1. W -2 and 1099 Process Municipal Treasurers Association of Wisconsin Fall Conference Wisconsin Department of Revenue September 22, 2016

2. Session Overview  Withholding Tax Law  Employer Reporting  Common questions  Fraud update  Resources 2

3. Withholding Tax Law  Individuals pay income tax throughout year  Trust tax  Generally, WI income & withholding laws conform to Federal Income Tax Code 3

4. Withholding Tax Law Wisconsin Statutes - Section 71.63 – Definitions - Section 71.64 – Employer requirements -Section 71.71 – Statement of wages (W-2) -Section 71.72 – Nonwage payments (1099) Wisconsin Administrative Code - Tax 2.04 – Info returns & wage statements - Tax 2.90 – Withholding; wages 4

5. Who is required to withhold? Every employer doing business in Wisconsin who:  Pays wages to a Wisconsin resident (regardless of where services are performed).  Pays wages to a nonresident (person domiciled outside of Wisconsin) for services performed in Wisconsin. 5

6. "Employee" includes:  An officer, employee or elected official of the United States, a state or any political subdivision (city, village, town or county) thereof… 6

7. "Wages" include:  Salaries  Bonuses  Supplemental wages  Involuntary separation payments  Vacation pay 7

8. Withholding Exceptions Examples (not subject to WI withholding) -  Election worker wages  Retirement, pension or profit-sharing benefits received after retirement  County fair association wage or salary payment to employee receiving less than $500 annually. 8

9. Nonresident Exceptions  Nonresident is a legal resident of a reciprocal state (provides WI Form W-220 to employer)  Earns less than $1500 for the calendar year.  Wages paid for qualifying disaster relief work (Publication 411) 9

10. Wisconsin Form WT-4  Required unless claiming same # of exemptions as federal  Option for additional withholding  Employer sends copy to DOR if:  Employee claimed more than 10 exemptions, or  Earns more than $200 a week and claims complete exemption 10

11. Wisconsin Withholding  Voluntary withholding - If agreed upon (for example, agricultural labor)  Pension or sick pay paid by third party - Recipient may request/written notification - Amount withheld from each payment may not be less than $5 11

12. Withholding Lock-in Letters  DOR may void incorrect certificates  DOR sets # of exemptions  Notifies employer and employee  Remains in effect indefinitely 12

13. New Hire Reporting  Definition  All employers w/ a FEIN must report new hires  Required under federal and state law 13

14. New Hire Reporting  Report w/in 20 days of start or return date  Complete & mail WT-4  Call 1-888-300-4473, or  Go to www.wi-newhire.com 14

15. Prepayment of Tax  Individuals may prepay 100% of taxes  Payment made Nov 1 – Jan 1  WI Form W-200 will be issued  Payer provides copy to employer  No withholding required 15

16. EMPLOYER REPORTING 16

17. Employer Reporting  Withholding tax deposit (WT-6) -Monthly, quarterly -Semi monthly filers  Annual reconciliation (WT-7) - Due within 30 days of account cease date, when withholding account is closed prior to Dec 31 17

18. Employer Reporting  Withholding liability incurred when wages are paid to employees, not when wages are earned.  Report due even when no tax is due  File last deposit report of the calendar year 18

19. Electronic Filing Required  E-file mandate  WT-7 reconciliation  Withholding deposits (unless less than $300 in prior year)  Wages statements or information returns -50 or more  E-file waiver request – Form EFT-102 19

20. Wisconsin Information Returns  Employers and payers doing business in WI must file wage and certain information returns with Wisconsin DOR (Pub 117):  All wage statements (W-2) required  Certain lottery prizes (W-2G) required  Certain personal services not subject to Wisconsin withholding (1099-MISC ) required  Retirement plan distributions (1099-R) required if $600 or more or Wisconsin tax withheld 20

21. Wisconsin Information Returns  Wage Statements  All payments defined as wages under s. 71.63, Wis. Stats. regardless of amount reported on W-2.  Due to employee January 31  Due to WI DOR January 31 21

22. Wisconsin Information Returns  1099-MISC  Persons who (deduct payments to determine WI taxable income and) make rents and royalties payments of $600 or more to:  Individuals who are residents of WI (regardless of property location).  Nonresident individuals if property located in WI 22

23. Wisconsin Information Returns  W-2, 1099-MISC or 1099-R, as appropriate  Other compensation for personal services not subject to WI withholding (excluded from s. 71.63, Wis. Stats. definition of wages) Example – agricultural labor  Distributions from retirement, stock bonus, pension, profit-sharing, disability, annuity, IRA, Keogh, 401(k) or similar plan.  Does not include distribution from a qualified plan to a nonresident. 23

24. Wisconsin Information Returns  Must send full sets to SSA/IRS and WI DOR  Wage and information returns must equal those reported on the reconciliation  Returns with incomplete or incorrect information will be rejected  Annual reconciliation and supporting statements due January 31. 24

25. How do I transmit W-2s?  Key W-2s into My Tax Account, or  Create PDF at SSA site. Transmit the file through DOR website, or  Submit an SSA EFW2 file through DOR website. 25

26. How do I transmit 1099 forms?  Use My Tax Account to file 1099-MISC and 1099-R - New! or  Transmit an IRS formatted 1099-MISC or 1099-R file to DOR at https://www.revenue.wi.gov/eserv/w-2.html 26

27. Wisconsin Information Returns  If you file less than 50 wage or information returns, we encourage you to file them electronically, otherwise mail to: Wisconsin Department of Revenue PO Box 8920 Madison WI 53708-8920  No transmittal form needed 27

28. Wisconsin Information Returns  Required information:  15 digit Wisconsin withholding tax number (WTN)  Nine digit FEIN  Legal name must match WTN & FEIN  Wisconsin as top state, if possible 28

29. Verify Required Information 29

30. Required Format for Paper Filers  No more than four statements or returns per page  Page no larger than 8.5" x 11"  Page no smaller than 2.75" high or 4.25" wide  Data must be in similar location of federal form on IRS website  We will not accept text lists. Must be in form format. 30

31. Wisconsin Information Returns Do not send:  Transmittal form  Correspondence  Copy of electronically filed WT-7  W-2 forms with no tax connection, if paper filing  CDs, magnetic tapes, or transmit non-SSA PDFs  1099-DIV or 1099-INT if no WI withholding (do not include on WT-7) 31

32. COMMON QUESTIONS 32

33. What's New?  RT record required (for EFW2 format)  New federal due date  W-2 to SSA  Nonemployee compensation (box 7) 1099-MISC to IRS 33

34. Independent Contractor or Employee? IRS "right-to-control" test  Behavioral control  Financial control  Type of relationship of the parties Federal Publication 15-A, Employer's Supplemental Tax Guide 34

35. Independent Contractor or Employee  Wisconsin DOR follows IRS determination  Federal Form SS-8, Determination of Worker Status  Wisconsin Department of Workforce Development (DWD) online test for programs administered by DWD 35

36. Independent Contractor or Employee?  Why it matters  Correct classification determines employer's legal obligations  Wisconsin misclassification penalty for construction contractors – up to $25,000 per violation 36

37. Election workers  Common-law employees  Income tax withholding not required  Election worker may request voluntary income tax withholding (Form W-4) 37

38. Election workers  Must file W-2 for amounts of $600 or more paid to a worker in any taxable year  Employer may use separate W-2s to report payments to an individual for election worker services and non-election worker services  Federal Revenue Ruling 2000-6  Election worker reporting article – irs.gov 38

39. How can I view my account history?  Step 1 – Create username and password  Step 2 – Enter business information  Step 3 – Add access to accounts  Step 4 – Use authorization code 39

40. How can I view my account history? 40

41. How can I view my account history? 41

42.  Step 1 42

43.  Step 2 43

44.  Step 3 44

45.  Step 4 Use the authorization code from the email sent to you and log in at: https://tap.revenue.wi.gov/mta https://tap.revenue.wi.gov/mta Important: An authorization code is needed the first time logging into MTA or after resetting a password 45

46. My Tax Account Two-Step Authentication –  User must enter email and/or cell phone number (for text) at log-in  DOR will send security code  Can choose "remember this computer" and subsequent entry will not be required 46

47. Using My Tax Account (MTA)  File and amend deposit reports (WT-6)  File and amend annual reconciliation (WT-7)  Receive payment and filing confirmations  Transmit W-2s  Transmit 1099-MISC & 1099-R – New!  Review letters from DOR 47

48. Adding Future My Tax Account Periods  Login and select withholding account #  Select "File a Return" on left  Select "Show Future Periods" tab on upper right  Enter period end date (ex. 10/31/2016), click "OK"  Enter the amount of tax withheld, click "submit"  Click "Agree"  Make payment the next business day if desired. 48

49. Adding Future My Tax Account Periods  One step "File/Pay" is not available when adding future periods  "Payment" option under "File/Pay" will be available the business day following filing 49

50. Reporting W-2 differences  When federal and state taxable income differs:  Include the amount taxable for Wisconsin purposes (but not for federal purposes) in box 16 of Form W-2 OR  Provide employees with a supplemental "Wisconsin only" Form W-2 with the taxable benefits shown in Box 16 50

51. Transportation Fringe Benefits Current 2016 Treatment: Amount that may be excluded from employee wages is limited:  $255 per month for qualified parking; federal same  $130 per month for commuter highway vehicle transportation and transit passes; federal $255/month  $20 per month per qualified bicycle commuting month; federal same 51

52. Employee Withholding  Resolving under withholding  Reduce # of exemptions claimed, or  Request additional amount withheld - Use Form WT-4 or submit written request to employer  Resolving over withholding  Complete Form WT-4A 52

53. Filing frequency Annual review  Deposit history reviewed in November  Determines filing frequency for periods beginning in 2016  If filing frequency changes, you'll be notified in writing  Letter will be available in My Tax Account 53

54. Record retention  Statute of limitation on refunds and assessments – sec. 71.77, Wis. Stats.  No limitation for fraudulent or unfiled returns. 54

55. FRAUD UPDATE 55

56. ID Verification Statistics - 1/1/16 – 9/3/2016 56 Refund returns and claims evaluated2,963,662 Letters sent to take quiz27,447 Quizzes passed / failed20,223 / 6,960 PIN letters sent 12,126 PIN letter responses9,998 Letters sent to supply ID verification documents12,126 Persons who submitted valid ID verification documents11,753 Persons who did not pass quiz and did not supply valid ID documents (refund denials) 10,598

57. Bad Refunds Stopped – 7/1/2015 – 6/30/2016 57 Tax Processing Fraud Adjustments $14.9 million Fraud Detection/Analytics$11.2 million Earned Income Credit$19.9 million Homestead Credit$17.0 million Total$63.0 million

58. RESOURCES 58

59. Federal Resources Federal, State and Local Governments Publications:  Publication 963, Federal –State Reference Guide  Publication 5138, Quick Reference Guide for Public Employers  Publication 5137, Fringe Benefit Guide  Webinars -http://www.irsvideos.gov/Governments/Employershttp://www.irsvideos.gov/Governments/Employers General IRS Publications:  Publication 15, Employer Tax Guide  Publication 15-A, Employer's Supplemental Guide  Publication 15-B, Fringe Benefit Guide 59

60. DOR Resources – revenue.wi.gov 60

61. Withholding 61

62. Resources  My Tax Account webinars  Publication 117, WI Wage and Information Returns  Publication W-166, Wisconsin Employer Guide  Subscribe to withholding email alerts http://www.revenue.wi.gov/html/lists.html  Topical index  Withholding Tax Update  Wisconsin Tax Bulletin 62

63. Resources  DORWithholdingTax@wisconsin.gov DORWithholdingTax@wisconsin.gov  DORIncome@wisconsin.gov DORIncome@wisconsin.gov  DORMyTaxAccountHelp@wisconsin.gov DORMyTaxAccountHelp@wisconsin.gov  Withholding Tax (608) 266-2776  Income Tax (608) 266-2772  My Tax Account (608) 261-5338 63

64. Speakers Erin Egan Director, Bureau of Tax Operations erinb.egan@wisconsin.goverinb.egan@wisconsin.gov / (608) 261-5235 Becky Haines Tax Specialist, Office of Technical Services rebecca.haines@wisconsin.govrebecca.haines@wisconsin.gov / (608) 261-5282 64