Revised Federal Forms 940, 941 and W-9 and Interactions With SUTA Forms

Transcription

1 Presenting a live 110-minute teleconference with interactive Q&A Revised Federal Forms 940, 941 and W-9 and Interactions With SUTA Forms Unemployment and Employment Tax Update and Compliance Lessons THURSDAY, MAY 31, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Steven J. Weil, PhD, EA, President, RMS Accounting, Fort Lauderdale, Fla. Jay Grokowsky, Manager, Bauman Associates, Eau Claire, Wis. For this program, attendees must listen to the audio over the telephone. Please refer to the instructions ed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at ext. 10.

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5 Revised Federal Forms 940, 941 and W-9 and Interactions With SUTA Forms Seminar May 31, 2012 Jay Grokowsky, Bauman Associates Steven J. Weil, PhD, EA, RMS Accounting

6 Today s Program Federal Form 940 Issues [Jay Grokowsky] Slide 7 Slide 22 SUTA Issues [Jay Grokowsky] Slide 23 Slide 30 Federal Form 941 Issues [Steven Weil] Slide 31 Slide 45 W-9 And I-9 Issues [Steven Weil] Slide 46 Slide 55

7 Jay Grokowsky, Bauman Associates FEDERAL FORM 940 ISSUES

8 Federal Form 940 A little history Early days (1938) More recent (1984) Current form Bauman Associates, Ltd

9 Federal Form 940: General General issues and comments News: legislation/proposals Temporary surtax went away in mid budget proposal bring it back/make permanent? Suspend interest payments and credit reduction 2012/13 Higher wage base/reduced tax (2015) $15,000, inflation index Reduce net tax to 0.37% Bauman Associates, Ltd

10 Federal Form 940: General (Cont.) Who is subject to FUTA? - Pub 15, page 28 General (non-farm/household worker): $1,500 wages or employees for 20 weeks (current/prior year) Household ($1,000 any calendar quarter current/prior year) Farm workers ($20,000 wages; 10 or more workers during 20 weeks current/prior year) States: May be different (lower thresholds) What is subject to FUTA? Pubs 15 and 15A are your friends. Charts starting on page 30 (Pub 15) Bauman Associates, Ltd

11 Federal Form 940: General (Cont.) Software setup: New FUTA/SUTA rates Software in general ALWAYS review the output Assume the software is the preparer, and you are the reviewer Bauman Associates, Ltd

12 Form 940: Form Highlights Part 1 Line 1a/Line 1b Line 2: Credit reduction (Schedule A) Bauman Associates, Ltd

13 Form 940: Form Highlights (Cont.) Part 2: FUTA tax (net) Line 3: Total compensation Very broad - Includes Fringes Non-cash compensation Wages you paid Wages you didn t pay (predecessor wages) Not the same as total wages on Form 941 (Box 1, W-2 wages) Bauman Associates, Ltd

14 Form 940: Form Highlights (Cont.) Line 4: Exclusions Specific boxes Other (Pub 15 charts) Lines 7b & 7d: (2011) pre-7/1, 0.8%; post-6/30, 0.6% Actually, these are credit reduced amounts. True rates were 6.2% and 6%, respectively. Bauman Associates, Ltd

15 Form 940: Form Highlights (Cont.) Part 3: Adjustments ( tax increases ) Line 9: If all FUTA wages excluded from SUTA 5.4% tax increase Line 10: Some FUTA wages excluded in a state or some/all SUTA taxes paid late Example: Officer s wages excluded for state purposes Worksheet time (calculate tax increase )! Bauman Associates, Ltd

16 Form 940: Form Highlights (Cont.) Line 10: Worksheet page 8 instructions On time: What it means On time vs. late vs. not at all SUTA wages vs. FUTA (e.g., officer exclusion) Wisconsin: Benefit if you have 2 other employees State rate vs. 5.4% credit rate Bauman Associates, Ltd

17 Form 940: Form Highlights (Cont.) Line 11: Multi-state/credit reduction states Schedule A Multiple states and/or credit reduction state Check box for a state, even if 0% Credit reduction states: FUTA taxable wages, not total wages in state OR wages subject to SUTA tax New list of credit reduction states for 2012 DOL Rates assume each state has a loan balance (loan from federal unemployment account) as of 11/10/ likely, too? Bauman Associates, Ltd

18 Credit Reduction Sidebar: What is this? Loans from federal unemployment fund Higher FUTA tax Bauman Associates, Ltd

19 Form 940: Credit Reduction Confusion Confusion: Poor definition Tax reduction? Credit reduction = Tax increase Form 940: Poor design (1938 form better?) Start with gross tax Deduct credits Bauman Associates, Ltd

20 Form 940: Deposits Part 4: Deposits/what s left to pay Line 13 tax deposits Payment of taxes due to credit reduction Not due until 4 th Q payment is due November deadline final determination of credit reduction Pay with 940 (<$500)/deposit in January (>$500) Bauman Associates, Ltd

21 Form 940: Form Highlights (Cont.) Part 5 Line 16 liability by quarter only if > $500 Credit reduction is a 4th Q liability Completed 940 and Schedule A Bauman Associates, Ltd

22 Form 940: Special Items Successor employer Reporting Line 5: Include payments the predecessor made in calculating the $7000 limits Example: Predecessor paid $4,000. Successor paid $5,000. Total $9,000 put on line 3 $2,000 paid in excess of wage base $2,000 excess + $4,000 paid by predecessor = $6,000 Line 5 Net to be taxed to successor = $3,000 ($9,000 6,000) Bauman Associates, Ltd

23 Jay Grokowsky, Bauman Associates SUTA ISSUES

24 State Unemployment Taxes (SUTA) Issues Wages subject to SUTA Higher wage base than FUTA Many states: Same definition of wages (FUTA credit) Wisconsin: Federal definition of wages for UI tax purposes, with two exceptions: Agricultural entity coverage; only cash wages are considered. Once covered, the employer must include all cash and non-cash payments for agricultural labor as wages. The value of employee achievement awards (compensation for services) is included as wages. Bauman Associates, Ltd

25 State Unemployment Taxes (SUTA) Issues (Cont.) Coverage rules may be different Example: Wisconsin not-for-profit with more than 4 employees in 20 or more weeks Check your state(s) Web site listings for SUTA agencies at back of Form 940 instructions (page 13) Check your software! Bauman Associates, Ltd

26 State Unemployment Taxes (SUTA) Issues (Cont.) E-filing state reports Some states require online/e-file (MN) Wisconsin Relatively painless; can amend prior returns online Once hit 25 employees or file 1 report online, stuck with online filing $20 fine for paper E-pay (Wisconsin wants $$ by end of month, not mailed by end of month) Bauman Associates, Ltd

27 State Unemployment Taxes (SUTA) Issues (Cont.) Business sale/purchase New owner can take over remaining account balance. Generally asset purchases Also applies to a merger Application: Find out if an unemployment account balance is positive Officer s exclusion: Wisconsin and other states? Effect on FUTA Bauman Associates, Ltd

28 State Unemployment Taxes (SUTA) Issues (Cont.) Wisconsin: Deferral of Q1 tax payment 1st Q liability of $1000 or more Defer payment of up to 60% into future quarters, interestfree State SUTA: Look for state-specific seminars Bauman Associates, Ltd

29 State Unemployment Taxes (SUTA) Issues (Cont.) Special assessment for interest Due to federal unemployment loans NOT a tax Interest owed to the federal government as of Sept. 30 Example: Wisconsin: Sends out notices in July/August to each employer Based on 2011 taxable payroll and a rate the state calculates (0.18% for 2012 payment) Taxable wages need to exceed $25,000 for Bauman Associates, Ltd

30 State Unemployment Taxes (SUTA) Issues (Cont.) Examples (Cont.) Florida Payment due by 6/30.092% rate, taxable wages of at least $7,000 for FYE 6/30/2011 Arizona 0.5% of $7,000 of taxable wages Paid with quarterly report Connecticut 1.7% per $1,000 of payroll; separate letter sent to employer Bauman Associates, Ltd

31 Steven J. Weil, PhD, EA, RMS Accounting FORM 941 ISSUES

32 What's New For 2012 On Form 941 Minor form changes Social Security wage max $110,100 Employee rate 4.2%* Employer rate 6.2%* Medicare has no wage max* Employee rate 1.45%* Employer rate 1.45%* * Unchanged from Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

33 33 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

34 941X refunds are now noted to be included here, meaning you no longer have to guess. 34 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

35 35 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

36 Old Line 16 was removed from 2011, and lines were renumbered. Hint: If you handle more than one company, use the same PIN for all. 36 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

37 Important Things To Remember About Form 941 Paid preparers must complete the paid preparer s block and sign Form 941. Federal tax deposits must be made by electronic funds EFTPS or sameday wire. Balance due returns may be filed with EFW (electronic funds withdrawal). Required tax deposits may NOT be made by EFW. Returns must be filed for all quarters except for seasonal employers that check the box on Line Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

38 Important Things To Remember About Form 941 (Cont.) Address changes should be reported to the IRS by filing Form 8822-B, NOT by just changing your address on Form 941. Taxable fringe benefits need to be included in taxable wages. Personal use of auto Gift cards Auto allowance Excess life insurance Non-accountable plan expenditures Health insurance 2% S - Corporate shareholders 38 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

39 Closing Or Ending Payroll When a business closes or permanently stops paying wages to employees, it must file a final return notifying the IRS. This is done by marking the box on Line 17 and entering the date final wages were paid. You must also attach a statement showing the name of the person keeping the payroll records and the address where they will be kept. Final 941 filing may trigger a required early W2 filing requirement. 39 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

40 40 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

41 E-Filing Points Filer type Batch filer: Filing multiple companies Company: Individual registration PIN Issues Transmitting last minute, system down Filing too soon (941X to fix errors) Lost ID or password 41 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

42 Year-End Notes Verify employee information: Names, SS#s and addresses Verify that taxable fringe benefits are properly included Verify that tax-favored benefits are properly classified Reconcile 941s, SUTA & FUTA with W2s & W3 totals 42 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

43 Reconcile 941s, W2s, W3, SUTA And FUTA CLIENT #: XXXXXXX CLIENT NAME SMALL BUSINESS SUTA RATE W-2 RECONCILIATION REPORT TOTAL WAGES FED W/H SS WAGES SS TAX MED WAGES MED TAX QUARTER 1 129, , , , , , QUARTER 2 130, , , , , , QUARTER 3 122, , , , , , QUARTER 4 201, , , , , , TOTALS 583, , , , , , W-2 TOTALS 583, , , , , , DIFFERENCE , , SUTA/940 RECONCILIATION 940/SUTA WAGES 940 TAX SUTA TAX ROSS PAY PER CSA REPOR QUARTER 1 64, , QUARTER 2 5, Less Caf (7,419.00) QUARTER 3 4, Less 401K (55,438.60) QUARTER 4 9, Taxable Wages 583, TOTALS 84, Difference 0.00 NOTES & ADJUSTMENT S ACTUAL 940 DEPOSITS 616, Med Wages (55,438.60) Less 401K , Plus 2% Health , FIT Wages payments to date total due 583, FIT Wages amount to remit - DIFFERENCE 43 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

44 W-2 44 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

45 W-3 45 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

46 Steven J. Weil, PhD, EA, RMS Accounting W-9 AND I-9 ISSUES

47 DANGER DO NOT FILL THIS FORM OUT FOR YOUR EMPLOYEES REFER THEM TO THEIR TAX ADVISIOR DANGER 47 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

48 Not To Be Overlooked Handling those mismatch name & SS#s before year-end. Make sure you have the correct legal name for every employee. A good friend once told me, no one is born Bubba You have to earn it! 48 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

49 49 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

50 Retaining Form I Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

51 51 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

52 ICE Audits ICE audits are so prevalent among certain targeted U.S. industries that in January, ICE Director John Morton announced the establishment of a wholly dedicated auditing unit to support ICE's work site enforcement strategy by helping the ICE field offices expedite the audits they perform. The Employment Compliance Inspection Center (ECIC), established in Crystal City, Va., flanks ICE headquarters and investigates businesses to ensure compliance with employment verification procedures and U.S. immigration laws. 52 Steven J Weil PhD, EA, LCAM, RMS Accounting 4:55 PM

53 IRS Revises Form 941-X And Instructions The IRS has posted an April 2012 version of Form 941-X (adjusted employer s quarterly federal tax return or claim for refund) and the Form 941-X instructions, on its Web site. Form 941-X is filed to correct an error on a previously filed Form 941. Form 941-X is a stand-alone tax return. It does not get attached to Form 941. The form and instructions were last revised in January The new version of the form takes into account the extension of the payroll tax cut through Dec. 31, The payroll tax cut temporarily lowers the Social Security withholding tax rate on wages earned by employees from 6.2% to 4.2%, from Jan. 1, 2011 to Dec. 31, Employers report corrections to taxable Social Security wages and tips on Form 941-X, Part 3, lines 8-9. The IRS notes in an asterisk below these lines that if employers are correcting either a 2011 or 2012 Form 941, they should be using a 10.4% tax rate (i.e., 4.2% employee tax rate plus 6.2% employer tax rate) in the tax calculation, rather than 12.4% (i.e., 6.2% employee tax rate plus 6.2% employer tax rate). An asterisk below Form 941-X, Part 3, Line 10 advises employers correcting taxable Medicare wages to use a 1.45% tax rate, rather than 2.9%, if they are only correcting the employer portion of Medicare wages and tips. 53

54 IRS Not Processing Some Credit Reduction 54 Unemployment Tax Returns Correctly On the May 3 IRS payroll industry conference call, two payroll processing companies said that the IRS is making a few calculation errors in the processing of 2011 Form 940 (employer's annual federal unemployment (FUTA) tax return), for clients who have payroll in credit reduction states. Background: Under Title XII of the Social Security Act, states with financial difficulties can borrow funds from the federal government to pay unemployment benefits. If a state defaults on its repayment of the loan, the amount of state unemployment tax credits that employers in the state may claim on Form 940 is reduced (i.e., the state is a credit reduction state). Employers in credit reduction states pay federal unemployment tax (FUTA) at a rate 0.3 percentage points higher than other employers, beginning with the second consecutive Jan. 1 in which the loan isn t repaid. They report the credit reduction on Form 940, Schedule A (multi-state employer and credit reduction information). The calculation errors: One of the callers said that the error was limited to employers with payroll in Minnesota. The returns had been filed on paper. Affected clients were receiving credit notices from the IRS. The other caller said that calculation errors were also being made on returns filed by employers with payroll in other states than Minnesota. However, unlike the first caller, her clients were receiving balance due notices from the IRS. The IRS was doubling the amount of the credit reduction. The affected returns had apparently been filed electronically. The IRS is looking into the matter.

55 55 Employee Vs. Independent Contractor