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1 Form W-2 Filing Requirements INTERNAL REVENUE SERVICE Federal, State & Local Governments.

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Presentation on theme: "1 Form W-2 Filing Requirements INTERNAL REVENUE SERVICE Federal, State & Local Governments."— Presentation transcript:

1 1 Form W-2 Filing Requirements INTERNAL REVENUE SERVICE Federal, State & Local Governments

2 2 Topics uEmployment Tax Reporting Overview uReporting Requirements uForm W-2 Reporting Methods uName/SSN Verification uForm W-2 Income Items u Just for Governments uCommon Errors u Form W-2/ 941 Reconciliation

3 3 Employment Taxes Defined uFederal income tax withholding –Income –Filing status –Exemptions uSocial security tax –12.4% (employer and employee contribution) uMedicare tax –2.9% (employer and employee contribution) –No wage cap

4 4 Reporting to SSA and IRS uSSA –Determines eligibility for benefits – Keeps individual accounts –Pays benefits u IRS –Collects taxes and returns u Both Agencies –Receive and match Form W-2 form information

5 5 Employment Tax Reporting Cycle uHave employee complete W-4 uIdentify applicable taxes uWithhold taxes from each paycheck uPeriodically make tax deposits uFile quarterly tax returns uIssue Forms Form W-2

6 6 Form W-4 Employees Withholding Allowance Certificate uName & social security number – ask for social security card uMarital status uWithholding allowances uEmployers 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.

7 7 Identify Applicable Taxes uSection 218 –State administrators –SSA uPost-June 1991 and no retirement plan –Social security mandatory uHired after March 1986 –Medicare coverage mandatory

8 8 Withhold Taxes From Each Paycheck uUse W-4 info from employee uUse Pub 15 withholding tables uSpot-check payroll software calculations

9 9 Deposit Rules uPay with 941 if you know taxes for quarter will be less than $2,500 (pay annually with Form 944) uLookback period – 4 quarters comprising – Begins July 1st ending June 30 th of preceding yrs – For 2007: July 1, 2005 thru June 30, 2006 uMonthly deposits –Reported taxes in lookback period $50,000 uSemiweekly deposits –Reported taxes in lookback period $50,000 uNext day deposit if $100,000 or more taxes on any day u Use EFTPS in 2007 if deposits were $200,000 in 2005

10 10 File Quarterly Tax Returns uForm 941 – Employers Quarterly Federal Tax Return uReport wages, liabilities and deposits for –Federal income taxes –Social security taxes –Medicare taxes uFour quarters totals should match Forms W-3

11 11 File Annual Tax Returns uForm 944 – Employers Annual Federal Tax Return uAnnual tax liability must be $1000 or less u Report wages, liabilities and deposits for –Federal income taxes –Social security taxes –Medicare taxes uAnnual totals should match Forms W-3

12 12 Issue Form W-2s uDue to employee by January 31 st uDue to SSA by February 28 th –Extended to March 31 st for electronic filers uEmployees leaving or terminated before December 31 st can get Form W-2 in mid-year uDue within 30 days of request by employee whose employment ended in mid-year.

13 13 Form W-2 Reporting Methods uElectronic –Your Best Choice! uMagnetic Media no longer accepted beginning 2007 uPaper Copy A

14 14 Electronic W2 Filing uBusiness Services Online – u Register for PIN and Password u Upload W2 files uForm W-2 Online –Create Form W-2 Online –Print Employee Copies

15 15 Electronic Filing (cont.) Automatic Electronic Receipt uCompressed Files Accepted uCheck Status of Submissions –Displays Some Errors and Notices uTest Transmissions (Connectivity Only) u Fully Electronic-No Paperwork

16 16 Form W-2c uIf 250 or more Forms Form W-2c during the calendar year, then must file electronically u File Form W-2c with SSA to correct SSN, Name and Dollar Amount. uDo not file Form W-2c with SSA only to correct an employees address –Update employment record for employee

17 17 Paper Form W-2 Copy A uIf You Cant File Electronically… uIRS Copy A, Pub. 1141 Compatible, or SSA-Approved Laser Forms uSent to Wilkes-Barre Data Operations Center via Form W-3 by Feb. 28 u Forms are Machine Scanned u NO Staples and/or Form Folding –Machine reading error can occur

18 18 IRC Section 6721 Penalty Failure to File by Due Date uCorrectly file by March 30 $15/return uCorrectly file after March 30 but by August 1 $30/return uCorrectly file after August 1 $50/return uIntentional disregard $100/return

19 19 IRC Section 6722 Penalty Failure to Furnish to Payee u$50 per information return u$100 per return for intentional disregard

20 20 Name / SSN Mismatches uForm W-2 Name and SSN Need to Match SSA Records uNo Wage Credit If Data Mismatches u95% of Form W-2s Have Valid Information uUnable to Match Several Million Forms Form W-2 uNotices to Employer and Employee

21 21 Prevent Mismatches uAsk to See SSN Card at initial hire uRecord Name and SSN as Shown on SSN Card –OK to Use Middle Initial Only –Use Care With Compound Names uUse Employee Verification Service!

22 Employee Verification Service uVerifies Employee Supplied Data uName, SSN, DOB, Gender uTelephone: 800-772-6270 (5) uLocal SSA office (50) uPaper List (300), Tape or Disk (any size) –Registration Required uDetails at

23 23 Form W-2 Income Items uElective 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 uGroup-term life insurance –Do not include in any box up to $50,000 –Include excess in Boxes 1, 3 and 5

24 24 Completing Form W-2 uFringe benefits excluded from all taxes –Health insurance –Tuition reductions –Meals & lodging for employers 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

25 25 Completing Form W-2 (Cont.) uFringe 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)

26 26 Completing Form W-2 (Cont.) uFringe 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

27 27 Completing Form W-2 (Cont.) uFringe benefits subject to all taxes –Cash awards –Performance awards (fair market value of noncash) –Bonuses –Back pay –Severance pay –Value of personal use of employers vehicle –Expense reimbursements under a nonaccountable plan –Cash benefits from a cafeteria plan –Employees taxes paid by employer uSee Pub 15-B, Employers Guide to Fringe Benefits

28 28 Completing Form W-2 (Cont.) uArcher 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 –Employees 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 uAdvance earned income credit payments –Report in Box 9 only

29 29 Just for Governments uMedicare govt. emp. box B on W-3 uOptions 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 uReport § 457 plan distributions on 1099-R

30 30 Just for Governments cont: uReport election worker payments $600 – $600 if required by a 218 agreement ( also see Revenue Ruling 2000-6) uElected and appointed officials – are generally employees of the governments they serve. uEmergency workers- employees hired on temporary basis in response to disaster ( not permanent government employees)

31 31 Common Form W-2 Reporting Errors uPrint Too Small/ Large/Too Light uWrong format in boxes uName/SSN Mismatches uWrong EIN uAdd dollar signs to money amount boxes uInappropriately check Retirement Plan checkbox in box 13 –See Retirement Plan in Form W-2 instructions

32 32 Reconciliation uCompares 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)

33 33 Reconciliation Notices uForms Form W-2 Less Than Forms 941: SSA Sends Notice uForms Form W-2 More Than Forms 941: IRS Sends Notice uSSA Notices Mailed Nov-Feb for Prior Tax Year uCheck Actual Data Sent to SSA & IRS uReply to Avoid IRS Penalty uCall If Help Needed

34 34 For More Information uInstructions: Forms Form W-2, W-3, W-4 & 941 uPub 15 Employers Tax Guide uPub 15-A Employers Supplemental Tax Guide uPub 15-B Employers Tax Guide to Fringe Benefits uPub 963 Federal-State Reference Guide uPub 969 Health Savings Accounts and Other Tax-Favored Savings Accounts

35 35 Need Help? – Employer services u –Tax information for Federal State and Local governments –Public Employers Toolkit – Email us at

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