Sec 6: Withholding Taxes Flashcards
What is a good way to verify an EE’s name and SSN?
Through the Social Security Administration’s SSN Verification Service (SSNVS)
What to do when an employee changes his or her name
When an employee presents a name change for inclusion in the payroll system, usually after a marriage or divorce, the employer should refuse to make the change until a new social security card with the employee’s new name is presented for confirmation. If the employee has not obtained a new card, give him or her a FormSS- 5 for completion and submission to the SSA
When is a FormW‑ 4 effective?
FormW- 4 submitted by a newly hired employee must be put into effect by the employer for the first payroll period ending after the form is submitted. An amended FormW- 4 submitted by a current employee must be put into effect by the employer no later than the beginning of the first payroll period ending on or after the 30th day after the form is submitted to the employer
States that allow you to use a W4 to calculate state withholding?
ID, NM, ND, UT, VT, WV
FormW‑4P
Used to specify withholding from periodic pension or annuity payments. Generally, payments from a retirement or deferred compensation plan are considered periodic if they are made
over a period of more than one year
FormW‑4R
Individuals use FormW- 4R to have payers withhold the correct amount of federal income tax from a nonperiodic payment or eligible rollover distribution from an employer retirement plan, annuity (including a commercial annuity), or individual retirement arrangement (IRA)
FormW‑4S
When an employee who is disabled by a non- job- related illness or injury is being paid sick pay by a third- party insurer, no federal income tax will be withheld unless the employee requests it by submitting FormW- 4S, Request for Federal Income Tax Withholding From Sick Pay to the third party
Methods of Withholding Federal Income Tax
The most popular methods are the percentage method and the wage bracket method
Payroll period
Whatever method is used, the basis for the calculation is the employer’s “payroll period,” or the frequency with which it pays its employees
Rounding permitted
When determining the amount to be withheld, employers may round off the withholding amount to the nearest dollar
States with no income tax-9
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming
What are eligible rollover distributions
Generally all nonperiodic payments of all or any portion of the balance of a recipient’s account in a qualified deferred compensation plan are eligible rollover distributions other than:
* Substantially equal periodic payments made over the lifetime or life expectancy of the employee or his or her beneficiary, or made for a specified period of at least 10 years
* Any minimum distribution that is required under IRC §401(a)(9) regarding qualified plans
* Distributions not included in gross income (e.g., return of an employee’s after‑tax contributions), except for net unrealized appreciation of employer securities
* Returns of amounts deferred under a §401(k) or §403(b) plan that exceed the elective deferral limits
* Loans treated as deemed distributions
* Dividends paid on employer securities
* Distributions of the cost of current life insurance coverage
Under IRS regulations, what methods may employers use to notify employees who have no income tax withheld and do not file exempt of their possible eligibility for a tax refund because of the EIC.
Payers must generally withhold 24% of reportable nonpayroll payments during 2024 if payees fail to furnish payers with their taxpayer identification number or the IRS notifies them to withhold. This withholding is referred to as backup withholding.
Can EE’s receive advance payments of the Earned Income Credit for wages paid in 2024?
No. Advance payments of the Earned Income Credit were eliminated for wages paid after December31,2010
