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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:733111
Chapter 1
Overview, Update, and Reference Guide
Learning Objectives
After completing this chapter, you should be able to:
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."
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