1 / 21

Chapter 9

Chapter 9. Withholding, Estimated Payments, and Payroll Taxes. Objective. Be able to complete Form W-4: Employee’s Withholding Allowance Certificate. Withholding Methods. Employer must withhold taxes from employees’ pay based on their Form W-4

todd-moore
Télécharger la présentation

Chapter 9

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 9 Withholding, Estimated Payments, and Payroll Taxes

  2. Objective Be able to complete Form W-4: Employee’s Withholding Allowance Certificate

  3. Withholding Methods • Employer must withhold taxes from employees’ pay based on their Form W-4 • Pay includes salaries, bonuses, commissions, vacation, some non-cash fringe benefits • W-4 tells employer number of exemptions claimed by employee • single, married, or married but tax withheld at higher single rate • can claim exempt status if had no liability last year and expect none this year • Best tax planning scenario is if withholding equals tax liability (no refund/tax due)

  4. Objective Know how to calculate income tax (FIT) and FICA tax withholding from wages

  5. Computing Withholding • To compute amount to withhold from pay • Employers must know • # of allowances claimed • gross wages for the pay period • marital status • Use IRS tables to calculate federal income tax based on gross wages

  6. Withholding on Tips • Employer must receive a tip report from each employee and withholds taxes based on this report • If employee reports less than 8% of gross food/beverage sales in tips • Employer must “allocate” tips up to 8% and collect taxes on these tips • Employer must report to IRS “Annual Information Return of Tip Income & Allocated Tips” (Form 8027)

  7. Other Withholdings • Required withholding on IRA and pension distributions, bonuses, etc. • Backup withholding required on interest and dividends when: • Taxpayer does not provide an identification number (SSN) or provides incorrect number • Taxpayer fails to certify that he/she is not subject to withholding • Backup withholding is 30% of amount paid to taxpayer

  8. Estimated Payments • Self-employed taxpayers and other taxpayers with non-wage income must make quarterly estimated tax payments if annual payment due for the year is ≥ $1000 (after withholding) • Quarterly payments due April 15, June 15, September 15, and January 15 of the following year • Annual required payment is the lesser of • 90% of current year tax, or • 100% of prior year tax, but • exception if AGI > $150,000 for prior year, then annual required payment = 112% of prior year

  9. FICA Tax • Federal Insurance Contributions Act (FICA) was intended to provide retirement benefits for workers and their families • FICA is two taxes • Social Security - 6.2% of first $84,900 of gross earnings • Medicare - 1.45% on total gross earnings • If taxpayer has more than one source of income, possible to overpay Social Security • Taxpayer can then claim the excess with other pre-payments of income tax

  10. Federal Tax Deposit System • Employers withhold both FIT and FICA from paychecks and must make deposits either monthly or semi-weekly based upon the total amounts withheld • Monthly - made by 15th of following month • Semi-weekly - made within 3-4 days of running payroll • exceptions: • owe > $100,000 then must deposit within 24 hours • owe less than $1,000 in a quarter, may pay with quarterly Form 941 Payroll Tax Return

  11. Federal Tax Deposit System (continued) • To make deposit, fill out Form 8109 as a deposit slip and take deposit to a Federal Depository • If mailed, must be postmarked second day before due date,or • May be electronically deposited via EFTPS (Electronic Federal Tax Payment System)

  12. Objective Be able to complete Form W-2 and Form 941 and understand certain other employer payroll reporting requirements

  13. Employer Reporting Requirements • Annually, employers must send W-2s • By 1/31 to each employee • By 2/28 with a Form W-3 (transmittal) to the Social Security Administration • May have obligation to send W-2 and state specific transmittal form to state Department of Revenue • W-2 shows gross wages, income and FICA tax withholdings and “special Items” • Unreported tips, 401(k) contributions, employer provided day care, and other taxable fringe benefits

  14. Reporting Requirements • Annually, employers must complete Form 1099-MISC for each independent contractor • By 1/31 to each unincorporated independent contractor who earned > $600 and provided a service (for example - attorney, lawn service, etc.) • By 2/28 with a Form 1096 (transmittal) to the IRS • May have obligation to send 1099s and state specific transmittal form to state Department of Revenue

  15. FUTA Tax • Federal Unemployment Tax Act requires employers to pay tax to support unemployment payments • Employer pays 6.2% (net) up to first $7,000 per employee per year, but credit of up to 5.4% for state employment taxes • Deposit quarterly (if over $100) • File annual report (940-EZ) to show gross wages, FUTA wages and FUTA tax

  16. Objective Know how to calculate taxes for self-employed taxpayers

  17. Self-Employment Tax (Schedule SE) • Self-Employment (SE) tax is the same as FICA, except taxpayer is both employer and employee. Therefore, rates are: • Social Security - 12.4% of first $84,900 of net self-employment income • Medicare - 2.9% on total net self-employment income • If taxpayer has both W-2 wages and self-employment income, the $84,900 limit applies to the combined earnings • Don’t have to pay SE tax if SE income is less than $400 • May take a “for” deduction for one-half of SE tax paid

  18. Objective Understand the special tax and reporting requirements for household employees

  19. The Nanny Tax • Household employee is anyone working in taxpayer’s home (full- or part-time) such as cook, housekeeper, etc. • Employer must • Pay FICA on any household employee who earns > $1,300 in a calendar year • Withhold taxes for household employee and pay FUTA • Report FICA and FIT annually

  20. The Nanny Tax (continued) • Employer must also • Complete a Schedule H and attach to 1040, or • If have 941 and 940 filing requirements for other business, can add household employees on to these reports • Must file W-2 for each household employee who earns $1,300 or more a year • Not required for anyone under 18 unless providing household services is his or her principal occupation

  21. The End

More Related