1 form w-2 filing requirements internal revenue service federal, state & local governments

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Form W-2 Filing Requirements

INTERNAL REVENUE SERVICE

Federal, State & Local Governments

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Topics Employment Tax Reporting Overview Reporting Requirements Form W-2 Reporting Methods Name/SSN Verification Form W-2 Income Items Just for Governments Common Errors Form W-2/ 941 Reconciliation

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Employment Taxes Defined Federal income tax withholding

– Income– Filing status– Exemptions

Social security tax– 12.4% (employer and employee contribution)

Medicare tax– 2.9% (employer and employee contribution)– No wage cap

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Reporting to SSA and IRS

SSA– Determines eligibility for benefits– Keeps individual accounts– Pays benefits

IRS– Collects taxes and returns

Both Agencies

– Receive and match Form W-2 form information

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Employment Tax Reporting Cycle

Have employee complete W-4

Identify applicable taxes

Withhold taxes from each paycheck

Periodically make tax deposits

File quarterly tax returns

Issue Forms Form W-2

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Form W-4 Employee’s Withholding Allowance

Certificate Name & social security number

– ask for social security card

Marital status

Withholding allowances

Employers no longer send questionable W-4 forms to IRS – the IRS will notify the employer to withhold income tax from

an employee by issuing a lock-in letter.

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Identify Applicable Taxes Section 218

– State administrators– SSA

Post-June 1991 and no retirement plan– Social security mandatory

Hired after March 1986– Medicare coverage mandatory

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Withhold Taxes From Each Paycheck

Use W-4 info from employee

Use Pub 15 withholding tables

Spot-check payroll software calculations

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Deposit Rules Pay with 941 if you know taxes for quarter will be less

than $2,500 (pay annually with Form 944) Lookback period – 4 quarters comprising

– Begins July 1st ending June 30th of preceding yrs– For 2007: July 1, 2005 thru June 30, 2006

Monthly deposits– Reported taxes in lookback period $50,000

Semiweekly deposits– Reported taxes in lookback period $50,000

Next day deposit if $100,000 or more taxes on any day

Use EFTPS in 2007 if deposits were $200,000 in 2005

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File Quarterly Tax Returns Form 941 – Employer’s Quarterly Federal

Tax Return

Report wages, liabilities and deposits for– Federal income taxes

– Social security taxes

– Medicare taxes

Four quarters totals should match

Forms W-3

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File Annual Tax Returns Form 944 – Employer’s Annual Federal

Tax Return

Annual tax liability must be $1000 or less

Report wages, liabilities and deposits for– Federal income taxes

– Social security taxes

– Medicare taxes Annual totals should match Forms W-3

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Issue Form W-2s Due to employee by January 31st

Due to SSA by February 28th

– Extended to March 31st for electronic filers

Employees leaving or terminated before December 31st can get Form W-2 in mid-year

Due within 30 days of request by employee whose employment ended in mid-year.

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Form W-2 Reporting Methods

Electronic– Your Best Choice!

Magnetic Media no longer accepted beginning 2007

Paper Copy A

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Electronic W2 Filing

Business Services Online– www.ssa.gov/employer

Register for PIN and Password Upload W2 files Form W-2 Online

– Create Form W-2 Online– Print Employee Copies

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Electronic Filing (cont.)

Automatic Electronic Receipt Compressed Files Accepted Check Status of Submissions

– Displays Some Errors and Notices Test Transmissions (Connectivity Only) Fully Electronic-No Paperwork

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Form W-2c

If 250 or more Forms Form W-2c during the calendar year, then must file electronically

File Form W-2c with SSA to correct SSN, Name and Dollar Amount.

Do not file Form W-2c with SSA only to correct an employee’s address– Update employment record for employee

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Paper Form W-2 Copy A

If You Can’t File Electronically… IRS Copy A, Pub. 1141 Compatible, or

SSA-Approved Laser Forms Sent to Wilkes-Barre Data Operations

Center via Form W-3 by Feb. 28 Forms are Machine Scanned NO Staples and/or Form Folding

– Machine reading error can occur

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IRC Section 6721 PenaltyFailure to File by Due Date Correctly file by March 30 $15/return

Correctly file after March 30 but by August 1 $30/return

Correctly file after August 1 $50/return

Intentional disregard $100/return

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IRC Section 6722 PenaltyFailure to Furnish to Payee

$50 per information return

$100 per return for intentional disregard

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Name / SSN Mismatches

Form W-2 Name and SSN Need to Match SSA Records

No Wage Credit If Data Mismatches 95% of Form W-2s Have Valid Information Unable to Match Several Million

Forms Form W-2 Notices to Employer and Employee

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Prevent Mismatches

Ask to See SSN Card at initial hire

Record Name and SSN as Shown on SSN Card– OK to Use Middle Initial Only

– Use Care With Compound Names

Use Employee Verification Service!

Employee Verification Service

Verifies Employee Supplied Data Name, SSN, DOB, Gender Telephone: 800-772-6270 (5) Local SSA office (50) Paper List (300), Tape or Disk (any size)

– Registration Required Details at www.ssa.gov/employer

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Form W-2 Income Items Elective deferrals

– Includes employee retirement contributions except for section 501(c)(18) contributions

– Do not include in Box 1– Do include in Boxes 3 and 5– Include in Box 12 with identifying code

Group-term life insurance– Do not include in any box up to $50,000– Include excess in Boxes 1, 3 and 5

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Completing Form W-2 Fringe benefits excluded from all taxes

– Health insurance

– Tuition reductions

– Meals & lodging for employer’s convenience

– Cafeteria plan contributions by salary reduction – Educational assistance

– Dependent care assistance

– Noncash employee achievement awards for length of service or safety

– Nominal holiday/ special occasion awards (Noncash) – Certain awards transferred to charities before receipt

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Completing Form W-2 (Cont.) Fringe benefits excluded from all taxes (cont)

– No additional cost service

– Working condition fringe

– De minimis fringe

– Qualified moving expenses

– Qualified employee discounts (20% of service price, property price at cost)

– Qualified transportation expenses (commuter highway vehicle, transit pass, parking)

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Completing Form W-2 (Cont.) Fringe benefits excluded from all taxes (cont)

– Paid under an accountable plan» Business connection» Adequate accounting within reasonable time» Return excess reimbursement within reasonable time

– Work clothes (condition of employment and unsuitable for everyday wear)

– Safety equipment– Professional license– Per diem travel allowances & mileage federal rate– Meals away from home overnight on business– Nonpersonal automobile expenses if records are kept

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Completing Form W-2 (Cont.) Fringe benefits subject to all taxes

– Cash awards

– Performance awards (fair market value of noncash)

– Bonuses

– Back pay

– Severance pay

– Value of personal use of employer’s vehicle

– Expense reimbursements under a nonaccountable plan

– Cash benefits from a cafeteria plan

– Employee’s taxes paid by employer

See Pub 15-B, Employer’s Guide to Fringe Benefits

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Completing Form W-2 (Cont.) Archer Medical Savings Account

– Employer contributions not subject to taxes » Do not include in Boxes 1, 3 or 5

» Show in Box 12 with code R

– Employee’s contributions are subject to all taxes» Show in Boxes 1, 3 and 5

» Employee can deduct on their 1040

– See Pub 969 Medical Savings Accounts for tax details

Advance earned income credit payments– Report in Box 9 only

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Just for Governments

“Medicare govt. emp.” box B on W-3

Options for reporting wages subject only to Medicare tax for part of year and full social security and Medicare taxes for rest– Combine all wages on one Form W-2 (SSA

preference)– Report different wages on separate Forms Form W-2

Report § 457 plan distributions on 1099-R

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Just for Governments cont: Report election worker payments $600

– $600 if required by a 218 agreement

( also see Revenue Ruling 2000-6)

Elected and appointed officials – are generally employees of the governments they serve.

Emergency workers- employees hired on temporary basis in response to disaster

( not permanent government employees)

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Common Form W-2 Reporting Errors Print Too Small/ Large/Too Light

Wrong format in boxes

Name/SSN Mismatches

Wrong EIN

Add dollar signs to money amount boxes

Inappropriately check “Retirement Plan” checkbox in box 13– See “Retirement Plan” in Form W-2 instructions

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Reconciliation

Compares Totals from Form W-2s with 941s– Income Tax Withheld (Box 2)

– Social Security Wages (Box 3)

– Medicare Wages and Tips (Box 5)

– Social Security Tips (Box 7)

– Advance EIC Payments (Box 9)

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Reconciliation Notices Forms Form W-2 Less Than Forms 941:

SSA Sends Notice Forms Form W-2 More Than Forms 941:

IRS Sends Notice SSA Notices Mailed Nov-Feb for Prior

Tax Year Check Actual Data Sent to SSA & IRS Reply to Avoid IRS Penalty Call If Help Needed

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For More Information Instructions: Forms Form W-2, W-3, W-4 & 941 Pub 15 Employer’s Tax Guide Pub 15-A Employer’s Supplemental Tax

Guide Pub 15-B Employer’s Tax Guide to Fringe

Benefits Pub 963 Federal-State Reference Guide Pub 969 Health Savings Accounts and Other

Tax-Favored Savings Accounts

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Need Help? www.ssa.gov/employer

– “Employer services”

www.irs.gov/govt

– “Tax information for Federal State and Local governments”

– “Public Employer’s Toolkit”

– “Email us at “tege.ask.fslg@irs.gov”