Depositing and Reporting Withheld Taxes

Employer Identification Numbers (EIN) Identifies employer to IRS and SSA Depositing taxes Filing returns Communications 9-digit number in required format: 00-0000000 Form SS-4, Application for Employer Identification Number U.S. employers use online application, by fax, by mail Foreign employers apply by phone Watch mergers, consolidations, and reincorporation Be sure to use the correct EIN

Payroll Tax Deposit Rules Based on the employer’s total liability for federal income, social security, and Medicare taxes during a lookback period 12-month period ending the preceding June 30 Calendar Year 2017: July 1, 2015 – June 30, 2016 Shortfall rule Deposit obligation met if the amount of the shortfall is no greater than $100 or 2% of entire amount due Shortfall deposit due by appropriate make up date dependent on depositor status

Payroll Tax Deposit Rules Semiweekly Depositor Total liability exceeds $50,000 during lookback period Accumulated tax liability due for wages paid on Wednesday, Thursday, and Friday by the following Wednesday Accumulated tax liability due for wages paid on Saturday, Sunday, Monday, and Tuesday by the following Friday Saturday, Sunday, and holidays are not business days Monthly Depositor Total liability is $50,000 or less during lookback period Accumulated tax liability due each calendar month by 15th of the following month

Payroll Tax Deposit Rules One-day Depositor Total liability exceeds $100,000 during the monthly or semiweekly deposit period Accumulated tax liability due the close of the next business day Monthly depositors become semiweekly depositors for the remainder of the current calendar year and the entire next calendar year Quarterly Depositor Total liability is less than $2,500 for the current or immediately preceding quarter Annual Depositor Total liability is less than $1,001 upon notification from the IRS

Electronic Federal Tax Payment System Required for all depository taxes Exception: Quarterly or Annual depositors who deposit taxes with the quarterly or annual tax returns EFTPS Payment Options EFTPS – Direct (ACH Debit) EFTPS – Through a Financial Institution (ACH Credit) Employer accountable for timely tax deposits made by payroll service providers Form 8655 – Reporting Agent Authorization Allows payroll provider to submit employment tax returns and deposits

Electronic Federal Tax Payment System Enrollment Process Complete Form 9779, Business Enrollment Form for EFTPS Enrollment takes 2 – 10 weeks Form 9787, Business Confirmation/Update Form Received within 15 business days once Form 9779 is completed 10% penalty assessed if payroll taxes are paid using EFTPS, excluding exception depositors Legal marijuana business Provide proof of denied bank account applications to have penalties abated

Penalties for Failure to Deposit on Time Subject to the following failure to deposit (FTD) penalties Depositors that fail to deposit the entire amount of tax required by the due date, with the shortfall consideration, and without reasonable cause for the failure 2% of the amount not deposited if deposited within 5 days of the due date 5% of the amount not deposited if deposited within 6 - 15 days of the due date 10% of the amount not deposited if deposited more than 15 days of the due date 15% of the amount not deposited if deposited within 10 days after receipt of the first IRS delinquency notice or on the same day a notice and demand for payment is received

Penalties for Failure to Deposit on Time 100% penalty of total amount of taxes uncollected or paid Individuals who are responsible for collecting, accounting for, and paying taxes and who willfully fail to do so This could be you! Felony conviction goes with 100% penalty Criminal penalty Fined up to $10,000 and/or imprisoned for up to 5 years

Federal Employment Tax Returns Form 941, Employer’s Quarterly Federal Tax Return Form 941-PR, Employer’s Quarterly Federal Tax Return – Puerto Rico Form 941-SS, Employer’s Quarterly Federal Tax Return – all other possessions Form 941-Schedule B, Report of Tax Liability for Semiweekly Schedule Depositors (when liability due not when tax deposit made) Form 941-Schedule D, Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations Form 941-Schedule R, Allocation Schedule for Aggregate Form 941 Filers (used by 3rd-party providers who file tax returns and deposits)

Federal Employment Tax Returns Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees Form 944, Employer’s Annual Federal Tax Return for small employers Form 945, Annual Return of Withheld Federal Income Tax Non-payroll withholding Form 945-A, Annual Record of Federal Tax Liability

Federal Employment Tax Returns Quarterly tax return due the last day of the first month following the end of each calendar quarter. Automatic extension when all deposits are made timely. Quarterly tax return due with extension on the 10th day of the next month Quarter Quarter Ends Tax Return Due Date Automatic Extension January - March March 31 April 30 May 10 April – June June 30 July 31 August 10 July – September September 30 October 31 November 10 October - December December 31 January 31 February 10

Correcting Tax Returns Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund Used to correct errors employer’s have discovered on a previously filed Form 941 Due Date for Form 941-X, with underreported tax Discovered error in: January – March; Form 941-X is due April 30 Discovered error in: April – June; Form 941-X is due July 31 Discovered error in: July – September; Form 941-X is due October 31 Discovered error in: October – December; Form 941-X is due January 31 Form 843, Claim for Refund and Request for Abatement Request a refund or abatement of assessed interest, additions to tax, or penalties

Penalties: Late Reporting / Paying Tax Late filing of employment tax returns 5% of the amount of tax required to be shown on the return for each month with a maximum of 25% Fraudulent: 15% per month up to maximum of 75% Failure to pay employment taxes 0.5% of any unpaid tax shown on the return for each month with a maximum of 25% Additional 0.5% when IRS has issued a notice and demand and not paid within 10 - 21 days Penalties increase to 1% beginning 10 days after the day the employer is notified by the IRS that it intends to levy on the employer’s assets or notice of immediate payment is received

Penalties: Late Reporting / Paying Tax Criminal Penalties Willful failure to file a return, pay tax: fine of up to $25,000 and/or imprisonment for up to one year Willful delivery of fraudulent tax return: fine of up to $10,000 and/or imprisonment for up to one year Willful attempt to evade the payment of any tax: fine of up to $100,000 and/or imprisonment for up to five years Willful signing of fraudulent tax return: fine of up to $100,000 and/or imprisonment for up to three years General Statute of Limitations for assessing taxes: 3 years from the date the return was filed

Information Return: Employees Form W-2, Wage and Tax Statement 6-part form Employer provides to employee before January 31 following the tax year Employer files informational returns with SSA before January 31 Applies to any employer engaged in a business that pays compensation to an employee for work performed, even if payment is not paid in cash Undeliverable Forms W-2: must be kept through April 15 of the 4th year Reissued Forms W-2: write “reissued statement” on the face of the form Multiple forms acceptable for specific circumstances Employers can provide electronic copies with employee consent. Watch state regulations!

Information Return: Employees Format considerations on Form W-2 Hyphenation: include in EIN and SSN as appropriate Dollar Amounts: no commas or dollar signs; cents required Electronic reporting for Form W-2 Filing 250 or more forms for a calendar year are required to file electronically Wage and tax information to SSA – Form W-3, Transmittal of Wage and Tax Statements Only required for paper filers Accompanies paper Form W-2

Form W-2 Boxes Box 1: Federal income taxable wages for the year Box 3: Social security taxable wages for the year Box 5: Medicare taxable wages for the year Boxes 2, 4, and 6: respective tax withheld Tips: Watch out for box 7 and box 8 Box 9: W-2 Verification Code initiative participating employers Box 10: Total dependent care benefits provided by employer (IRC §129) Box 11: Distributions from a NQDC or net losses subject to social security and Medicare taxes during the year

Form W-2 Boxes Box 12: Box 14: Other Capital letters only 4 codes per form Familiarize yourself with the most common ones. Refer to section 3 and section 4! Catch-up contributions are added to elective deferral for reporting Make-up deferral for veterans Be sure to include the 2-digit year after the code (e.g. D 15 2225.00) Box 14: Other Miscellaneous information for employee Railroad employers must report RRTA compensation and taxes in box 14

Correcting Informational Returns Form W-2c, Corrected Wage and Tax Statement 6-part form Electronic filing requirement for 250 or more corrected returns Undeliverable Forms W-2c: must be kept through April 15 of the 4th year Form W-3c, Transmittal of Corrected Wage and Tax Statement One form for each type of Form W-2 corrected APA offers fill-in forms for Form W-2c and Form W-3c for members

Reconciliation Process Prevent out-of-balance conditions by periodically reconciling the wage and tax information. Reconciliation frequency Pay period Payroll register totals of taxes withheld against tax liabilities record Tax deposit Tax liabilities against tax deposits made Quarterly Payroll registers against quarterly tax returns Year-end YTD payroll registers against Form W-2s and annual tax returns

Information Return: Nonemployees Form 1099 Series Follows reporting guidelines similar to Form W-2 Most common Form 1099-MISC, Miscellaneous Income Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Form 1099-LTC, Long-term Care and Accelerated Death Benefits Form 1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA Form 1096, Annual Summary and Transmittal of U.S. Information Returns

Failure to File Information Returns General Rules $50 per return if the failure to file or provide correct information is corrected within 30 days after the due date, with a maximum penalty of $536,000 a year $100 per return if the failure to file or provide correct information is corrected more than 30 days after the due date but by August 1 of the same year the return is due, with a maximum penalty of $1,609,000 a year $260 per return if the failure to file or provide correct information is not corrected by August 1 of the same year the return is due, with a maximum penalty of $3,218,500 a year Willful disregard: The greater of $530 per return or 10% of the correct amount of tax shown on the return. No maximum penalty.

Failure to Provide Information Returns General Rules $50 per return if the failure to file or provide correct information is corrected within 30 days after the due date, with a maximum penalty of $536,000 a year $100 per return if the failure to file or provide correct information is corrected more than 30 days after the due date but by August 1 of the same year the return is due, with a maximum penalty of $1,609,000 a year $260 per return if the failure to file or provide correct information is not corrected by August 1 of the same year the return is due, with a maximum penalty of $3,218,500 a year Willful disregard: The greater of $530 per return or 10% of the correct amount of tax shown on the return. No maximum penalty.

Electronic Reporting Requirements Employers that file 250 or more Forms W-2 must file electronically Includes employers in U.S. possessions Employers that file 250 or more Forms W-2c must file electronically Hardship exception Form 8508, Request for Waiver From Filing Information Returns Electronically Filing extension Form 8809, Application for Extension of Time to File Information Returns Businesses filing 250 or more of any single type of Form 1099 must file electronically Must obtain approval first Form 4419, Application for Filing Information Returns Electronically

Electronic Reporting Requirements Large food or beverage establishments Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips ACA reporting forms Form 1094-B, Transmittal of Health Coverage Information Returns Form 1094-C, Health Coverage Form 1095-B, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

Special Wage Payment Reporting IRS Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, offers guidance on reporting Beneficiary’s annual earnings limits Retirees: Age 62 to full retirement age is $16,920 Retirees: in the year of full retirement age is $44,880 Only until the month the retiree reaches full retirement age Special wage reporting in addition to Form W-2 reporting Aligns back pay with the year earned not the year awarded and paid Form SSA-131, Employer Report of Special Wage Payments

DO YOU KNOW??? What are the general deposit requirements for monthly, semiweekly, and one-day depositors? What is the lookback period for determining an employer’s Form 941 payroll tax depositor status? What is the Schedule B (Form 941) used for? What form is used to report nonpayroll withheld taxes? What is the purpose of Form 944? What is the penalty for late filing of employment tax returns? What is the penalty for providing information returns late?