HHM Finance Night - Employment Tax Witholding

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Tips and information for withholding employment taxes and estimated tax payments.

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HHM Finance Night - Employment Tax Witholding

  1. 1. 1 Tax Withholdings and Estimated Payments Presented by: Jennoa R. Graham, Ph.D. Friday, March 8, 2013
  2. 2.  Income – Money that is received in exchange for a product, service or contract agreement  Tax Withholding – Installment payments that are deducted from the total income earned (gross) prior to issuing employee paycheck  Estimated Tax – Installment payments made by independent contractor from the total income received for services 2 Small Business is not included in this presentation
  3. 3.  Allowances (Exemptions) - A point system based on IRS Form 1040 filing status and number of dependents, that reduces the dollar amount deducted from the total income earned (gross) prior to issuing employee paycheck  Withholding Calculator – an application that determines IRS Form W-4 allowances and estimated tax liability. Does not calculate state estimated tax liability. 3
  4. 4.  IRS Form W-4 – used to determine the dollar amount to withhold from a payroll check for federal income tax installments.  IRS Form 1040-ES – voucher used to submit estimated federal income tax installment payments 4
  5. 5.  GA Form G-4 – used to determine the dollar amount to withhold from a payroll check for Georgia state income tax installments.  GA Form 500ES - voucher used to submit estimated Georgia state income tax installment payments 5
  6. 6.  Determine whether tax withholding or estimated tax is applicable  Determine applicable forms for tax withholding and estimated tax processes  Calculate the number of tax withholding allowances or dollar amount of estimated tax  Determine when and how to submit applicable forms/payments 6
  7. 7.  Traditional Employee – Payer controls what work is assigned and how it is completed  Independent Contractor – Worker controls what work is assigned and how the work is completed  There are exceptions to these general rules under statutory and common laws guidelines:  Form SS-8, Determining of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding  See www.irs.gov for more information 7
  8. 8.  Traditional Employee – Payer controls what work is assigned and how it is completed  Payroll Tax Withholding - Mandatory  With Consent (W-4)  Without Consent (highest rate)  Withholding Allowance  W-4 Personal Allowances Worksheet  Withholding Calculator – Complicated; See www.irs.gov or tax professional for more information 8
  9. 9. 9 Rule of Thumb: Number of Allowances Form W-4 < Form1040 Submitted at time of employment; update at anytime
  10. 10. 10 Rule of Thumb: Number of Allowances Form W-4 < Form1040
  11. 11.  Independent Contractor – Worker controls what work is assigned and how the work is completed  Estimated Tax Installments - Voluntary  Prepay (1040-ES)  Tax Season (1040-V, may include penalty fees)  Installment Amounts  1040-ES Estimated Tax Worksheet  Withholding Calculator – Complicated; See www.irs.gov or tax professional for more information 11
  12. 12. 12 Payments are made once every 4 months (quarterly)
  13. 13.  Payroll Tax Withholding - Mandatory  G-4, Employee Withholding Allowance Certificate  G-4, Allowance Worksheet  Estimated Tax Installments – Voluntary  500-ES Individual and Fiduciary Estimated Tax Payment Voucher (Prepay)  GA-9465 Installment Agreement Request (Tax Season)  Send request if full payment cannot be made at time of filing  Penalties may be applied if request is denied 13 See www. etax.dor.ga.gov or tax professional
  14. 14. 14 Rule of Thumb: Number of Allowances Form G-4 = Form W-4
  15. 15. 15 Payments are made once every 4 months (quarterly)
  16. 16. 16 Repayments are due monthly not to exceed 36 months
  17. 17.  Determine whether tax withholding or estimated tax is applicable  Tax withholding applicable to Employees  Estimated tax is applicable to Contractors  There are exceptions to every general rule  Determine applicable forms for tax withholding and estimated tax processes  W-4 Employee Withholding Allowance Certificate  G-4 Employee Withholding Allowance Certificate  1040-ES Estimated Tax  500-ES Individual and Fiduciary Estimated Tax Payment Voucher 17
  18. 18.  Calculate the number of tax withholding allowances or dollar amount of estimated tax  Allowances Worksheet  Estimated Tax Worksheet  Withholding Calculator (Federal only)  Determine when and how to submit applicable forms/payments  W-4 & G-4 submitted at time of employment and can be updated at any time during the year  ES payments submitted quarterly 18
  19. 19. 19
  20. 20.  IRS (2013). Tax forms and definitions. Internal Revenue Code, Retrieved March 5, 2013, from http://www.irs.gov  GA Dept of Revenue (2013). Tax forms and definitions. Office of Tax Policy, Retrieved March 6, 2013, from http://etax.dor.ga.gov 20

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