissions Yes Yes Yes Company Car - Personal Use Optional Yes Yes Death Benefits No No No Deceased Employee Wages - Paid No No No after Calendar Year of Death Deceased Employee Wages - Paid in Same Calendar Year as Death No Yes Yes Dependent Care Assistance - Up to $5,000 No No No Directors Fees No No No Discounts No No No Dismissal or Severance Pay Yes Yes Yes Dividends No No No Eating Facilities No No No Educational Assistance - Up to $5,250 No No No Equipment and Tool Allowances No No No Golden Parachute Payments Yes Yes Yes Group Legal Services Yes Yes Yes Guaranteed Wage Payments Yes Yes Yes Subject to withholding except service and safety awards up to $400 per employee, per year under a non-qualified plan. $1600 per employee, per year, with a $400 average benefit award under a qualified plan. A-3
  9. 9. WITHHOLDING REQUIREMENTS FOR SPECIFIC PAYMENTS continued Withholding Required Type of Income Fed IT. F.I.C.A. F.U.T.A. Holiday Gifts Yes Yes Yes Interest Free or Below Market Interest Rate Employer Loan more than $10,000 Yes Yes Yes Jury Duty Pay Yes Yes Yes Meals and Lodging for Employers Convenience No No No Meeting Payments Yes Yes Yes Military Pay (For Temporary Assignments) Yes Yes Yes Moving Expenses - Qualified (See B-39) No No No Moving Expenses - Non-qualified (See B-39) Yes Yes Yes Out-Placement Services No No No Parking Expense - Up to $220/month No No No Probationary Pay Yes Yes Yes Retiree Consulting Fees No No No Retroactive Wage Increases Yes Yes Yes Royalties No No No Scholarships No No No Standby/Idle Time Pay Yes Yes Yes Supper Money No No No Supplemental Unemployment Yes No No Uniform Allowances No No No Union Payments Yes Yes Yes Vacation Pay Yes Yes Yes Workers Compensation Benefits No No No See Circular E for more complete information. A-4
  10. 10. HOUSEHOLD EMPLOYMENT TAXES ■ SCHEDULE "H" FORM FOR EMPLOYEES IN HOME Schedule H, Household Employment Taxes, is used to report cash wages paid to a person who worked in your home, and is submitted annually with Form 1040. The schedule is used to report and pay federal income taxes withheld and to calculate FICA, Medicare and federal unemployment taxes on wages paid to household employees. The wage threshold for domestic employees remains unchanged at $1,700 per year in 2010. Social security tax is not necessary for household workers underage 18. Household employers are required to include the social security and federal employment taxes in their estimated tax payments. Who is a household employee? An employer-employee relationship exists if you control what and how work is to be done, supply the employee with tools and a place to work and have the right to discharge the employee. Some household employees, such as gardeners, are likely to be considered independent contractors because they use their own tools and decide how the work is to be done. Examples of household employees include baby-sitters, butlers, cooks, caretakers, drivers, gardeners, housekeepers, and private-duty nurses. AGRICULTURAL EMPLOYMENT TAXES According to the IRS, any plot of ground or other area used primarily for the raising of an agricultural or horticultural commodity constitutes a farm for employment tax purposes. Only cash wages paid to employees are subject to FICA and federal income tax withholding. Noncash items such as lodging, food, clothing, and transportation are not subject to FICA and federal income tax withholding. FICA and federal income tax withholding apply to cash payments if either 1) the employee is paid $150 or more for the year, or 2) the employer's total payments to all employees for agricultural labor is $2,500 or more for the year. Agricultural wages are subject to FUTA and SUTA if: 1) agricultural wages of $20,000 or more are paid in any quarter in the current or preceding calendar year, or 2) 10 or more individuals are employed in agricultural labor for some portion of a day for 20 weeks in the current or preceding calendar year. Agricultural employers who pay wages for both agricultural and nonagricultural labor must keep the wages separate. Agricultural wages and taxes due are reported on form 943; other wages and taxes due are reported on form 941. A-5
  11. 11. LIST OF HELPFUL GOVERNMENT PUBLICATIONS The following Publications are available from the Internal Revenue Service. You may order them by calling 1-800-TAX-FORM (1-800-829-3676). You may also download some of them from www.irs.gov: Publication Number Title Description 15 Circular E, Employer's All employers receive a copy of this publication Tax Guide automatically. This is an annual publication that includes the current year's tax tables, FICA rate, FUTA rate, and a general explanation of rules for depositing federal tax withheld. 15-A Employer's Supplemental Supplement to Circular E. Tax Guide 15-B Employer's Tax Guide Detailed information on proper way to handle to Fringe Benefits fringe benefits. 51 Circular A, Agricultural Same as Circular E, except this is specifically for Employer's Tax Guide agricultural employers. 393 Federal Employment Tax All employers receive a copy of this publication Forms which explains annual reporting and provides instruction for ordering forms. 505 Tax Withholding and Explanation of the rules for claiming personal Estimated Tax exemptions on the Form W-4. Excellent guide to assist employees in completing a new Form W-4. 970 Tax Benefits for Education Explains which educational expenses qualify for deduction for tax purposes. This booklet may assist the payroll practitioner in understanding the taxability of various types of educational expense reimbursements paid by the employer. 521 Moving Expenses Essential publication for explaining the reporting and taxation of reimbursed moving expenses, both for the employer and the employee. 525 Taxable and Nontaxable Essential guide to understanding the taxability of Income wages, salaries, fringe benefits, and other compensation received for services as an employee. A-6
  12. 12. LIST OF HELPFUL GOVERNMENT PUBLICATIONS-continued Publication Number Title Description 531 Reporting Tip Income A guide to the reporting, withholding, record keeping. 596 Earned Income Credit A guide to who may be eligible for the credit and how they may apply for the credit. 919 How Do I Adjust My Tax Another guide to employees for completing Form Withholdings? W-4. 1494 Table for Figuring This is a table for figuring the amount from a Amount Exempt from levy on wages, salaries, and other compensation. Levy On Wages, Salary & Other Income 1542 Per Diem Rates A table of the federal per diem rates for lodging, meals and incidental expenses. 2009 Instructions Instructions to filers of Form 1099,1098,5498 and 1099-ALL W-2G. 926 Household Employer's A guide to who qualifies as a household Tax Guide employee and instructions on figuring the tax. Compliance assistance information is available from the U.S. Department of Labor in regards to the following: Americans with Disabilities Act of 1990 (ADA) The Davis-Bacon and Related Acts (DBRA) The Fair Labor Standards Act (FLSA) The Family and Medical Leave Act (FMLA) Federal Employee' Compensation Act (FECA) And many more You may order by calling 717-221-4539 or 570-826-6316 or print from website www.dol.gov/esa/regs/compliance. A-7
  13. 13. ESSENTIAL PAYROLL WEB SITES Whether you're an expert on the Web or a novice, there are some sites that you should visit regularly to see what's new. Federal Sites EFTPS www.eftps.gov Internal Revenue Service (homepage): www.irs.gov Social Security Administration: www.ssa.gov U.S. Department of Labor employment law site: www.dol.gov New-hire reporting: www.acf.hhs.gov/programs/cse/ newhire/employer/private/newhire.htm State & Local Sites PA Department of Revenue: www.revenue.state.pa.us PA Department of Revenue Business Tax Registration: www.pa100.state.pa.us PA Department of Labor & Industry: www.dli.state.pa.us PA Department of Community and Economic Development www.newpa.com PA Etides: www.etides.state.pa.us Maryland Webpage www.state.md.us Comptroller of Maryland www.comp.state.md.us MD Dept. of Labor, Licensing & Regulation www.dllr.state.md.us York Adams Tax Bureau www.yatb.com Professional Organizations American Payroll Association (APA): www.americanpayroll.org A-8
  14. 14. Essential Phone Numbers Name Phone Number Internal Revenue Service Business and Specialty Tax Line 800-829-4933 Electronic Federal Tax Payment System (EFTPS) Hotline 800-555-4477 Employee Plans Taxpayer Assistance Telephone Service 877-829-5500 (toll free) Employer identification Number (EIN) Request Number 800-829-4933 Form SS-4 may be faxed to: Holtsville, NY at 631-447-8960 Cincinnati, OH at 859-669-5760 or Philadelphia, PA at 215-516-1040 Form 941 and Form 940 Filing On-Line Filling New Toll Free Number fore-Help Program /Austin Submission Center 866-255-0654 Forms (IRS) Forms may be ordered at: 800-829-3676 General IRS Tax Law Questions and Account Information 800-829-1040 Information Reporting Program Customer Service Section 866-455-7438 (toll free) IRS Tax Fax 703-368-9694 (non-toll-free) This service offers faxed topical tax information. National Taxpayer Advocate's Help Line 877-777-4778 (toll free) Taxpayer Advocacy Panel 888-912-1227 (toll free) Telephone Device for the Deaf (TDD) 800-829-4059 Tele-Tax System 800-829-4477 Social Security Administration Copy A / Form W-2 Reporting SSA's Employer Reporting Service 800-772-6270 General SS benefit Questions 800-772-1213 A-9
  15. 15. Essential Phone Numbers Name Phone Number PA Dept. of Revenue Fact and Information Line 888-PATAXES (728-2937) e-Business Tax Unit (e-Tides Technical Assistance 717-783-6277 Taxpayer Service and Information Center 717-787-1064 Special Hearing or Speaking Needs (TTonly) 800-447-3020 Taxpayers' Rights Advocate 717-772-9347 PA Unemployment Compensation UC Tax Information Line 866-403-6163 or 717-787-7679 UC Employer Tax Services York and Adams Counties 717-767-7620 Cumberland County 717-249-8211 or 717-697-1203 Lancaster County 717-299-7606 Dauphin and Perry Counties 717-787-1700 Franklin 717-264-7192 A-10
  16. 16. INDEXED EMPLOYEE BENEFIT LIMITS Employee Benefit Limit 2010 2009 Section 416 Defined Benefit Dollar Limit IRC Sec. 416(i)(1 )(A)(i)—see Q-261 $160,000 $160,000 Section 415 Defined Contribution Dollar Limit IRC Sec. 415(c)(1)(A)-see Q-261 $ 49,000 $ 49,000 IRCSec.415(b)(1)(A) $195,000 $195,000 *Elective Deferral Limit for 401 (k), 403(b), & 457(e) Plans and SEPs $ 16,500 $ 16,500 IRC Sec. 402(g)(1)-see Qs-237, 276, 277 Beginning January 1, 2006, 401 (k) plans may begin allowing designated ROTH $ 16,500 $ 16,500 401 (k) employee contributions. Combined 401(k)/ROTH 401 (k) contribution limits Minimum Compensation Amount for SEPs IRC Sec. 408(k)(2)(C)-see Q-236 $ 550 $ 550 Maximum Compensation Limit for: IRC Sec. 505(b)(7) SEPs $245,000 $245,000 IRC Sec. 408(k)(3)(C) TSAs IRC Sec. 403(b)(12) Qualified Plans IRC Sees. 401 (a)(17), 404(1) Highly Compensated Employee Definitional Limits under 414(q)(1)(B) $110,000 $110,000 ESOP Payout Limits $195,000 $195,000 IRC Sec. 409(o)(1)(c)-see Q-280 $985,000 $985,000 'Simple Plans Code Sec. 408(p)(2)(E) $ 11,500 $ 11,500 *IRA Limit $ 5,000 $ 5,000 Individuals 50 years of age or over may make additional "catch up contributions" each year as follows: 2010 ROTH 401 (k) $ 5,500 401 (k), 403(b), 457, SEP-408(k) $ 5,500 SIMPLE-408 $ 2,500 IRA's $1,000 A-11
  17. 17. USE INDEPENDENT CONTRACTORS One way to save on payroll taxes is by using independent contractors. Independent contractors are not employees and therefore are not covered by employment tax laws. Use independent contractors when specialized skills are needed or a project is of a limited duration. However, employers should use caution when classifying individuals as independent contractors rather than employees. Employers may be held liable for all the employment taxes (and be assessed a penalty of 100% of the unpaid taxes) if they classify employees as independent contractors and there is no reasonable basis for doing so. Consult the following checklists to insure that you have a reasonable basis for determining the independent contractor status. What Factors Determine A Worker's Classification? When determining the proper classification of a worker, the IRS first looks at whether a business has the right to direct or control the means and details of the individual's work. (This is known as the common-law test.) To determine the degree of control that an employer has, the Service uses a "20-factor" test, which has grown in recent years and now actually includes 24 factors. Note: The 24 factors are listed here in order of their importance, as ranked in the IRS's training manual for employment tax auditors. Extremely Important 1. Instructions. Employees must follow instructions as to when, where, and how work is done; independent contractors do not. 2. Training. Company-provided training implies that work must be done in a particular manner. Independent contractors are not given training. 3. Profit or loss. Independent contractors realize a profit or incur a loss from their work; employees do not. Very Important 4. Form W-2's. Filing a W-2 rather than a 1099 indicates that the business and the worker believe the worker is an employee. 5. Benefits. Traditionally, only workers with employee status receive company benefits. 6. Intent. A written agreement between a business and a worker describing the worker as an independent contractor can show that the classification was intended by both parties. 7. Incorporation. A worker who is incorporated is usually classified as an independent contractor. A-12
  18. 18. What Factors Determine A Worker's Classification? - continued Very Important - continued 8. Integration. If a worker's services are integrated into a business' operations, they are usually considered important to the success of that business, and the IRS will assume the worker is an employee under the direction and control of the company. 9. Personally rendered services. If services are to be performed only by the worker, that indicates the worker is an employee under the direction and control of the business. Independent contractors can substitute another person's services without the approval or knowledge of the business. 10. Assistants. Independent contractors can hire, supervise, and pay their own assistants, and are responsible for the work results. Employers hire, supervise, and pay their employees' assistants. 11. Continuing relationship. Independent contractors work by the job; a continuing work relationship indicates that the worker is an employee. Note: A continuing relationship may exist even if the recurring work is performed at irregular intervals. 12. Work sequence. Independent contractors can set their own work schedules. Employees are required to perform work in a certain order or sequence. 13. Oral or written reports. A requirement that a worker give regular reports demonstrates an employer-employee relationship. Independent contractors usually only file a report at the end of the job. 14. Payment method. Payment by the hour, week, or month points to employee status. Independent contractors are paid upon completion of the job or are paid on a straight commission basis. 15. Tools and materials. Independent contractors supply their own tools and materials. Employees usually do not. 16. Investment. Employees tend not to make significant investments in the facility where they work. Independent contractors will rent, own, or have some other significant investment in the facility where they perform services for clients. Less Important 17. Working for more than one firm. Multiple jobs can indicate an independent contractor or an employee who is moonlighting. 18. Requirement to work set hours. A predetermined schedule, rather than a deadline, indicates an employer-employee relationship. A-13
  19. 19. What Factors Determine A Worker's Classification? - continued Less important - continued 19. Requirement to work full-time. This limits a person's options to work for other companies and indicates an employer-employee relationship. 20. Right of employer to discharge. Generally independent contractors can't be fired unless they fail to meet contract requirements, so this right indicates an employer-employee relationship. 21. Services available to general public. Independent contractors advertise or make their services available to the public. 22. Working on business's premises. A requirement that work be performed on site indicates that a business has control over an employee especially if the work can be done elsewhere. 23. Business and/or travel expenses. Company reimbursements paid to a worker generally indicate an employer-employee relationship. 24. Right of worker to quit. Typically, employees do not incur any liability if they quit. But independent contractors may be held liable for breach of contract if they don't complete a job. A-14
  20. 20. FILE REPORTS ON TIME - "AVOID PENALTIES" One type of payroll administration expense for which there is no excuse is that resulting from penalties and/or interest imposed because employment tax payments or returns - federal or state - were not made or filed in a timely manner. The penalties levied by the Internal Revenue Service can be a very significant payroll cost. Some of the commonly incurred penalties follow: Failure to file a return: 5% of the net amount of tax required to have been reported for each month or fraction of a month during which the failure continues, not to exceed 25% in the aggregate. Failure to pay tax: 0.5% on the amount due (1% in some cases) for each month during which the failure to pay continues, not to exceed 25% in the aggregate. Failure to deposit taxes: 2% of any underpayment if deposit is between 1 and 5 days late 5% of any underpayment if deposit is between 6 and 15 days late. 10% of any underpayment if deposit is more than 16 days late. 15% if the tax is not deposited by the earlier of 10 days after the date of the first delinquency notice or the day on which notice and demand for immediate payment is given. Failure to electronically deposit taxes: 10% failure to file electronically 2% late filing penalty Here's the list of the services whose time stamps qualify as a postmark for purposes of the "timely mailing and timely filing/paying" rule of IRC Sec. 7502: . Federal Express: FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx Intl Priority & FedEx Intl first . United Parcel Service: UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, and UPS 2nd Day Air A.M., UPS Woldwide Express Plus, & UPS Woldwide Express CAUTION: Remember, not all the services offered by the companies qualify under the IRS' list, just the services listed above. That means that a time stamp from another of the company's services will not suffice as proof of timely mailing. A-15
  21. 21. DIRECT DEPOSIT OF PAYROLL Direct deposit of payroll can save time and money for the employer and employee. On the employer side, direct deposit means that each employee's paycheck is deposited right into the employee's personal account, eliminating costly steps in the payroll process, including the need to stop payment on and reissue lost or stolen checks. Direct deposit means fewer check processing charges and reconcilement maintenance fees from the employer's financial institution. On the employee side, there is no chance of lost or stolen checks, no two to four day waiting period for the paycheck to clear, and employees still receive a pay receipt detailing their gross and net pay and deductions made. KEEP UP-TO-DATE ON "TAXABLE WAGES" AND "EXEMPT EMPLOYEES" Two of the most important potential tax-savings areas of which a payroll manager must be aware involve payments that may not be subject to one or more of the federal or state employment taxes and employees who may not be subject to them. Keep in mind in this regard that direct tax savings will generally result only in relation to the "social security" type employment taxes-that is, the taxes imposed under the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), and the various state unemployment and disability insurance laws. This is because these are the laws that impose a tax directly on an employer, and actual tax dollars can be saved by knowing that a particular type of payment or employee is exempt from a particular tax. This is not to say that the subject of taxable wages and exempt employees is unimportant where federal and state income taxes are involved. Even though employers have no general out-of-pocket tax liability where such taxes are concerned, knowing what types of payments and employees are subject to withholding can save needless bookkeeping time and the expenses of correcting situations where tax is withheld when it should not have been, to say nothing of avoiding the penalties that may be imposed where an uninformed payroll manager fails to withhold from a payment or employee from whom tax should have been withheld. PLANNING AHEAD - RETIREMENT & SOCIAL SECURITY If you have employees who are planning to retire, now is a good time for them to contact the Social Security Administration to see which month is best for them to claim benefits. In some cases, the choice of retirement month could mean additional benefits for the employee and his or her family. Depending on the person's earnings, age, and benefit amount, it may be possible for him or her to start collecting benefits while continuing to work. If your employees want more information about social security, or want to arrange for an appointment to talk with a social security representative, the Social Security Administration advises that they should call 1-800-772-1213. The government has a web site located at "www.ssa.gov". A-16
  22. 22. PLANNING AHEAD - RETIREMENT & SOCIAL SECURITY- continued Individuals may apply for social security benefits online by using the website www.ssa.gov/applytoretire/, or they may apply by telephone by calling 1-800-772-1213. The SSA website, contains a Retirement Benefits Planner. The Planner and online calculators give estimates for disability and survivors benefits as well as your retirement benefit estimate. An "Earnings Limit" Calculator" assists workers in computing the effect of earnings on their social security retirement benefits. Workers who have reached full retirement age (age 65 & 10 months in 2007, age 66 in 2008) may work without their benefits being reduced because of the amount of their annual earnings. Annual earnings affect the amount of Social Security benefits only until full retirement age. After that, you can receive full benefits no matter how much you earn. Full retirement age will gradually increase to age 67, as shown below. The Social Security Administration has developed a unique educational tool to help Americans understand their social security benefits so they can undertake adequate financial planning for their future. This SSA tool is a Social Security Statement that gives workers of all ages their own personal historical data and future benefit estimates. These Statements are mailed to workers age 25 and older. The 4-page Social Security Statement provides information for retirement, disability, and survivors benefits that they could be eligible for now and in the future. PAYROLL'S ROLE. The social security earnings record provided on the Social Security Statement is based on Form W-2 information supplied by an individual's employers. Discrepancies in wage record information - such as name/SSN mismatches - preclude wages being credited to an individual's account. Such earnings will be placed in a suspense file and will not appear on the Social Security Statement. Since uncredited earnings will affect an individual's future entitlement, employees who get a Social Security Statement with earnings totals lower than they expect are going to - and should - have questions. The most likely place for an employee to turn with a question is, of course, the payroll department, so practitioners need to be prepared. AGE TO RECEIVE FULL SOCIAL SECURITY BENEFITS Note: Persons born on January 1 of any year should refer to the previous year. Full Retirement Year of Birth Aae 1937 or earlier 65 1938 65 and 2 months 1939 65 and 4 months 1940 65 and 6 months 1941 65 and 8 months 1942 65 and 10 months 1943-1954 66 1955 66 and 2 months 1956 66 and 4 months 1957 66 and 6 months 1958 66 and 8 months 1959 66 and 10 months 1960 and later 67 The earliest a person can start receiving Social Security retirement benefits remains age 62. A-17
  23. 23. CUT LABOR COSTS BY WATCHING WAGE-HOUR EXEMPTIONS For most employers the largest single statutory source of labor costs is the Fair Labor Standards Act with its minimum wage and overtime pay requirements. Effective August 23, 2004 the Department of Labor reformed 50-year old overtime regulations and introduced new overtime rules. In many cases, however, labor costs may be cut by knowing exactly what it is the Fair Labor Standards Act requires, and what it does not require. For example, there are any number of exemptions-total or partial-from the minimum wage requirements. The Department of Labor (www.dol.gov) website provides additional information. Of utmost significance to most employers is the complete minimum wage and overtime exemption extended to so-called white collar workers-administrative, executive and professional employees. Keep in mind that federal wage-hour rules are not the only ones with which you should be concerned. States also have legislated in this area, and although the state laws may cover employees who are not covered by the federal law, the states, too, provide exemptions with which employers must be familiar. Knowledge of these will prevent payment of overtime rates when straight-time pay will suffice under the law and from paying a straight-time wage rate that is higher than that required under the law. Under the Small Business Protection Act, the federal minimum wage is currently $7.25 as of July 24, 2009. If the state's minimum wage amount is higher, it will prevail over the less-beneficial federal minimum wage. Pennsylvania's minimum wage is $7.25 per hour. Maryland's minimum wage is $7.25 as of July 24, 2009. Delaware's minimum wage is $7.25 as of July 24, 2009. A-18
  24. 24. HANDLE GARNISHMENT PROBLEMS SMOOTHLY A busy payroll manager has never been fond of garnishment proceedings. But with the job protection offered an employee-debtor under the Consumer Credit Protection Act, the payroll manager is going to have to live with the problem. Thus, the methods by which garnishments are handled must be made as simple, efficient and economical as possible. The U.S. Department of Labor website at www.dol.gov has very useful information on this topic. TAX CREDIT FOR FICA PAID ON TIP INCOME To ease the payroll-tax burden on restaurant employers and other food and beverage businesses where employees commonly receive tips for serving food and beverages to customers, the Revenue Reconciliation Act of 1993 expanded the general business credit to include an amount equal to an employer's FICA tax obligation (7.65%) on reported tips in excess of the amount of tips treated as wages for purposes of the Fair Labor Standards Act (FLSA). Effective January 1,1997, the tip credit was expanded to include service and delivery of food and beverages for off-premises consumption. Although the federal minimum wage has been increased, the Small Business and Work Opportunity Tax Act of 2007 allows food and beverage establishments to continue to compute the amount of the tip credit based on the federal minimum wage previously in effect on January 1, 2007 ($5.15 per hour). Also, the credit can now offset the alternative minimum tax. A-19
  25. 25. EMPLOY CHILDREN/SPOUSES/PARENTS Taxability of Children/Spouses Wages for Sole Proprietorship Federal State Local Income Social Income Income State Tax Security Medicare Tax Tax FUTA Unemployment Spouse T T T T T E E Child under 18 T E E T T E E Child 18-20 T T T T T E T Child 21 and T T T T T T T Over Parents T T T T T E E SAVE BY REDUCING THE NUMBER OF PAYROLLS One often overlooked way to save payroll costs is to have fewer payrolls. Many employers pay their employees every week. By switching to bi-weekly payment these employers use half the amount of time spent computing and processing the payroll. Additional savings result from reducing the supplies required. OTHER WAYS TO SAVE • Check the computation of your unemployment compensation "experience rating." • Review and respond to any charges against your unemployment account. Charges are benefits paid to employees or former employees. • Maintain a stable employee group. • Use a "common paymaster" where employees are shared by two or more related companies. • Hire employees from a "Targeted" group. They may qualify the employer for certain credits. Under the federal Work Opportunity Tax Credit, which has been extended to cover employees from a targeted group who begin work before 9/1/2011, employers receive a federal tax credit for hiring from one of nine targeted groups. - 25% credit of 120 - 400 hours paid to the worker during the first year, and - 40% credit of first $10,000 paid to the worker during the first year, and - 50% credit of first $10,000 paid to the worker during the second year A-20
  26. 26. OTHER WAYS TO SAVE - continued - Eligible wages include cash wages PLUS tax exempt amounts the employer pays for health insurance coverage, dependent care assistance, and tuition reimbursement paid under Sect. 127. Form 8850, Pre-Screening Notice and Certification Request for Work Opportunity Tax Credit, is used by employers to both pre-screen prospective employees and to request certification from the State's Employment Security Agency. This form is not filed with the IRS. Form 8850 is available by calling 1- 800-829-1040 or from www.irs.gov. Persons and corporations who employ Short-term welfare recipients or vocational rehabilitation customers may be eligible for a Pennsylvania "Employment Incentive Payments Credit." A completed PA Schedule W must be filed to claim this credit. July 1,1996, the Pennsylvania "Job Creation Tax Credit" became effective. Up to $1,000 is allowable for each new full-time job, paying at least one hundred fifty percent of the federal minimum wage, created within Pennsylvania by a company that agrees to: 1) create at least twenty-five new jobs in PA within a three-year period, or 2) increase the number of employees in PA by at least twenty percent within a three-year period, whichever is less. A new, start-up company will qualify provided they meet the other requirements. A business may apply the tax credit to 100% of the business' state corporate net income tax, capital stock and franchise tax or the capital stock and franchise tax of a shareholder of the business if the business is a Pennsylvania S corporation, gross premiums tax, gross receipts tax, bank and trust business shares tax, mutual thrift institution tax, title insurance business shares tax, personal income tax or the personal income tax of shareholders of a Pennsylvania S corporation, or any combination thereof. Cash refunds will not be issued for unused credits. For more details contact the Pennsylvania Department of Community and Economic Development at (717) 787-7120. Of the 22.5 million dollars approved per year, twenty-five percent is set aside for companies with less than one hundred employees (six new jobs), however, if that amount isn't used by April 30, then it becomes available to large companies. A-21
  27. 27. OTHER WAYS TO SAVE - continued FEDERAL BUSINESS CREDITS • Credit For Employer-Provided Child Care Facilities - Employers can claim a tax credit for 25% of qualified expenses for employee child care. Qualified expenses include costs to acquire, construct, rehabilitate, or expand a facility for child care, operational costs for the facility, and amounts incurred under a contract with a child care facility to provide service to employees. A 10% credit can also be claimed for the costs incurred under a contract to provide child care resource and referral services to employees. The maximum credit in any year is $150,000. • Small Business Credit For New Retirement Plan Expenses - A nonrefundable credit is available for expenses associated with establishing a new qualified retirement plan. The credit is equal to 50% of the first $1,000 in administrative and retirement-education expenses for the plan for each of the first three years of the plan. A "small business" is defined as one with no more than 100 employees having compensation in excess of $5,000 in the preceding year, and with at least one non- highly compensated employee. • Saver's Credit - Each eligible individual may claim a nonrefundable credit for IRA contributions (traditional and Roth), for elective deferrals to a section 401 (k) plan, section 501(c)(18) plan, a governmental section 457 plan, SIMPLE plan, or SEP. Voluntary after-tax contributions to qualified employer plans also qualify. Eligible individuals must be 18 or older. Dependents and full-time students are not eligible for the credit. Up to $2,000 of annual contributions are eligible for the credit. The amount of the credit depends upon modified AGI and filing status as shown below. Adjusted gross income amounts are indexed for inflation as shown below: Modified Adjusted Gross Income for 2010 Head of All Other Credit Joint Household Statuses Rate 50% $0 - $33,500 $0-$25,125 $0-$16,750 20% $33,501 - $36,000 $25,126-$27,000 $16,751 -$18,000 10% $36,001 - $55,500 $27,001 -$41,625 $18,001 -$27,750 0% Over $55,500 Over $41,625 Over $27,750 The credit is in addition to any allowable deduction or exclusion from income. After-tax contributions used to claim the credit are treated as investment in the contract. A-22
  28. 28. PARTB Processing And Reporting
  29. 29. PART B - PROCESSING AND REPORTING Page Federal Tax Deposit Requirements B -1 Form 941 Deposit Rules B -1 Form 940 Deposit Rules B -3 Federal Tax Deposit Coupon B -4 Electronic Federal Tax Payment Systems (EFTPS) B -5 Sample EFTPS Enrollment Form 9779 B -7 Pennsylvania Withholding Filing Requirements B -9 PA Electronic Funds Transfer B -11 PA Authorization Agreement for Electronic Payments B -13 PAe-Tides B-15 PA Credit Card Payments B -16 Multi-State Reporting B-17 Bonuses/Supplemental Wages B-18 How and When to Use Cumulative Withholding B -19 Other Benefits Exempt From Taxes B - 20 Group Term Life Insurance B - 21 Cafeteria Plans B - 23 Personal Use of Company Provided Vehicle B - 25 Sick Pay (Disability Income) B - 31 Form 1099 - Miscellaneous Income B - 32 Business Expense Reimbursements B - 35 Moving Expense Reimbursements B - 39
  30. 30. FEDERAL TAX DEPOSIT RULES FORM 941 FEDERAL TAX DEPOSITS Calculation of the Deposit 1. Social Security taxes withheld $ 868.00 2. Medicare taxes withheld 203.00 3. Total FICA taxes withheld (Line 1 + Line 2) 1 ,071.00 4. Multiply by 2 x 2 5. Total employer and employee FICA taxes 2 ,142.00 6. Add - federal income taxes withheld 532.25 7. Subtract - advance payments of the earned income credit 20.00 8. Required payroll tax deposit (Line 5 + Line 6 - Line 7) $2 .654.25 Deposit Rules (Due to change 6/1/2011) An employer is either a monthly depositor, a semi-weekly depositor, or an annual depositor. This determination is made based on the aggregate amount of employment taxes reported during a "look back" period. The regulations define a look back period as the twelve-month period ending on the preceding June 30th. The determination is made by the IRS prior to the beginning of each calendar year and employers are advised if there is a change in the deposit rules they must follow. Monthly deposit - An employer is a monthly depositor if the aggregate amount of employment taxes reported for the look back period is $50,000 or less. A monthly depositor must deposit employment taxes for payments made during a calendar month into a Federal Reserve Bank or authorized financial institution by the 15th day of the following month. If the 15th day of the following month is not a banking day, taxes will be treated as timely deposited on the next following banking day. Semi-weekly deposit - An employer is a semi-weekly depositor if the aggregate amount of employment taxes reported for the look back period is more than $50,000. Under the semi-weekly deposit rule, those paying wages on Wednesday, Thursday, and/or Friday must deposit employment taxes by the next Wednesday in a Federal Reserve Bank or an authorized financial institution, while those paying wages on Saturday, Sunday, Monday, and/or Tuesday are required to deposit employment taxes on the following Friday. B-1
  31. 31. FEDERAL TAX RETURN DEPOSITS - continued Deposit Rules - continued If any of the three weekdays following the close of a semi-weekly period is a bank holiday, employers will be given an additional banking day to make the deposit. There is a special rule for a return period, either quarterly or annual, that ends during a semi-weekly period. When it happens, an employer must complete the Federal Tax Deposit Coupon so that it designates the return period for which the deposit is made. If the return ends during a semi-weekly period that has two or more payment dates, two deposit obligations may exist. For example: if one quarterly return period ends on Thursday and a new quarterly period begins on Friday, employment taxes from payments on Wednesday and Thursday are subject to one deposit obligation, and taxes from payments on Friday are subject to a separate obligation. Two separate Federal Tax Deposit Coupons are required in this case. One-day rule - The semi-weekly or monthly deposit rules will not apply if an employer has accumulated $100,000 or more of employment taxes. These taxes must be deposited in a Federal Reserve Bank or authorized financial institution by the close of the next banking day. To determine whether the $100,000 threshold is met, (1) a monthly depositor takes into account only those employment taxes accumulated in the calendar month in which the day occurs; and (2) a semi-weekly depositor takes into account only those employment taxes accumulated in the Wednesday - Friday or Saturday - Tuesday semi-weekly period in which the day occurs. Safe harbor and de minimis rules - The deposit obligation will be satisfied if the difference between the amount of tax that should have been deposited less the amount of tax actually deposited (shortfall) does not exceed the greater of $100 or two percent of the amount required to be deposited. However, the underdeposit has to be deposited by a specified "make-up" date. The make-up date for the monthly depositors is the due date for the quarterly return. The make-up date for the semi- weekly depositors and those required to make accelerated deposits is the first Wednesday or Friday (whichever is earlier), falling on or after the 15th day of the month in which the deposit was due. Small Employers If the total amount of accumulated employment taxes for the quarter is less than $2,500 for that quarter, or the previous quarter, and the amount is fully deposited or remitted with a timely filed return for the quarter, the amount deposited or remitted will be deemed to have been timely deposited. If the total amount of accumulated employment taxes is $1,000 or less over a period of four quarters, the employer may wait and pay their total employment taxes for the year when they file Form 944, Employer's Annual Federal Tax Return. The 944 Form (and tax payment) for each calendar year is due by January 31, of the following year. B-2
  32. 32. FEDERAL TAX RETURN DEPOSITS - continued CREDIT CARD PAYMENT Employers filing Forms 940 and/or 941 with a balance due may pay the amount owed by credit card. Additionally, Form 941 filers can make credit card payments for up to 3 prior quarters. A convenience fee will be charged by the service provider. Payments are processed 24 hours a day, seven days a week, but are not effective until the date the charge is authorized. Please note: Federal Tax Deposits cannot be paid by credit card. FORM 940 DEPOSIT RULES If your FUTA tax liability for a quarter is $500 or less, you do not have to deposit the tax. Instead, you may carry it forward and add it to the liability figured in the next quarter to see if you must make a deposit. If your FUTA tax liability for any calendar quarter is over $500 (including any FUTA tax carried forward from an earlier quarter), you must deposit the tax by electronic funds transfer (EFTPS) or in an authorized financial institution using Form 8109, Federal Tax Deposit Coupon. When to deposit. Deposit the FUTA tax by the last day of the first month that follows the end of the quarter. B-3
  33. 33. AMOUNT OF DEPOSIT (Do tJOT type, please print.) Darken only one nl Darken onlv one Id! TAX PERIOD EninuLLJ_l DOLLARS CENTS TYPE OF TAX MOMTH TAX YEAR ENDS 0. 941 <y«945 ■ C/< Quarter 0. 1120 0 ■* 1042 1 | (/< Quarter EMPLOYER IDENTIFICATION NUMBER BANK NAME/ DATE STAMP Name J 0* 0* 943 720 0* 990-T 0 ■* 990-PF 1 (/< Quarter H /~> 3rd I (/< Quarter ■ /O 4th IMS USE ONLY Address . 0 t«944 City_ State .ZIP. Telephone number IICR ENCODING Federal Tax Deposit Coupon Form 8109-B (Rev.12-2006) SEPARATE ALONG THIS LINE AND SUBMIT TO DEPOSITABY WITH PAYMENT OMB NO. 1545-0257 What's new. The oval for Form 990-C has been deleted. Form 990-C ^t using dollar signs, commas, a has been replaced by Form 1120-C, U.S. Income Tax Return for jjng zeros. If the deposit is for whole dollars only, Cooperative Associations. Filers of Form 1120-C must use the 1120 oval > boxes. For example, a deposit of $7,635.22 when completing Form 8109-B. lhis: '^ The type of tax ovals for the 1120, 1042, and 944 have been moved on the coupon. Read the type of tax to the right of the oval before you darken the oval. Note. Except for the name, address, and telephone number, entries must be made in pencil. Use soft lead (for example, a #2 pencil) so that the entries can be read more accurately by optical scanning equipment. The name, address, and telephone number may be completed other than by hand. You cannot use photocopies of the coupons to make your . Darken on ■ace for TYPE OF TAX and only one space deposits. Do not staple, tape, or fold the coupons. PERIOD gpace to the left of the applicable form and The IRS encourages you to make federal tax deposits using the period. Darkening the 1 space or multiple spaces may delay Electronic Federal Tax Payment System (EFTPS), For more infoi your account. See below for an explanation ofTypes on EFTPS, go to www.eftps.gov or call 1-800-555-4477. the Proper Tax Period. Purpose of form. Use Form 8109-B to make a tax deposit following two situations. it's QUARTERLY Federal Tax Return (includes 1. You have not yet received your resupply of preprinti coupons (Form 8109). S 941-M, 941-PR, and 941-SS) :r'5 Annual Tax Return for Agricultural Employees 2. You are a new entity and have already b< identification number (EIN), but you have not Employer's ANNUAL Federal Tax Return (includes Forms 944-PR, 944(SP), and 944-SS) of preprinted deposit coupons (Form 8109). lf| EIN, see Exceptions below. Annual Return of Withheld Federal Income Tax Note. If you do not receive your resupply of di Quarterly Federal Excise Tax Return deposit is due or you do not receive yoi Employer's Annual Railroad Retirement Tax Return of receipt of your EIN, call 1-800-829 Employer's Annual Federal Unemployment (FUTA) Tax How to complete the form. Enter, wn on your retu Return (includes Form 940-PR) or other IRS correspondence, addi the sp Form 1120 U.S. Corporation Income Tax Return (includes Form 1120 Do not make a name or address cl (se series of returns, such as new Form 1120-C and Change of Address). If you are reqi Form 2438) 990-PF (with net investment in< 990-^" Form 990-T Exempt Organization Business Income Tax Return which your tax year ends in ONTH TAX YEAR ENDS Form 990-PF Return of Private Foundation or Section 4947(a)(1) Nonexempt example, if your tax year ends ■, enter 01; if it ends in* Charitable Trust Treated as a Private Foundation December, enter 12. fylal for EIN and MONTH TAX R Form 1042 Annual Withholding Tax Return for U.S. Source Income of ENDS (if applicable) as mt of deposit below, Foreign Persons Exceptions. If^jpu h; for an EIN, have not received it, and a deposit mustjfl'made^ ie Form 8109-B. Instead, send your Marking the Proper Tax Period payment t ^ 'e you file your return. Make your check Payroll taxes and withholding. For Forms 941, 940, 943, 944, 945, or money to the United States Treasury and show on it CT-1, and 1042, if your liability was incurred during: your name ^n Form SS-4, Application for Employer • January 1 through March 31, darken the 1st quarter space; Identification NumSSHfcddress, kind of tax, period covered, and date • April 1 through June 30, darken the 2nd quarter space; you applied for an EINTDo not use Form 8109-B to deposit delinquent taxes assessed by the IRS. Pay those taxes directly to the IRS. See Pub. • July 1 through September 30, darken the 3rd quarter space; and 15 (Circular E), Employer's Tax Guide, for information. • October 1 through December 31, darken the 4th quarter space. Amount of deposit. Enter the amount of the deposit in the space Note. If the liability was incurred during one quarter and deposited in provided. Enter the amount legibly, forming the characters as shown another quarter, darken the space for the quarter in which the tax liability below: was incurred. For example, if the liability was incurred in March and deposited in April, darken the 1st quarter space. I2l3l4l5l6l7l8lqlol Excise taxes. For Form 720, follow the instructions above for Forms 941, 940, etc. For Form 990-PF, with net investment income, follow the instructions on page 2 for Form 1120, 990-T, and 2438. Department of the Treasury Form 8109-B (Rev. 12-2006) Internal Revenue Service Cat. No. 61042S B-4
  34. 34. ELECTRONIC FEDERAL TAX PAYMENT SYSTEMS (EFTPS) The North American Free Trade Agreement includes a provision which requires many corporations to electronically deposit backup, wage, pension and nonresident alien withholding, along with various excise taxes and estimated income tax payments. - Businesses with first time aggregate federal deposits exceeding $200,000 in 2006 will be mandated to use EFTPS beginning January 1, 2008. Under these rules, a company is required to deposit electronically if its aggregate federal deposits for the second previous year exceed $200,000. Aggregate federal deposits include ALL federal business taxes (941,940, corporate estimates, & excise tax deposits). When the $200,000 threshold is met, ALL federal business taxes must be electronically deposited. If enrolled in EFTPS through a payroll service you must file a separate enrollment form to obtain a PIN number in order to electronically deposit "other" federal business taxes. Before making electronic payments, taxpayers enroll with the IRS by filing Form 9779, the EFTPS Business Enrollment Form. This enrollment process takes approximately four to six weeks. There are two payment options: 1) EFTPS - Direct (preferred method) - funds are debited from the taxpayer's bank account by the IRS. The taxpayer initiates payment by a telephone call (EFTPS- Phone), through a personal computer (EFTPS-PC Software), or by using the internet (EFTPS-OnLine), Free Windows ® - based software is available from the IRS. Payment must be initiated by 8:00 p.m. one business day prior to date due. The IRS provides a confirmation number. EFTPS allows taxpayers to "warehouse" their tax payment up to 120 days in advance of the tax due date. The payment is then automatically made on the due date. 2) EFTPS - Through Your Financial Institution - taxpayer initiates a credit transaction through their financial institution to the IRS one business day prior to date due. Cutoff time must be confirmed with the bank. Employer should check with their bank for availability, deadlines, and fees. No confirmation number is given. IRS Offers Express EFTPS Enrollment IRS offers EFTPS Express Enrollment for new businesses. Employers that receive a new EIN (Employer Identification Number) and have a federal tax obligation will automatically be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS.) After receiving their EIN, employers will receive a separate mailing containing an EFTPS Personal Identification Number (PIN) with instructions for activating their enrollment. New employers can then activate their enrollment by calling a toll-free number, entering their banking information, and completing an authorization for EFTPS to transfer funds from their account to Treasury's account for tax payments per their instructions. B-5
  35. 35. ELECTRONIC FEDERAL TAX PAYMENT SYSTEMS (EFTPS) - continued EFTPS - OnLine: Taxpayers Can Pay All Federal Taxes On The Web Taxpayers can enroll and pay all Federal taxes through a secure web site, http://www.eftps.gov. The Electronic Federal Tax Payment System, (EFTPS), has been a service that businesses and individuals can use to pay all their federal taxes electronically, 24 hours a day, 7 days a week, via the phone or personal computer (PC) software. EFTPS-OnLine is the same, easy to use system as the telephone and PC software versions of EFTPS, but it also includes new features. EFTPS - On-Line users will not only be able to pay their taxes when they want, but they can also review their tax payment history and print out payment confirmation. Payment history can be accessed for 16 months. By using any of the EFTPS methods to pay taxes, taxpayers benefit from increased accuracy, easier payment and less paperwork. With EFTPS-Direct, all three methods are interchangeable and can be used as a backup. For more information call: - EFTPS Customer Service at 1-800-555-4477 (business) or 1-800-316-6541 (individual) for information and enrollment. - Visit the IRS website at www.eftps.gov Penalties: Ten percent failure to file electronically. Two percent late filing penalty. Note: If you are already enrolled in EFTPS and want to sign up for the on-line system, you will need your original confirmation letter from the IRS. If you do not have this you can call 1-800-555-4477 to request a new letter. B-6
  36. 36. Electronic Federal Tax Payment System Tax Form 9779 with Instructions Department of the Treasury BUSJnSSS EtirOllmSt EFTPS "~ This form contains instructions to complete the Electronic Federal Tax Payment System (EFTPS) Enrollment Form for Business Taxpayers. It is to be used either for initial enrollment in the system or to add financial institution information. If you wish to use multiple accounts in one financial institution, or accounts in multiple financial insLiiuLions, you will need to provide multiple copies of the enrollment form. For questions regarding EFTPS or this Enrollment Form please call: EFTPS Customer Service 1-800-555-4477 For TDD (hearing impaired) support 1-800-733-4829 Visit our web site at www.EFTPS.aov to enroll online. en espanol 1-800-244-4829 24 hours a day, 7 days a week When your form is completed, please mailo: EFTPS Enrollment Processing Center P.O. Box 173788 Denver, Colorado 80217-3788 You should receive void Confirmation/Update Foi m and iiistnictious on using EFTPS approximately two to fooi weeks, after we receive your Eniollmeiit Form MARKING EXAMPLE: INSTRUCTIONS Marking Instructions: • Use black or blue ink only. 1. Employer Identification Number • Please print legibly. Use one character per block. Use (EIN). Enter your nine-digit Employer only capital letters. Keep all printing within the boxes. Identification Number. Enter the EIN on the back it'tlu farm in the upper right ♦ Do not make any stray marks on this form. Stale Zip Code corner as well. Taxpayer Information Note to Sole Proprietors: if you are a 1. Employer Identification Number (EIN) - (Please enter EIN on reverse side also.) Sole Proprietor business, without employees, you need to enroll as an Individual (Tax Form 9783) and use your i | I :.. Social Security Number as your Taxpayer Identification Number. 2. Business Taxpayer Name: 2. Business Taxpayer Name. Print your business name exactly as it appears on the tax return. Sole Proprietors should use the individual owners name rather 3. Business Street Address: than the DBA name. The only valid characters are A-2,0-9. •, 8, and blank. 3. Business Address. This address City: State: ZIP Code: should be the address as it appears on the business tax return. ITTTT ji) IjofalllkiatfosshssfBeii International: Province, Country, and Postal Code: pre-prinled and .is incorrect, it| ia/i ill! 111 ii only be'■ changed by submitting an ! ! j t IRS Change of Address (Form 8822) i ; i■ 1f i ■; Ii 1 .! . j i i i i i [ ; to the Internal Revenue Sen/Ice. The address on yoiififftS enrollment will automatically be updated when Contact Information Form 8S22 is submitted. See the 4. Primary Contact Name: back of Form 882? lo determine [ mr j j i i i ! i j i 1 ; 1 1 1 i ! i i i ! 1 j j where ihelorm should be mailed. 5. Primary Contact Mailing Street Address (if different from #3 above): 1 ' i : 4. Primary Contact Name. Print the : i ! |s ! i j i ! i ! j i 1 i I ! ! i i name of a person, company, or third party who can be contacted in the event 1 L M ! ■ I I i = City: State: Zip Code questions arise regarding this enrollment Ll! ! 1 i 1 1 i ! H ; j 1 or tax payments. All EFTPS mailings will be sent to your primary contact. i I Li M U_ Internationa : Province, Country, and Postal Code: 1 : ' ' ' i i : ! 5-6. Primary Contact Mailing Address i ; ■ < ' ! ! • '; ! ! ! and Phone Number (if different from #3 I i , , '■ above). You need not complete the address area il your contact's address is 6. Primary Contact Phone Number: US Area Code International Country Code City Code the same as the business address. If an _L!/L: L H lL: j °11" address is provided here, it will be used to mail confirmation materials and _J_j L1...L.-L.J L. instruction booklets 7. Primary Contact E-mail Address (use as many spaces as needed up to 60): 7. Primary contact E-mail Address. (optional) (over) B-7

×