Tax Reporting
Fundamental Payroll Certification
Chapter 5
2011
1
2011 Tax Reporting
– TEST UPDATE
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Test will be using 2010 forms that are PRE ARRA
 American Recovery and Relief Act 2009
Enacted February 13, 2009
Form 941 Change due to COBRA Credit
 COBRA Premium Assistance
 EE Pays 35% of COBRA Premium
 ER Pays 65% COBRA Premium for EE and gets Credit on
941 Return
 Subsidized for reduction in hours and involuntary
terminations between September 1, 2008 and December 31,
2009
 Subsidy extended to March 31, 2010
2
Depositing Federal Taxes
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The size and frequency of payroll tax
liability determines the compliance
dates for deposits
Penalties assessed for noncompliance
What are Total Federal Taxes?
Employee Federal Taxes
Employer Federal Taxes
 Federal Income Tax
 No Federal Income Tax
 FICA 4.2% to Limit
 FICA 6.2% to Limit
 Medicare 1.45% No Limit  Medicare 1.45% No Limit
3
Depositing Federal Taxes
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IRS tracks deposits and filings by EIN
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EIN- Employer Identification Number
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Form SS-4 request for EIN to IRS
EIN utilized on all:
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Tax Deposits
Tax Return filings
Responding to IRS notices
4
Depositing Federal Taxes
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Total Federal taxes reconciled on Form 941
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Employer Quarterly Tax Return
Tax deposit requirements based on the
lookback period
4 Quarters
For 2011:
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3rd and 4th quarters of 2009 (July – December)
1st and 2nd quarter of 2010 (January – June)
5
Depositing Federal Taxes
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Deposit schedule – ER Responsible for Correct Timing
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Based on Lookback period
If Deposit Status Changes IRS Notifies You in
November
See and know chart on 5-5
 Annual
< $1,000 for the Year
 Quarterly
< $2,500 for the Quarter
 Monthly
$50,000 or Less
 Semiweekly
>$50,000 and < $100,000
 One-day Deposit $100,000 or more
6
Clarification –Annual $1,000
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If aggregate annual is less than $1000 – may
file by 1-31 with the Form 944 Employer’s
Annual Tax Return
If annual is greater than or equal to $2500
can file 944 for this year but must file 941 for
following years
If liability exceeds $100,000 on any day —
deposit is due the next day and the company
becomes a semi-weekly depositor
7
Clarification– Quarterly $2500
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If less than $2500 liability per quarter
deposit with the quarterly filing (941)
If probability of exceeding the deposit
liability of $2500 then it’s prudent to
make deposits using monthly
depositor’s rules
This will avoid the interest on late
deposits
8
$100,000 One day rule
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Regardless of current deposit
frequency- Once liability hits $100,000
that deposit must be made within one
business day.
Monthly depositors then become semiweekly for all future deposits in current
and following year
9
Depositing Federal Taxes
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Monthly depositor status change-see
previous slide
Holiday deposit rules
Quarter ends
Manual checks
10
Holiday Deposit Rules
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When a deposit is required on a day
that is not a banking day:
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Monthly & one-day depositors -by the close
of the next banking day after the holiday
Semiweekly depositors-at least 3 banking
days
State holidays are not banking days
11
Quarter end liability
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When a semiweekly deposit period
overlaps quarters – multiple deposits
may be required to accommodate the
appropriate payment in the correct
quarter.
12
Manual Checks
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In the eyes of the IRS– Manual checks
are viewed as regular payroll checks
liability and deposit rules apply based
on the check date and constructive
receipt
13
Depositing Federal Taxes
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Safe Harbor rule (98% rule)
Must deposit timely at minimum 98% of
liability—cannot exceed 2% or $100
whichever is larger
Make up deposits –
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Monthly– by due date of Form 941
Semiweekly- on the first Wednesday or Friday
after the 15th of the month – no later than the
Form 941 due date
14
Depositing Federal Taxes
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EFTPS—Electronic Federal Tax Payment System
Two designated Treasury Financial Agents (TSA)
 Chase (Bank One) and
 Bank of America
ACH network
 ACH Debit – direct to TSA or EFTPS Direct
 ACH Credit -- Financial Institution initiates
15
Depositing Federal Taxes
ACH Credit-done through your bank
 EFTPS- Tax Payer tells bank to make the
payment
 Issuance of PIN to verify completed
transactions
 Payment deadlines are set by the bank that
initiates the payment
 Payments due on holiday- must be initiated
day prior for availability the day after the
holiday
16
Depositing Federal Taxes
ACH Debit-EFTPS Direct
 IRS instructs ER’s bank to withdrawal funds
from ER’s account
 Issuance of a PIN to make payments via PC
or phone– 24 hours –seven days a week
 Must be made by 8:00 pm EST to be effective
the next business day
 PIN allows for payments and confirmations
17
Depositing Federal Taxes
ETA– Electronic Tax Application
 Allows for same day deposit to Federal
Reserve System-via Fedwire transfer
 Must be completed by 2:00 pm their
time
18
Depositing Federal Taxes
Non- EFTPS –Beginning 1/1/11 this is
no longer an option!!
 Immediate credit item – cash-money
order- check from Federal Reserve city
 Accompanied with Form 8109 -Federal Tax Deposit Coupon
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Name, address, EIN
Legible as they are scanned
19
Quarterly Tax Return 941
Form 941 used for reconciliation of Federal Tax
Payments
 Due end of month following end of quarter
 Wages, tips and other comp (including nontaxable
income)
 Fed income tax from wages and tips
 Total wages & tips subject to SS/ MED
 Total deposits for the quarter& any balance due
 Advanced earned income credit pd to ees
 COBRA Subsidy
20
Quarterly Tax Return 941
Filing timely– acceptable mediums
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USPS- return receipt requested-postmarked
date due
PDS-Private delivery services
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DHL- same day or overnight by 10:30
FedEx- Priority or Std Overnight-2day –
International Priority or First
UPS-Next day or 2 day Air A.M.- worldwide or
worldwide Express
21
Quarterly Tax Return 941

Ensure efficient processing
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No dollar signs or commas
 1000.00
Negative numbers entered with the
negative sign -1000.00
Utilize the pre-printed labels!
22
Quarterly Tax Return 941
Look at Form 941
23
Quarterly Tax Return 941
Header Section
 EIN – Employer Identification Number
 Employer Name and Address Information
 Report for this Quarter of 2010 – check
box
24
Quarterly Tax Return 941
Part 1
 Line 1- Number of employees
 Line 2 Total wages, tips & other
compensation subject to withholding
 Line 3- Total income tax withheld
 Line 4- check box if no wages subject to
Social Security and Medicare
25
Quarterly Tax Return 941
Line 5 – Taxable Soc Sec & Medicare Info
 Line 5a
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Line 5b
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Column 1 Taxable Social Security Wages
Column 2 Social Security Tax
Column 1 Taxable Social Security Tips
Column 2 Social Security on Tips
Line 5c
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Column 1- Taxable Medicare Wages & Tips
Column 2 Medicare Tax
26
Quarterly Tax Return 941
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Line
Line
Line
Line
Line
Line
Line
Line
Line
Line
Line
6- Hire Act Information
7- Tax adjustments
8 – Total Taxes after Adjustments
9 – Advanced EIC Payments Made to employees
10 – Total Taxes After Adjustments
11 – Total Deposits for this Quarter
12a & 12b COBRA Adjustments
12c & 12d Hire Act for Q2 2010
13 Total Adjusted Deposits
14 Balance Due
15 Over Payment – check box on how to handle
27
Quarterly Tax Return 941
Line 15 Over Payment – check box on how to handle
Part 2
 Line 16 State or MU
 Line 17 – Decide which box to check
 If first box, go directly to Part 3
nd box, fill in Monthly Deposit Amounts
 If 2
rd box, Complete Schedule B; file with this form
 If 3
Part 3
 Line 18 – complete if business closed
 Line 19 – complete if a seasonal employee
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28
Quarterly Tax Return 941
Part 4 – Authorization for Third Party Designee

Associate authorized to work with IRS
Part 5 - Sign here
 Must be Owner, President, VP, Corp. Officer, etc. . .
 Any others require a Power of Attorney- Form 2848
Paid Preparer’s Use Only Sec 5 – unless already
listed with IRS as filing agent with Form 8655
29
Alternative forms
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Form 941-X – Adjusted Quarterly Federal
Tax Return or Claim for Refund
Form 943 - Employers annual Federal tax
return for agricultural employees
Form 944 – Annual Employers Federal Tax
return<$1000
Form 945 - Annual Return of withheld
Federal Income tax- non payroll
30
State Unemployment
•
•
•
•
All states must have a plan
Utilized to pay the unemployed
Employer tax
3 states allowing ee taxation
•
Pennsylvania, Alaska, New Jersey (PAN)
31
State Unemployment
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Calculations vary per state
More than half need to be by mag media
Commonalities
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Total wages paid
Taxable wages paid
Nontaxable wages paid
Number of ees each month
Gross wages for each ee
Breakdown of taxable & nontaxable wages per ee
Number of weeks worked by each employee
32
FUTAFederal Unemployment Tax Act
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Assistance via loans to subsidize federally mandated
state UI programs
Rate 6.2% of initial $7,000
Credit of 5.4% -- Not Automatic!
 Timely state deposits
 Not be in arrears in borrowed FUTA funds
Effective rate is .8% with the Credit (6.2% - 5.4%)
Some states don’t qualify for the full credit
 Example: MI FUTA Tax Rate 1.4%
 6.2% - 4.8% = Paid 1.4% instead of .8%
33
FUTAFederal Unemployment Tax Act
Look at Form 940
34
FUTAFederal Unemployment Tax Act
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Calculating Federal UI Tax each Quarter
Up to Wage Base $7,000
Deposit Using EFTPS by Deposit Due Date
With full credit max withheld per ee is $56.0
 $7,000 x .8% = $56.00
If liability for quarter is under $500 it can be carried
forward
Due dates for Deposits:
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Q1- April 30
Q2- July 31
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Q3- October 31
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Q4- January 31
35
FUTAFederal Unemployment Tax Act
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Annual filing – Form 940 – Federal
Unemployment Tax Return
Due by January 31 unless all deposits
were made by the due dates—extension
to February 10
Penalties are the same as other Federal
taxes
36
FUTA- 940 Annual Return
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Must file if Wages of $1500 pd in any qtr of 10 or 11, or
At least one employee employed for any part of a day in
any of 20 different weeks in 10 or 11
Business Owner changes
 Taxes re-start with each employer meeting either test;
 Must file separately
Non profit organizations do not pay FUTA
 Section 501 (c)(3) of IRC
(Go to Page 5-59 in your book to view Form 940)
37
FUTA- 940 Annual Return
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Line by Line- Section by Section
Type of return
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A. Amended
B. Successor employer
C. No payments to ees in 2010
D. Final Business Return
38
FUTA- 940 Annual Return
Part 1 Tell about return
 Line 1a- State unemployment postal
code
 Line 1b- SUI to multiple states-check
and complete schedule A
 Line 2- check if credit reduction state
39
FUTA- 940 Annual Return
Part 2 Determine FUTA tax before adj
 Line 3-Total payments for all employees
 Line 4-Payments exempt from FUTA tax
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4a- Fringe Benefits
4b- GTLC4c- Retirement Pension
4d- Dependent care
4e- Other amounts
40
FUTA- 940 Annual Return
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Line 5-Payments made to each ee in
excess of $7,000
Line 6- Subtotal
Line 7- Total taxable FUTA wages
Line 8- FUTA tax before adjustments
41
FUTA- 940 Annual Return
Part 3- Determine your adjustments
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Line 9- FUTA wages exempt from SUI(all)
Line 10- Some FUTA wages exempt from
SUI
Use the Tax x 5.4%
Line 11- Credit reduction- copy line 3 amt
42
FUTA- 940 Annual Return
Part 4- Determine FUTA tax for 2010
 Line 12- Total FUTA after adjustment
(8+9+10+11 = Line 12)
 Line 13- FUTA tax deposited
 Line 14- Balance due
 Line 15- Overpayment
43
FUTA- 940 Annual Return
Part 5- Report FUTA Liability by Quarter
only if Line 12 is < $500. If not, skip
and go to Part 6
 Line 16- FUTA liability per quarter on
lines 16a-16d
 Line 17- Total liability for the year
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(16a+16b+16c+16d = Line 17)
44
FUTA- 940 Annual Return
Part Six – Authorization for Third Party Designee
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Associate authorized to work with IRS
Part Seven - Sign here
 Must be owner, president, VP, corp. officer, etc. . .
 Any others require a Power of Attorney- Form 2848
Paid Preparer’s Use Only – unless already listed with
IRS as filing agent with
Form 8655
45
FUTA- 940 Annual Return
Schedule A– state unemployment paid
to multiple states
 Part one- Check state boxes that are
applicable
 Part 2-Information for states with credit
reductions
46
FUTA- 940 Annual Return
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The lines for credit reduction states will be
listed and if FUTA wages were paid to these
states the amount needs to be listed and the
additional percentage, known as the credit
reduction needs to be calculated.
This is done for each applicable state
Total amount is calculated and entered on
line 11 of the 940
47
Wage and Tax StatementForm W-2
Look at Form W2
48
Wage and Tax StatementForm W-2
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(Go to Page 5-36 in your book)
W2 provides
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Employee documentation to file their Form 1040
IRS to track tax obligations, and
 Social Security Administration SSA to provide
social security benefits
Form W-2 – Wage & Tax Statement
Form W-2c - Corrected Wage & Tax Statement
Form W3 – Transmittal of Wage & Tax Statements
Form W3c – Corrected Transmittal of Wage & Tax
Statements
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49
Wage and Tax StatementForm W-2
Filing Deadlines
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Copy A – SSA– last day of February or if electronic –
March 31
Copy 1- State/ Local- state regulations
Copy B- Employees- January 31
Copy C- Employees for personal file- January 31
Copy 2- Employees filed with state- January 31
Copy D- Employers for files – none
Former ees – w/company unless requested in
writing-then 30 days from request
Business ceasing operation – by final 941 filing
Extension of 30 days if filing form 8809
50
Wage and Tax StatementForm W-2
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Ensure efficient processing
No erasures, strikeouts or whiteouts
Do not use dollar signs or commas
Use black ink only
Legibility a must
51
Wage and Tax StatementForm W-2
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Box A– Employee SS # -- if none use all 0’s
Void- check box if error in processing & do
not include in the Form W3
Box B- EIN
Box C- Employer name, address and zip
code
Box D- Control number
52
Wage and Tax StatementForm W-2
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Box E- Employees name
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Use full first name, middle initial and full
last name, and suffix if appears on SS card
Do not use titles or degrees
Compound- hyphenated no -
Box F- Employees address and zip code
53
Wage and Tax StatementForm W-2
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Box 1- Wages, tips & other
compensation
Box 2- Federal Income tax Withheld
Box 3- Social Security wages
Box 4- Social Security tax withheld
Box 5- Medicare wages & tips
Box 6- Medicare tax withheld
54
Wage and Tax StatementForm W-2
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Box 7- Social security tips
Box 8- Allocated tips
Box 9- AEIC
Box 10- Dependent care benefits
Box 11-Nonqualified plans
55
Wage and Tax StatementForm W-2
Box 12- multiple codes
 A= Uncollected ss tax on tips
 B =Uncollected Medicare on tips
 C= Cost of GTL over $50,000
 D= 401k Contributions
 E=403B Contributions
 F= 408k6 Contributions
 G= 457 b Contributions
 H= 501c18D Contributions
56
Wage and Tax StatementForm W-2
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J= Sick pay not included in income
K=Tax on golden parachute
L= Nontaxable part of employer business
expense reimbursements
M= Uncollected SS tax on GTL
N= Uncollected Medicare on GTL
P= Excludable Moving expense
reimbursements
Q= Nontaxable combat pay
57
Wage and Tax StatementForm W-2
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R=Archer Medical Savings Account
Contributions
S= Simple retirement account
contributions
T= Adoption benefits
V=Income from exercise of
nonstatutory stock options
W= Health savings accounts
58
Wage and Tax StatementForm W-2
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Y= Nonqualified Deferred Comp Deferrals
Z= Income from 409A-Nonqualified Deferred
Comp Plans
AA= Roth 401(k) deferrals
BB=Roth 403(b) deferrals
CC=Hire Exempt Wages & Tips
DD=Cost of ER Health Coverage –Note 2011
Optional
59
Wage and Tax StatementForm W-2
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Statutory Employee – check if
earnings are subject to soc sec and
medicare but NOT subject to FIT
Retirement plan box – check if in
plan even part of year
Third Party sick pay box- check if
vendor providing separate payments or
noting employer paid
60
Wage and Tax StatementForm W-2
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Box 14- Other usually for lease value
method of company vehicle- state
clearly
Box 15- Employers state tax ID
number
Boxes 16-20– state and local tax
information
61
Wage and Tax StatementForm W-2
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Reconcile the 941’s to the W2’s
The W3 is a summarization and must
accompany the W2s to SSA
All companies with 250 or more W2s must file
electronically
If electronic poses hardship – file at least 45
days prior to due date form 8508- Request
for Waiver from Filing Information Returns on
Magnetic Media
62
Wage and Tax StatementForm W-2
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USPS- - Certified mail–
PDS– street address necessary
Due dates are the dates postmark or
delivery commitment of PDS
Memorize the chart for penalties on
page 5-52 & 53.
63
1099 Misc., Trade or
Backup Withholding
Look at Form 1099 Misc.
64
1099 Misc., Trade or
Backup Withholding
(Go to Page 5-68 in book)
1099 Misc.
 Filed to IRS by 2-28 or if electronic by 3-31
 At least $10 in royalties, broker payments,
or tax exempt interest
 At least $600 in income, health care
payments, rents, prizes
 At least $600 in gross proceeds pd to an
attorney
 Any fishing boat proceeds

65
1099 Misc., Trade or
Backup Withholding
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Non profit organizations, trusts , farmers
cooperatives
Exceptions to Reporting:
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Box 6- medical & healthcare payment
Box 7- Services provided by attorney
Box 7-payments by a federal executive agency
Box 8- Substitute payments in lieu of dividends
Box 14- gross procedures to attorney for legal
services
66
1099 Misc., Trade or
Backup Withholding
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- Payment for merchandise
- Payment of rent for real estate agents
- Wages paid to employees-Use W2
- Business travel allowances pd to
employees-Use W2
67
1099 Misc., Trade or
Backup Withholding
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Company must withhold 28% federal
withholding on recipients of 1099 Misc
that do not provide a TIN.
Payments made as previously stated
Lookback period is the 2nd preceding
calendar year.
68
Form 4070

Employee’s Report of Tips to Employer

EE provides the total tips rec’d in a time
frame

Time frame can be no longer than a month but
can be more frequent
No reporting for $20 in tips in a
month
 ER’s not required to provide the form;
can use other methods for reporting

69
Tax Reporting
Study!
 Collecting & Depositing Federal Taxes
 Quarterly Tax Return Form 941
 Federal Unemployment & Form 940
 Wage & Tax Statements Form W2s
 Form 1099 Misc
70
Tax Reporting
Thanks For Attending!
71