Section 8 - Depositing and Reporting Withheld Taxes

Question 1

What is an EIN used for?

Answer 1

Federal Employer Identification Number. Identifies an employer to the IRS and SSA

Must be used when an employer is

• depositing taxes
• filing a return
• communicating with the IRS or SSA

9 Digit: 00-0000000

Question 2

What form is used to apply for an EIN?

Answer 2

SS-4

Question 3

If an employer has not yet received its EIN before the due date of a deposit or return, what should be entered in the EIN space of the form?

Answer 3

Applied for on (date)

Question 4

What is the lookback period for 2013?

Answer 4

July 1, 2011 - June, 30, 2012

Question 5

What is the amount of tax liability to qualify as a monthly depositor?

Answer 5

$50,000 or less during the lookback period

Question 6

What is the amount of tax liability to qualify as a Semiweekly depositor?

Answer 6

more than $50,000 during the lookback period

Question 7

When should new employers deposit?

Answer 7

Monthly until they accumulate more than $50,000 in a lookback period or trigger the one-day rule.

Question 8

A successor employer with the same EIN as its predecessor will deposit tax when?

Answer 8

Has the same deposit requirements as the predecessor.

Question 9

Who notifies the employer of having a change in their deposit schedule for upcoming year?

Answer 9

IRS

Question 10

When should a monthly depositor deposit the accumulated tax liability?

Answer 10

by the 15th of the following month

for example: Junes tax liability must be deposited by July 15th

Question 11

When should a monthly depositor deposit the accumulated tax liability?

Answer 11

Semiweekly depositors must deposit employment taxes for wages paid Wed, Thurs, Fri on the following Wednesday and for wages paid on Sat, Sun, Mon and Tues on the following Friday.

W, Th, F —–> on Wednesday
S, S, M, T —–> on Friday

Question 12

What is the One-Day Deposit Rule?

Answer 12

If the accumulated employment tax liability reaches $100,000 during any monthly or semiweekly deposit period, the taxes must be deposited by the close of the next banking day.

*If the employer was a monthly depositor, they now become a semiweekly depositor.

Question 13

What is the Quarterly “De Minimis” Deposit Rule?

Answer 13

Employers with an accumulated tax liability of less than $2,500 for any quarter can deposit the liability according to their depositor status OR pay it with their Form 941 quarterly return.

Question 14

If semiweekly periods bridge two quarters, when are deposits made?

Answer 14

2 deposits will be made, at the end of the quarter and the end of the semiweekly period.

For example: If 6/30 is a Thursday, you would make a quarterly deposit and a deposit the following Wednesday for the remaining liability in the semiweekly period.

Question 15

What is the extension if your deposit day falls on a Saturday, Sunday or Holiday?

Answer 15

Deposit is due on the next banking day.

Semiweekly depositors are guaranteed at least 3 banking days after the last day of the semiweekly period to make their deposit.

Question 16

What is the Short Fall Rule?

Answer 16

The IRS allows a “safe harbor” shortfall so employers are not penalized for depositing a small amount less than the entire amount of their deposit obligation. An employer satisfies its deposit obligations if the amount of the shortfall is no more than the greater of $100 or 2% of the amount due. Deposit must be made timely.

Question 17

How are payroll taxes deposited?

Answer 17

All organizations must use the EFTPS to make all their federal tax deposits.

Question 18

What is EFTPS?

Answer 18

Electronic Federal Tax Payment System

Question 19

What are the penalties for not depositing tax payments on time?

Answer 19

• 2% within 5 days
• 5% within 6-15 days
• 10% more than 15 days
• 15% if not paid within 10 days after the employer receives the IRS delinquency notice

Question 20

What is the penalty for employers who willfully fail to collect, account for and deposit taxes?

Answer 20

100%

Employers are subject to an additional penalty equal to the total amount of the taxes involved.

Question 21

What is form 941?

Answer 21

Employer’s Quarterly Federal Tax Return

-filed by all employers that withhold federal income tax from employees compensation.

Question 22

When is the 941 form due?

Answer 22

Quarterly,
Q1: April 30, automatic extension to May 10
Q2: July 31, automatic extension to August 10
Q3: October 31, automatic extension to November 10
Q4: January 31, automatic extension to February 10

Question 23

What is Schedule B?

Answer 23

Semiweekly depositors must file a Schedule B, Employer’s Record of Federal Tax Liability with their Form 941

Schedule B records an employer’s payroll tax liability

Question 24

What are the penalties for late filing of employment tax returns?

Answer 24

• 5% of the tax amount on the form 941 for each month - up to 25%
• 15 % each month if failure to file is due to fraud - up to 75%

Question 25

What are the penalties for failure to pay employment taxes?

Answer 25

• .5% of any unpaid tax each month late - up to 25%

- an additional .5% if the tax is not paid within 25 days - up to 25%

Question 26

Criminal Penalties can be imposed for:

Answer 26

• willful failure to file a return, pay tax or keep records
• willful delivery to the IRS a tax return know to be fraudulent
• willful attempt to evade the payment of any tax
• signing any return, statement or other document under the penalty of perjury without believing it to be true

Question 27

What is a form W-2?

Answer 27

Wage and Tax Statement

• report to employees taxable wages paid and tax amounts withheld

Question 28

What are the deadlines for submitting copy A?

Answer 28

Copy A is submitted to the Social Security Administration by last day of Feb if paper and March 31 if electronic.

250 or more forms W-2 must submit electronically

Question 29

What are the deadlines for submitted copy 1?

Answer 29

Copy 1 is submitted to the state/local tax agencies and those deadlines are set by state/locality.

Question 30

What are the deadlines for submitting copy B, C and 2?

Answer 30

Copy B, C and 2 are submitted to the employee and must be mailed by January 31st. They can be provided electronically to the employees.

Question 31

Where is copy D of the Form W-2 submitted?

Answer 31

Stored by the employer up to 4 years.

Question 32

What information is in Box 1 of the Form W-2?

Answer 32

Taxable amount for Federal.

Question 33

What information is in Box 3 of the Form W-2?

Answer 33

Taxable amount for Social Security

Question 34

What information is in Box 5 of the Form W-2?

Answer 34

Taxable amount for Medicare

Question 35

What are the Common Codes for Box 12 on the Form W-2?

Answer 35

C - taxable cost of GTL coverage over $50,000 -CROAK/COFFIN
D - Elective deferrals to 401K - DEFERRALS
J - Nontaxable sick pay (3rd party sick pay) - JELLO/JONDIS
P - Excludable moving expense reimbursements - PACK
T - Adoption Benefits - TODDLER
V - Income from exercise of nonstatutory stock options
DD - Cost of employer-sponsored health coverage

Question 36

What is a Form W-3?

Answer 36

Transmittal of Wage and Tax Statements

- accompanies paper W-2 forms when the employer submits them to SSA

Question 37

What are the penalites for failure to file Information Returns (W2, W3, 1096 and 1099)?

Answer 37

• $30 per return if corrected within 30 days after due date
• $60 per return if corrected more than 30 days after due date but before 8/1
• $100 per return if not corrected by August 1