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

Indian Tribal Governments Specialists in Alaska Call: Customer Account Services toll-free (877) Visit: Indian Tribal Governments Web site at Judy Pearson Phone Mary Jo Audette Phone

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

Why do you get PENALTIES on your Form 941? 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 $2500 Monthly depositor – fill out monthly liability Semi-weekly depositor – fill out Schedule B and attach it to Form 941 –How do you know which type of depositor you are???

Why do you get PENALTIES on your Form 941? 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 & Errors Discussion 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

Trends & Errors Discussion of items that often have errors, i.e., trends 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 E PO Box 123 Village E, AK XX XXX PO Box 006 ¾ Village E, AK CouncilmemberIrma X This W-2 has errors. What can I do? Check the “void” box so SSA will ignore it.

Trends & Errors Discussion of items that often have errors, i.e., trends 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?

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

Trends & Errors Discussion of items that often have errors, i.e., trends Form 940 Federal Unemployment Tax - FUTA –Newly hired bookkeeper files 940 –Newly hired 3 rd 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

Trends & Errors Discussion of items that often have errors, i.e., trends Deposits posted to wrong quarter Often happens the last payday of the quarter Example: –Payday was September 27 th (3 rd quarter) –Deposit is due Wednesday, October 2 nd –Deposit is made on October 1 st –4 th 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) Trends & Errors Discussion of items that often have errors, i.e., trends

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

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

W-2 for Tribal Council Member Tribal Government E PO Box 123 Village E, AK XX XXX PO Box 006 ¾ Village E, AK CouncilmemberIrma Rev Rul

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  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 Trends & Errors Discussion of items that often have errors, i.e., trends

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

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 & Errors Form 11-C not being filed Occupational Tax & Registration Return for Wagering used to register: l A tribe who is in the business of accepting taxable wagers for their own account (aka the Principal) l An agent (seller) who accepts taxable wagers for the tribe l Taxable wagers include sales of pull tabs & raffle tickets

Trends & Errors Form 11-C is due: l Initially, before wagers are accepted l By July 1 of each year thereafter Amount of Tax l $50 if all wagers accepted are authorized under state law or… l $500 for all other wagers

Form 11C Tribe Example

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 l due monthly, by the last day of the following month l must be filed if you are in the business of –selling pull tabs –conducting a raffle

P ull tabs which are manually dispensed are subject to the wagering tax Wagering Taxes Amount of Tax l.25% of the wager if authorized under state law l 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 Service Cincinnati, OH Form 730: Internal Revenue Service Cincinnati, OH

Questions?