Form W-4 for 2015: Best Practices and Compliance Requirements

Transcription

1 Form W-4 for 2015: 1 Best Practices and Compliance Requirements Presented on Thursday, January 15, 2015

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3 RCH Credit 3 To earn RCH, you must Stay on the webinar for the full 60 minutes Be watching the webinar using your unique URL Certificates delivered electronically, to address with which you registered Certificates delivered no later than February 20th

4 About the Speaker 4 Vicki M. Lambert, CPP, is President and Academic Director The Payroll Advisor, a firm specializing in payroll education and training. The firm, through its website provides unique and expert services for anyone dealing with the complexities and technicalities of the payroll process. As an adjunct faculty member at Brandman University, Ms. Lambert is the creator and instructor for the Practical Payroll Online payroll training program, which is approved by the APA for recertification credits.

5 What We Will Cover Today 5 Purpose and types of forms Review Form W-4 line by line Effective dates for new and expiring forms What to do if you don t have a form Invalid or questionable forms Processing the forms in payroll Submitting and retaining forms Electronic forms Nonresident aliens and the Form W-4

6 Purpose and Types of Forms 6 IRS Form W-4 Actual Name: Employee s Withholding Allowance Certificate Purpose: To know how much income tax to withhold from the employee s wages State equivalents-may use IRS form or its own form

7 Purpose and Types of Forms 7 There is also: Form W-4S for third party sick pay Form W-4P for pensions and annuities Form W-4V for voluntary withholding from government payments such as unemployment compensation or social security benefits Form W-4(SP) Spanish version

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9 Let s Talk About the States 9 Employers must verify if the state has an equivalent form The States may: Not have their own form and use the Form W-4 Have their own form but allow Form W-4 to be used Require only the state form be used

10 Examples 10 Arizona: Form A-4 is required California: DE4 required if withholding is different from federal withholding No state form: Idaho Use Federal Form W-4

11 Form W-4 Equivalents WA MT ND ME OR ID SD MN WI NY VT NH MA CA NV UT WY CO NE KS IA MO IL MI OH IN KY WV VA PA DE MD NJ RI CT AZ NM OK AR TN SC NC MS AL GA TX LA FL AK Must use state form May use federal Form W-4 Restrictions on using Fed Form W-4 No state income tax 11 HI No state form must use federal Form W-4

12 States That Require/Recommend Use of Their Own Certificate Include 12 Alabama: Form A-4 Arizona: Form A-4 Arkansas: Recommends AR-4EC but allows modified Form W-4 California: Requires Form DE 4 if withholding is different than federal Connecticut: Form CT-W-4 District of Columbia: Form D-4 Georgia: Form G-4 Hawaii: Form HW-4 Illinois: Form IL-W4 Indiana: Form WH-4

13 States That Require/Recommend Use of Their Own Certificate Include 13 Iowa: Form IA W-4 Kansas Form K-4 Kentucky: Form K-4 Louisiana: Form L-4 or L4E should be used but accepts (mutually agreed upon) modified Form W- 4 employer responsible to determine number of correct allowances Maine: Form W-4ME Maryland: Form MW 507

14 States That Require/Recommend Use of Their Own Certificate Include 14 Massachusetts: Form M-4 required if state exemptions differ from fed M-4 states to complete Form W-4 only if claiming same exemptions Michigan: Form MI-W4 Minnesota: Form W-4MN required if claiming more than 10, fewer allowances than federal or requests additional state tax be withheld Mississippi: Form Missouri: Form MO W-4 New Jersey: Form NJ-W-4 or Form W-4 may be used

15 States That Require/Recommend Use of Their Own Certificate Include 15 New York: Accepts W-4 recommends Form IT-2104 North Carolina: Form NC-4 or Form NC-4EZ Ohio: Form IT-4 Rhode Island: Form RI W-4 Federal may be used Vermont: Form W-4VT is recommended Virginia: Form VA-4 West Virginia: Form WV/IT 104 if state exemptions differ Wisconsin: Form WT-4 if state exemptions differ from fed

16 States That Have No Form Include 16 Colorado Delaware: Has Form SD/W4 for calculating only use Fed W-4 For Delaware Purposes Only Idaho Montana Nebraska New Mexico North Dakota Oklahoma Oregon Pennsylvania South Carolina Utah

17 Possible Other Forms on State Level 17 Special forms for employee to claim exempt from state income tax Special form for military spouse to use to claim exempt from state income tax Forms for nonresidents of the state Reciprocal agreement forms

18 Example of Exempt Form-NY 18 Completes the form if the employee is claiming exempt from state income tax Also used by Military spouses

19 Example of Exempt Form for Military Spouse 19 Example for Massachusetts that must be used by military spouses to claim exempt

20 Example of Nonresident Form-CT 20 Completes the form if the employee is a nonresident who performs services partly within and partly outside of Connecticut for same employer Must also complete Form CT- W4

21 One Form Mostly Fits All 21 Use the same form for most purposes Example is Georgia Use the G-4 to claim exempt from withholding if owing no tax and for military spouse exemption

22 States That Use Special Form 22 Example: Pennsylvania Local Earned Income Tax Residency Certification Form: DCED-CLGS-06 For more info on tax go to e/6747

23 For Example: 23 IL has agreement with WI Resident of WI works in IL but does not want IL tax taken out completes Form IL-W-5-NR NO IL tax is withheld Employer may but IS NOT required to withhold for WI

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25 For Example 2: 25 WI has agreement with IL Resident of IL works in WI but does not want WI tax taken out completes Form W- 220 NO WI tax is withheld Employer may but IS NOT required to withhold for IL

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27 Useful Links

28 Review Form W-4 Line by Line 28 New Forms must always be current year First name, middle initial and last name always must appear on the form Address must be on the form

29 29 Line by Line Goes without saying must have this one! Just mention to employee Must designate marital status

30 Line by Line 30 Must have the number of allowances May have additional dollar amount or not up to employee no need to put 0.00 just leave blank

31 Line by Line 31 Must have the number of allowances Dollar amount only and it can not stand alone. Must be with allowances and martial status No Percentages

32 Line by Line 32 Employee claims exempt here Employee signs here Dates goes here

33 Line by Line 33 If sending to IRS fill these boxes in

34 Effective Dates for Forms 34 All new employees need to complete form No form? Use single and zero until received All forms except exempt forms remain in effect until a new form is received Exempt forms expire of each year Have until 2-15 to submit new form Use single zero if new form not received Up to 30 days to input new forms

35 Practical Point 35 Employers should not accept any withholding or estimated tax payments from employees in addition or instead of the withholding based on their Form W-4

36 What Makes a Form Invalid 36 Any unauthorized change or addition makes a form invalid Includes taking out any language Employee indicating either verbally or in writing that the form is false An incomplete form

37 How To Handle an Invalid Form 37 Do not use the invalid form to determine withholding Inform the employee the form is invalid Request new form from employee Use a previously submitted form to determine withholding No previous form? Use single/zero

38 Questionable Forms 38 Employers are not the Form W-4 Police (on the federal level anyway) and are not responsible for verifying the number of allowances claimed by the employee. As long as it is a valid form, the employer accepts it.

39 Processing the Forms in Payroll 39 Each form should be reviewed to ensure validity before processing Filled out completely and correctly Signed and dated Invalid or incomplete forms should never be processed Return to employee Template letters are an easy method to use

40 Sample Memo for Missing Information on 40 the Form W-4 From: The payroll department To: Insert employee s name here Re: Incomplete Form W-4 Dear: Insert employee s name here. The payroll department has received your Form W-4, dated (insert date of form here). However, we are unable to complete the processing of the form due to missing information. Please provide the required information where we have highlighted the form in yellow. When you have finished providing the missing information, please return the form to the payroll office. Thank you for your prompt attention to this matter.

41 Sample Memo Invalid Form W4 41 From: The payroll department To: Insert employee s name Re: Invalid Form W-4 submitted to payroll Dear: Insert employee s name here It is necessary for the payroll department to return your Form W-4, dated (insert date of form here). We are unable to process the form. IRS regulations do no allow us to accept and/or process any Form W-4 that claims a fixed dollar amount only or a percentage. According to the IRS: The amount of income tax withholding must be based on marital status and number of allowances only. You may specify any additional dollar amount as well. If you still wish to change your withholding please complete a new Form W-4 and submit it to payroll at your earliest convenience.

42 Substitute Employee Forms 42 You cannot accept substitute Forms W-4 developed by employees as of October 10, 2007 If one submitted after that date it is considered invalid or the same has having failed to file the form You can continue to honor any valid employeedeveloped Forms W-4 accepted before October 11, 2007

43 43 Submitting Forms W-4 to the IRS As of April, 2005, no longer required as a routine function by IRS When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee You may also be directed to send certain Forms W- 4 to the IRS. Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice.

44 IRS Review of Forms 44 After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 The IRS also uses information reported on Form W-2 to identify employees with withholding compliance problems

45 IRS Review of Forms 45 In some cases, if a serious underwithholding problem is found to exist for a particular employee, the IRS may issue a letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee Commonly referred to as a "lockin letter

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47 Lock-In Letters 47 You must furnish this notice to the employee within 10 business days of receipt if the employee is employed by you as of the date of the notice Begin withholding based on the notice on the date specified in the notice. Usually 60 days from the date of the letter

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49 49 Use Lock-In Letters for Terminated Employees If You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. You reasonably expect the employee to resume services within 12 months of the date of the notice. The employee is on a leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence.

50 Modified Lock-In Letters 50 The IRS may issue a subsequent notice (modification notice) that modifies the original notice The modification notice may change the marital status and/or the number of withholding allowances permitted. You must withhold federal income tax based on effective date specified in the modification notice.

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53 Accepting New Forms from the Employee 53 If the employee with an active lock-in letter provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, disregard the new Form W-4

54 Submitting to the State 54 State may still require a Form W-4 to be submitted For example Connecticut requires the form to be submitted if the employee claims three times the maximum personal exemption amount available to an employee. So the employer should multiply the maximum personal exemption amount for the taxable year by a factor of three to determine if the Form CT-W4 of an employee must be sent to DRS.

55 Submitting to the State 55 Example: North Carolina

56 Submitting Form W-4 to State WA MT ND ME OR ID SD MN WI NY VT NH MA CA NV UT WY CO NE KS IA MO IL MI OH IN KY WV VA PA DE MD NJ RI CT AZ NM OK AR TN SC NC MS AL GA TX LA FL AK State requires form to be submitted to state under certain conditions State does not require form to be submitted No state income tax HI 56 No state form State has no form but requires it to be submitted

57 Retaining Form W-4 57 Current form until replaced Expired or replaced forms minimum four years plus current tax year

58 Electronic Forms 58 May establish system that allows employees to submit their initial form or change existing form electronically Paper form must be available as well Paper form can be required for some employees if business reason justifies Must be able to provide questionable forms to IRS electronically

59 Tech Specs for Electronic Forms 59 Electronic version must contain exact same info as the paper version-no exceptions Must be PIN or verified system Lock-in letter compliance must be available Perjury statement must be there Employees must understand that it is signed under penalty of perjury just like the paper form

60 Tech Spec Continued 60 Electronic signature required Must be able to print hard copy All other regulations apply the same as paper form Practical Point: Good to have a system that requires employee to acknowledge perjury statement in order to submit as a separate step

61 States and Electronic Submission 61 With the following exceptions the majority of states either permit electronic submission or have no provision to permit or prevent electronic submission Alabama: says the form must be signed Georgia: Department of Revenue letter dated June 26, 2013 states NO but no provisions in the code

62 States and Electronic Submission 62 Massachusetts: Letter from Maryland Revenue Administration Division dated August 8, 2013 says no but no provisions in code Pennsylvania no

63 Form W-4 Nonresident Aliens 63 Cannot claim exempt Request only single regardless of marital status Claim only one allowance If from Canada, Mexico or Korea may claim more than one allowance Write nonresident alien or NRA above dotted line on line 6 of form Electronic version must provide this field

64 Form W-4 Nonresident Aliens 64 May request additional withholding at their option Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual: If claiming a tax treaty exemption from withholding employee must submit Form 8233 instead of Form W-4

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66 Add Nonresident Alien or NRA 66 Put nonresident alien or NRA here

67 67 Are There Any Questions?

68 How Can Ascentis Help Me? 68 Ascentis Payroll Process payroll in real-time, ensuring 100% accuracy, flexibility and control Reduce payroll processing time by as much as 30% Information is electronically at your fingertips. By using Ascentis ESS payroll information can also be accessed by employees from anywhere and at anytime

69 RCH Credit 69 Once approved, to earn RCH, you must Stay on the webinar for the full 60 minutes Be watching the webinar using your unique URL Certificates delivered electronically, to address with which you registered Certificates delivered no later than February 20, 2015

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