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Advanced Tax Issues for Federal Payroll Taxes, Benefits and Form 1099s

Author/Moderator: Beth Stenberg, CPA
Publisher: AICPA
Availability: Backordered
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Description

Tackle the complex issues involved in employer/employee payroll tax matters.This course clears up the often confusing and complex issues involving employee vs. independent contractor. It also will enlighten you on the various actions an employer and its CPA can undertake to minimize the risk of misclassification. Resolve payroll tax-related issues involving the variety of employee benefit plans. Master the often confusing rules for Form 1099 reporting - when, what form and how much to report.

Objectives: 
  • Lock down the statutory definitions of an employee and non-employee
  • Correctly classify employees and independent contractors for payroll tax purposes
  • Resolve worker classification issues with the IRS settlement program
  • Comply with Form 1099 reporting requirements
  • Address payroll tax issues involving benefit plans
Prerequisite:  Working knowledge of payroll tax issues or payroll tax functions

Table of Contents

  • Chapter 1 - Overview, Update, and Reference Guide
    • Learning Objectives
    • Introduction
    • Payroll Tax Dates - 2007
    • Recent Changes
    • Forms
    • Publications
    • Other Government Agencies' Forms and Publications
      • Social Security Administration
      • Department of Homeland Security
      • Department of Labor
    • Websites and Phone Numbers
    • TeleTax Topics
    • E-mail Notification of Tax Topics
  • Chapter 2 - Employee versus Independent Contractor
    • Learning Objectives
    • Who Are Employees?
    • Common-Law Employee
      • Corporate Officers and Directors
      • Leased Employees
    • Independent Contractor
    • Common Law Control Test
      • Behavioral Control
      • Financial Control
      • Relationship of the Parties
      • Other Factors
    • Evidence Summary
    • Can the Same Worker Be an Employee and an Independent Contractor?
    • Let the IRS Make the Determination
    • Reporting Payments Made to Independent Contractors
    • Potential Penalties
      • Correcting Misclassified Employees
    • Resources
    • Exercise to Determine Worker Status
    • Appendix - Selected Forms
  • Chapter 3 - Statutory Workers
    • Learning Objectives
    • Introduction
    • Corporate Officers and Directors
    • S Corporation Officers
    • Statutory Employee
      • Who Performs the Work?
      • No Substantial Investment except Transportation
      • Continuing Relationship
      • Four Groups of Statutory Employees
      • Tax Implications for Statutory Employees
    • Statutory Non-Employee
      • Companion Sitters
      • Qualified Real Estate Agents
      • Direct Sellers
    • Interesting Note to End the Chapter
  • Chapter 4 - Section 530 Relief
    • Learning Objectives
    • Introduction
    • Relief Requirements
      • Reasonable Basis
      • Substantive Consistency
      • Reporting Consistency
    • Who Is Eligible for Section 530 Relief?
      • Officers Defined under Section 3121(d)(1)
      • Statutory Employees under Section 3121(d)(3)
      • State and Local Workers under Section 3121(d)(4)
    • Which Workers Are Not Eligible for Section 530 Relief?
    • Effect of Section 530 Relief on Worker and the Employer
    • Burden of Proof
    • Appendix - Selected Forms
  • Chapter 5 - Other Workers and Payments Specifically Addressed in the IRS Regulations
    • Learning Objectives
    • Introduction
    • Recent Changes
    • Employees of Exempt Organizations
      • Section 501(c)(3) Organizations
    • Religious Exemptions
      • Ministers
      • Members of Religious Orders
      • Lay Employees
      • Christian Science Practitioners and Readers
      • Personal Social Security Exemption
      • All Members are Required to Take a Vow of Poverty
      • Calculating Net Earnings for Self Employment for SE Tax
      • Calculating Income Tax
      • Ministers, Members of Religious Orders, and Christian Science Practitioners and Readers
      • Summary
    • Indian Fishing Rights-Related Activities and Agricultural Workers
      • Fishing Rights-Related Activities
      • Agricultural Workers of Indian Tribes
    • Agricultural Workers
      • Employment Taxes
      • Special Wage Situations
      • Deposits and Annual Reporting
    • Public Employees Not Covered by Social Security
      • Windfall Elimination Provision
      • Government Pension Offset Provision
      • Where to Get Form SSA-1945 and Additional Information
      • State and Local Employees Covered under Section 218 of the Social Security Act
    • Emergency Workers
    • Family Businesses
      • Spouses
      • Children
      • Parents
    • Employment Taxes in Mergers, Acquisition, and Other Reorganizations
      • Statutory Mergers and Consolidation
      • Acquisitions Qualifying under Predecessor-Successor Rules
      • Other Acquisition
    • Nonresident Aliens and Foreign Entities
      • Withholding Agent
      • Withholding Amount and Timing
      • What Are Not Wages?
      • What Is Subject to NRA Withholding?
      • Specific Income Withholding
      • Deposits
      • Reporting
      • Tax Treaty Tables
      • Liability
    • Back Pay and Special Wage Payments to the Social Security Administration
      • Back Pay
      • Special Wage Payments
    • Other
    • Appendix - Selected Forms
  • Chapter 6 - Fringe Benefits, Executive Compensation, Retirement Plans, Form 5500, and Fair
    • Labor Standards Act
    • Learning Objectives
    • Recent Changes
    • What Is a Fringe Benefit?
      • Taxable or Tax-Free?
    • Executive Compensation Including Fringe Benefits
      • Common Executive Benefits
    • Retirement Plans
      • Annual Check-ups
      • Traditional IRAs
      • Roth IRAs
      • Payroll Deduction IRA
    • Form 5500, Annual Return/Report of Employee Benefit Plan
      • Pension Benefit Plan
      • Welfare Benefit Plan
      • Direct Filing Entity (DFE)
      • Specifics for Form 5500
    • What Do I Pay Employees?
      • What Am I Required to Keep and For How Long?
      • DOL Revises Overtime Pay Requirements for Employees
      • Fact Sheets
      • Most Frequently Asked Questions
    • Appendix A - IRS Publications 4284, 4285, 4286, and 4531
    • Appendix B - IRS Quick Reference Chart for Form 5500, Schedules and Attachments
    • Appendix C - Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees under the Fair Labor Standards Act (FLSA)
    • Appendix D - Fact Sheet #17D: Exemption for Professional Employees under the Fair Labor Standards Act (FLSA)
    • Appendix E - DOL's Most Frequently Asked Questions on Overtime
      • Frequently Asked Questions - Overtime Security for the 21st Century Workforce
    • Appendix F - Publication 3998, Choosing a Retirement Solution for Your Small Business
  • Chapter 7 - Payroll Related Information Returns
    • Learning Objectives
    • Introduction
    • Recent Changes
    • Nominee/Middleman and Successor/Predecessor Reporting
    • Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-G, Certain Government Payments
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-LTC, Long-Term Care and Accelerated Death Benefits
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-MISC, Miscellaneous Income
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-SA, Distributions from an HSA, Archer MSA, or Medicare Advantage MSA
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 5498, IRA Contribution Information
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 5498-ESA, Coverdell ESA Contribution Information
      • Who Must File and Under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • Exceptions
      • When Do I File?
    • Form W-2, Wage and Tax Statement
      • Who Must File and under What Circumstances?
      • Amounts to Report
      • When Do I File?
    • Appendix - Selected Instructions and Forms
  • Chapter 8 - Non-Payroll Related Information Returns
    • Learning Objectives
    • Introduction
    • Recent Changes
    • Form 1098, Mortgage Interest Statement
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1098-E, Student Loan Interest Statement
    • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1098-T, Tuition Statement
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-A, Acquisition or Abandonment of Secured Property
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-C, Cancellation of Debt
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-CAP, Changes in Corporate Control and Capital Structure
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-DIV, Dividends and Distributions
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-INT, Interest Income
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-OID, Original Issue Discount
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-PATR, Taxable Distributions Received from Cooperatives
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-Q, Payments from Qualified Education Programs
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 1099-S, Proceeds from Real Estate Transactions
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 8300, (IRS/FinCEN Form), Report of Cash Payments over $10,000 Received in a Trade or Business
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 8308, Report of a Sale or Exchange of Certain Partnership Interests
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
    • Form W-2G, Certain Gambling Winnings
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions for Horse Racing, Dog Racing, Jai Alai, and Other Wagering Transactions
      • Instructions for Sweepstakes, Wagering Pools, and Lotteries
      • Instructions for Bingo, Keno, and Slot Machines
    • Form 104 (FinCEN), Currency Transaction Report
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
      • Instructions
    • Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts
      • Who Must File and under What Circumstances?
      • Amount to Report
      • Exceptions
      • When Do I File?
    • Appendix - Selected Forms
  • Chapter 9 - Information Return Submission, Corrections, and Other Annual Reporting
    • Issues
    • Learning Objectives
    • Introduction
    • Recent Changes
    • Form W-9, Request for Taxpayer Identification Number and Certification
      • Substitute Form W-9
      • Electronic Acceptance of Form W-9
      • Completing the Form W-9
      • Required Solicitations
      • Exceptions to the Two Annual Solicitations
    • Taxpayer Identification Number (TIN) Matching Program
    • What Name Do I Report on the Information Return?
    • Submitting Information Returns
      • Electronic/Magnetic Transmittal
      • Extensions
      • Completing Form 1096
    • Correcting Information Returns
      • Missing or Incorrect TINs
      • Incorrect Payer Name and/or TIN
      • Incorrect Name and/or Address
      • Original Return Was Filed Using the Wrong Type of Return
      • Incorrect Amounts, Code, or Checkbox
      • An Information Return was Filed in Error
      • Original Return Was Filed Using the Wrong Type of Return
      • Other Corrections
    • Backup Withholding
      • When Is the Payer Required to Withhold?
    • Notices from the IRS
    • Potential Penalties
      • Other Penalties
    • Retention
    • Appendix - Excerpts from Publication 1281
  • Chapter 10 - Other Information Return Submissions and Form 945
    • Learning Objectives
    • Introduction
    • Recent Changes
    • Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding
      • Submission
      • Extensions
      • Corrections
    • Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations
      • Submission
      • Extensions
    • Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business
      • Submission
      • Extensions
    • Form 8300 (IRS/FinCEN Form), Report of Cash Payments over $10,000 Received in a Trade or Business
      • Submission
      • Correction
    • Form 8308, Report of a Sale or Exchange of Certain Partnership Interests Submission
    • Form 104 (FinCEN), Currency Transaction Report
      • Submission
    • Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation
      • Submission
      • Extensions
    • Form W-2, Wage and Tax Statement
      • Submission
      • Extensions
      • Corrections
    • Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts
      • Submission
    • Form 945, Annual Return of Withheld Federal Income Tax
      • Pension and Annuity Payments
      • Distributions of Indian Gaming Profits to Tribal Members
      • Deposit Requirements
      • Determining Monthly versus Semiweekly Deposit Status
      • $100,000 Next-Day Deposit Rule
      • Payments to an Authorized Financial Institution
      • Electronic Federal Tax Payment (EFTPS)
      • Annual Reporting
      • Form 945-V, Payment Voucher
    • Appendix - Selected Forms
  • Chapter 11 - Ethics Focus: Taxation
    • Ethics Overview
    • Recent Developments
    • Spotlight on Independence in Tax Services
    • Key Ethical Dilemmas and Judgment Calls
    • Addressing Ethical Dilemmas
    • Available Resources
  • Chapter 12 - Latest Developments

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Excerpts

Chapter 1

Overview, Update, and Reference Guide

Learning Objectives

After completing this chapter, you should be able to:

  • Find resources for forms required for payroll tax administration.
  • Identify resources available to help with payroll tax administration.
  • Find resources for publications available to help with payroll tax administration.

Introduction

This course is written to provide basic information on payroll taxes. This reference guide is not a legal reference (except for the IRS publications found in the back of the book). Each situation must be researched in full before making a determination. Many references and resources are quoted throughout the book for your use.

Many participants come to AICPA classes to learn what is new in areas they practice. This chapter contains updates, a guide to payroll forms and publications, due dates of various payroll tax items and various websites that will be helpful to those involved in payroll.

Payroll Tax Dates — 2006

By January 31 Furnish W-2 to employees for 2005 wages.
Furnish Forms 1099 to payees.
File Form 940 or 940-EZ (ten extra days if all deposits were made timely).
File Form 945 to report any nonpayroll income tax withheld.
By February 15 Obtain a new Form W-4 from 2005 exempt employees.
On February 16 Exempt Forms W-4 expire - begin withholding for employees who previously claimed exemption from withholding but have not submitted a new Form W4.
By February 28 File paper Copy A of Forms 1099 with Form 1096 if applicable.
File paper Copy A of Forms W-2 with Form W-3 with the Social Security Administration if applicable.
File Form 8027, Employers Annual Information Return of Tip Income & Allocated Tips.
By March 31 File electronic Forms 1099, W-2 (to the Social Security Administration) and 8027. (Magnetic media is no longer acceptable.)
By May 11 Deposit FUTA taxes if more than $500.
File Form 941 and deposit any undeposited income, Social Security, and Medicare taxes (may pay up to $2,500 with the return). Ten additional days to file if all deposits were paid timely.
By July 31 Deposit FUTA taxes if more than $500.
File Form 941 and deposit any undeposited income, Social Security, and Medicare taxes (may pay up to $2,500 with the return). Ten additional days to file if all deposits were paid timely.
By October 31 Deposit FUTA taxes if more than $500.
File Form 941 and deposit any undeposited income, Social Security, and Medicare taxes (may pay up to $2,500 with the return). Ten additional days to file if all deposits were paid timely.
By January 31, 2007 Deposit FUTA taxes if more than $500.
File Form 941 and deposit any undeposited income, Social Security, and Medicare taxes (may pay up to $2,500 with the return). Ten additional days to file if all deposits were paid timely.
Before December 1 New Form W-4 are due from employees if their withholding allowances have changed or will change for the next year.
On January 1, 20072 Form W-5 expires and a new W-5 is required to receive advance payments in the next year.

Recent Changes - 2006

For returns filed after June 30, 2005, corporate officers or authorized agents may now sign the return with a rubber stamp, mechanical device, or a computer software program.3

Small businesses with annual employment tax liability of $1,000 or less are eligible to file the new Form 944, Employers’ Annual Federal Tax Return. Notification will be sent in February 2006 to eligible businesses, and new businesses apply for annual filing when requesting the employer identification number.

Signatures - As indicated above, for returns filed after June 30, 2005, corporate officers or authorized agents may now sign the return with a rubber stamp, mechanical device, or a computer software program.4

Annual Reporting of Withholding - Small businesses with annual employment tax liability of $1,000 or less are eligible to file the new Form 944, Employers’ Annual Federal Tax Return. Notification will be sent in February 2006 to eligible businesses, and new businesses apply for annual filing when requesting the employer identification number.

Form W-3PR Change - Form W-3PR, Transmittal of Withholding Statements - Puerto Rico was expanded to 7 inches wide and is required to be printed on 8.5 by 11 inch paper using a .5- inch top margin with .75-inch left and right margins.

Filing with Magnetic Media - Magnetic media is no longer an acceptable method of filing after tax year 2004 for returns filed in 2005. Diskette (3½ inch) filing is not an acceptable method of filing after tax year 2005 and will not be accepted after February 28, 2006.

Publication 1141 Change - Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3, is now only available for downloading from the IRS website. However, the revenue procedure is still released as hard copy in the Internal Revenue Bulletin.

Reporting Withholding Income Taxes on Nonresident Alien Employees' Wages - All wages paid after December 31, 2005, to nonresident alien employees require employers to use a new procedure to calculate the amount of federal income tax withholding.

Pay taxes with credit cards - Effective with 2006 filings, employers may pay any balance due on Forms 940 or 941 by credit card.

Ordering Employer Tax Products - 2006 is the last year employers will receive an order blank at the end of most publications containing employer tax products and information returns. The IRS now encourages for faster service ordering 2005 and 2006 forms online at www.irs.gov/businessses - selecting "Online Ordering of Employer Forms."

Videocourse Details

NASBA Field of Study: Taxes
Level: Advanced
Recommended CPE Credit: 10
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