Presented Wednesday, February 19, 2014 1
Presented Wednesday, February 19, 2014 1 ©The Payroll Advisor, 2014 2 RCH Credit 3 Once approved, to earn RCH, you must Stay on the webinar for the full 60 minutes Be watching the webinar using your unique URL Certificates delivered electronically, to email address with which you registered Certificates delivered no later than March 19th ©The Payroll Advisor, 2014 About the Speaker 4 Vicki M. Lambert, CPP, is President and Academic Director of Vicki M. Lambert, LLC, a firm specializing in payroll education and training. Known as “The Payroll Advisor,” Ms. Lambert is Founder and Director of www.thepayrolladvisor.com, a website that provides unique and expert services for anyone dealing with the complexities and technicalities of the payroll process. As an adjunct faculty member at Brandman University, Ms. Lambert is the creator and instructor for the Practical Payroll Online payroll training program, which is approved by the APA for recertification credits. Topics We Will Cover Today… 5 What’s new for 2014 Line by line review of the form Tips for completing the Schedule B Tips for balancing and reconciling the forms Due dates Penalties Correcting the form ©The Payroll Advisor, 2014 Purpose of Form 941 6 The IRS Form 941 was created to report and reconcile the payments made to the IRS for the income tax and FICA taxes during a quarter period. The Form 941 requires that the employer calculate the amount of tax due, and then demonstrate that the payment for the tax liability was made on time. ©The Payroll Advisor, 2014 Who Should Complete the Form 7 Each quarter, all employers who pay wages subject to income tax withholding (including withholding on sick pay and supplemental unemployment benefits) or Social Security and Medicare taxes must file Form 941, Employer's Quarterly Federal Tax Return, by the last day of the month that follows the end of the quarter. ©The Payroll Advisor, 2014 Exceptions to Filing Form 941 8 Seasonal employers who no longer file for quarters when they regularly have no tax liability because they have paid no wages. Household Employers Reporting Social Security And Medicare Taxes and/or Withheld Income Tax. Employers Reporting Wages For Employees In American Samoa, Guam, The Commonwealth Of The Northern Mariana Islands, The U.S. Virgin Islands, Or Puerto Rico. Agricultural Employers Reporting Social Security, Medicare, And Withheld Income Taxes. Smaller employers designated by the IRS. ©The Payroll Advisor, 2014 Penalties 9 For each whole or part month a return is not filed when required, there is a failure-to-file penalty of 5% of the unpaid tax due with that return. The maximum penalty is 25% of the tax due. Also, for each whole or part month the tax is paid late a failureto-pay penalty of 0.5% per month of the amount of tax generally applies. Reduced to 0.25% per month if installment agreement is in effect--must have filed their return on or before the due date of the return to qualify for the reduced penalty. The maximum for this penalty is also 25% of the tax due. The penalties will not be charged if there is a reasonable cause for failing to file or pay. If both penalties apply an any month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty ©The Payroll Advisor, 2014 Penalties 10 Use of a reporting agent or other third-party payroll service provider does not relieve an employer of the responsibility to ensure that tax returns are filed and all taxes are paid or deposited correctly and on time. ©The Payroll Advisor, 2014 Where and When to File Form 941 11 Employers should file starting with the first quarter in which they are required to withhold income tax or pay wages subject to Social Security and Medicare taxes. ©The Payroll Advisor, 2014 Where and When to File 12 Quarter Ending Due Date Jan.-Feb.-Mar. March 31 April 30 Apr.-May-June June 30 July 31 July-Aug.-Sept. Sept. 30 Oct. 31 Oct.-Nov.-Dec. Dec. 31 Jan. 31 ©The Payroll Advisor, 2014 Where and When to File 13 If an employer made deposits on time in full payment of the taxes for a quarter, the employer has 10 more days after the above due date to file. The return will be considered timely filed if it is properly addressed and mailed first class or sent by an IRS designated delivery service on or before the due date. See Circular E for more information on IRS designated delivery services. If the due date for filing a return falls on a Saturday, Sunday, or legal holiday, then the return may be filed on the next business day. ©The Payroll Advisor, 2014 Where to File Form 941 14 Depends on which state employer is located in and whether or not a payment is included with the form. For example Georgia employers without a payment would file report at: ◦ Department of the Treasury Internal Revenue Service Cincinnati, OH 45999-0005 But with a payment would file at: ◦ Internal Revenue Service P.O. Box 804522 Cincinnati, OH 45280-4522 ©The Payroll Advisor, 2014 Filing the Form 941 15 Two electronic methods: The 941 e-file program Electronic Filing by reporting agents (your payroll processor) Can file paper form as well ©The Payroll Advisor, 2014 Completing the Form 941 16 Next series of slides will cover a step by step for completing the Form 941. But first the basics: Use 12-point Courier font (if possible) for all entries if you are typing or using a computer to fill out your form. Omit dollar signs and decimal points. Commas are optional. (Report dollars to the left of the preprinted decimal point and cents to the right of it.) ©The Payroll Advisor, 2014 Completing the Form 941 17 Leave blank any data field (except lines 1, 2 and 10) with a value of zero. Enter negative amounts with a minus sign if possible otherwise use parentheses. Enter your name and EIN on all pages and attachments. (Filers using the IRSpreaddressed Form 941 are not required to enter their name and EIN on page 2.) Form on IRS website can be completed and saved online. ©The Payroll Advisor, 2014 18 ©The Payroll Advisor, 2014 Form 941 for 2014 19 Added: • Foreign country name • Foreign province/county • Foreign postal code ©The Payroll Advisor, 2014 Form 941 for 2014-Line 11 Change 20 2013 2014 Line 11 now lists the 941-X and 944-X for PR ©The Payroll Advisor, 2014 Form 941 for 2014-Lines 12 & 13 21 2013 2014 • Lines 12a, 12b are gone • Line 12 is now balance due • Line 13 is now for overpayments ©The Payroll Advisor, 2014 Form 941 for 2014 22 2013 What were lines 14, 15 & 16 in 2013 2014 Are Now Lines 12, 13 & 14 2014 ©The Payroll Advisor, 2014 Form 941 for 2014 23 2013 What were Part 3 lines 17 & 18 in 2013 Are Now Lines 15 & 16 in 2014 2014 ©The Payroll Advisor, 2014 Our First Polling Question 24 Before we continue our discussion let’s take our first polling question of the day… ©2014 The Payroll Advisor Top of Form 25 Make sure you have the right version ©The Payroll Advisor, 2014 This is marked each quarter as appropriate Part 1 Lines 1, 2, 3 & 4 26 This is the number of employees for the quarter This is the federal income taxable wages for the quarter ©The Payroll Advisor, 2014 This is the total FIT withheld from the employees for the quarter Lines 5 a-e: Calculating FICA 27 Additional Medicare Taxable Wages and Withholding is line 5d SS wages for quarter Medicare wages for quarter Do the math Both employee and employer rates are used Add the SS and Medicare amounts together ©The Payroll Advisor, 2014 Line 5f 28 Enter the tax due from a Section 3121(q) Notice and Demand on this line. This notice will advise the employer the amount of tips received by employees who either failed to report or underreported tips to the employer as determined by the IRS. Employers are not liable for the employer share of FICA taxes until the Notice and Demand is received. Do not wait to deposit taxes until the Form 941 is due unless the employer normally makes their tax deposit with the Form 941. Deposit the tax within the normal deposit schedule for the employer. ©The Payroll Advisor, 2014 Line 6: Total taxes before adjustments 29 Add the total federal income tax withheld from wages, tips, and other compensation (line 3) and the total social security and Medicare taxes before adjustments (line 5d) plus line 5e if needed The math: line 3 + line 5e + line 5f = Line 6 ©The Payroll Advisor, 2014 Before Doing Line 7…Stop and Do the Schedule B… 30 The small difference between your payroll totals for FICA and your calculated totals for FICA are known by the IRS as “fractions-of-cents adjustments The amounts on the Schedule B are not adjustable. These are the amounts of the actual liability. The Form 941 is calculated so it can be adjusted. Complete the Schedule B and compare to the Form 941. Adjust on line 7… ©The Payroll Advisor, 2014 31 ©The Payroll Advisor, 2014 Balancing to the Penny… 32 The amounts on the Form 941 and the Schedule B must balance to the penny No rounding Close enough won’t get it ©The Payroll Advisor, 2014 Adjustments on Line 7 33 There will always be adjustments for line 7 When you calculate the FICA taxes payroll by payroll you will arrive at a different answer than when you calculate the taxes as one lump sum times the rate. There will always be penny differences. This is what fractions of cents is for. From $0.01 to $1.00 is usually normal. ©The Payroll Advisor, 2014 Line 8… 34 Line 8 is used for adjusting FICA for third party sick pay Enter the adjustment for the employee share of social security and Medicare taxes that were withheld and deposited by the third-party sick pay payer. These wages are included on lines 5a and 5c. Third party sick payer will enter the adjustment for any employer share of these taxes required to be paid by the employer. Example: Paul’s Plumbing, Inc. included taxes of $2,000 for thirdparty sick pay on lines 5a and 5c columns 2. However the Acme Insurance, the company’s third-party sick pay provider withheld and paid the employee’s share of these taxes totaling $1,000. Paul’s Plumbing, Inc. is entitled to a negative $1,000 sick pay adjustment on line 8. ©The Payroll Advisor, 2014 Line 9 35 Enter adjustments for: Any uncollected employee share of social security and Medicare taxes on tips and the uncollected employee share of social security and Medicare taxes on group-term life insurance premiums paid for former employees. If by the 10th of the month after the month the employee’s report on tips is received if you don’t have enough funds to withhold the employee share of social security you are no longer required to collect it. Report the entire amount of these tips on lines 5b and 5c. Include negative adjustment on line 9 for the total uncollected employee share of social security and Medicare taxes. ©The Payroll Advisor, 2014 Example: Group Term 36 Paul’s Plumbing, Inc. paid group term life insurance premiums for policies in excess of $50,000 for former employees. Paul’s Plumbing, Inc. must include the employee share of these taxes on line 5a and 5c columns 2. The former employees’ share of the taxes amounts to $200. The former employees must pay their own share of the social security and Medicare taxes. Therefore Paul’s Plumbing, Inc. is entitled to a negative $200 adjustment on line 9. ©The Payroll Advisor, 2014 Line 10: Total Taxes After Adjustment 37 Add lines 6e through 9 together. This amount should match your deposits. Unless an error is actually made on the deposits. To match your deposits is the goal of lines 6-9 and why you do the adjustments--10 will match exactly. ©The Payroll Advisor, 2014 Line 11 Total Deposits 38 This is the amount you actually paid in tax deposits throughout the quarter. Again this is why you adjust lines 7-9 to this figure. ©The Payroll Advisor, 2014 Lines 12 and 13 39 If you made an error and over-deposited or under-deposited what was due in taxes for the quarter, this is where it will show. Once again no fractions of cents should be here. Use Line 7 to adjust for that. ©The Payroll Advisor, 2014 ©The Payroll Advisor, 2014 40 Our Second Polling Question 41 Before we continue on with our webinar let’s do our second polling question of the day focusing on adjustments on the Form 941 ©2014 The Payroll Advisor Part 2 Line 14 42 Monthly depositor If you are a monthly depositor you will fill in that section. If you are semiweekly you will do a schedule B. ©The Payroll Advisor, 2014 Part 3 Lines 15 & 16 43 If it applies complete it , if not leave it blank ©The Payroll Advisor, 2014 Part 4 Third-Party Designee 44 Payroll person The person who signs the form is the one who the IRS will speak to. If the payroll clerk needs to contact the IRS then the name goes here. ©The Payroll Advisor, 2014 Part 5 Sign Here 45 Needs to be signed by someone who is authorized for the company such as controller, VP of Finance, or President. Listed on the Form SS-4 for example. ©The Payroll Advisor, 2014 Schedule B 46 If you are a semiweekly depositor you will need to complete a Schedule B to accompany your Form 941. Schedule B will list the dates of your payroll liabilities or paydays and the amount of the taxes that were due. ©The Payroll Advisor, 2014 Total taxes for each payroll Total taxes or liability for each month Total of the 3 months for the quarter 47 ©The Payroll Advisor, 2014 Completing the Schedule B 48 Add the employee FIT and FICA together along with the matching employer FICA and put that on the form for each payroll of the month. Do it for all three months ©The Payroll Advisor, 2014 Completing Schedule B 49 Put the totals in the tax liability for each month. Then put in the total liability for the quarter. This figure matches the line 10 on the Form 941 and should match the deposits on line 11 of the Form 941 if no errors have been made ©The Payroll Advisor, 2014 Other Forms for Other Employers 50 There are several other types of Forms 941 in the series Form 941M Form 941PR Form 941SS Form 943 Form 944 ©The Payroll Advisor, 2014 Form 941M 51 This form is not for general public use. An employer would file Form 941-M on a monthly basis when required by an IRS compliance representative to report income taxes withheld, social security taxes, and Medicare taxes. The Form 941M should be filed directly with an IRS compliance representative. The IRS may require monthly returns on this form and payments of tax from any employer who has not complied with the requirements for the filing of returns or the paying or depositing of taxes reported on quarterly returns. ©The Payroll Advisor, 2014 Form 941PR and 941SS 52 Used by employers who have employees in Puerto Rico or other commonwealths outside the United States. Employers that pay wages to workers located in Puerto Rico must use Form 941PR, “Employer's Quarterly Federal Tax Return for Puerto Rico,” to report the wages and employment taxes withheld. The deposit and reporting requirements imposed on an employer that must file Form 941-PR are similar to those of Form 941. The form on the IRS website is in Spanish, but English versions are available from the Government of Puerto Rico. Employers would use Form 941-SS if their principal place of business is in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, or the U.S. Virgin Islands, or if they have employees who are subject to income tax withholding for these jurisdictions. ©The Payroll Advisor, 2014 Form 943 53 Form 943, “Employer's Annual Tax Return for Agricultural Employees,” must be filed every calendar year to report the employer and employee portions of FICA taxes on wages paid to agricultural employees. This requirement is imposed if the wages paid to the agricultural employee exceed a “cash pay” test. Form 943 is also used to report taxes on wages of domestic employees who work in a private home on a farm operated for profit. ©The Payroll Advisor, 2014 Form 944 54 Form 944, Employer's ANNUAL Federal Tax Return, is designed so the smallest employers (those whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less) will file and pay these taxes only once a year instead of every quarter. The form was new for calendar year 2006. Generally, the annual Form 944 is due January 31. ©The Payroll Advisor, 2014 Correction Form—Form 941X 55 IRS introduced 941X Form in 2009 Stand alone forms do not attach to 941 Discontinue using Form 941c as of Dec 31, 2008. Use corresponding 94X series for Forms 941, 943, 944, 945, and CT-1 Latest version April, 2013 Revised version pending April, 2014 ©The Payroll Advisor, 2014 ©The Payroll Advisor, 2014 56 Purpose 57 Use Form 941-X to correct: Wages, tips, and other compensation; Income tax withheld from wages, tips, and other compensation; Taxable social security wages; Taxable social security tips; Taxable Medicare wages and tips; Taxable wages and tips subject to Additional Medicare Tax withholding; ©The Payroll Advisor, 2014 Purpose 58 Advance earned income credit (EIC) payments made to employees (for quarters ending before January 1, 2011); Credits for COBRA premium assistance payments; Credits for qualified employer's share of social security tax on wages/tips paid to qualified employees March 19– 31, 2010 (second quarter 2010 only); and Exemptions for qualified employer's share of social security tax on wages/tips paid to qualified employees (for quarters ending after March 31, 2010, and before January 1, 2011). ©The Payroll Advisor, 2014 General Filing Rules 59 Do not use Form 941-X to correct other forms such as 944 or 945—use that form’s version such as 944-X or 945-X Report the correction of underreported and overreported amounts for the same tax period on a single Form 941-X Exception: If requesting a refund or abatement ©The Payroll Advisor, 2014 Due Dates 60 The due date for filing depends on two factors When the error is discovered If the employer underreported or over-reported tax The process used depends on when the Form 941-X is filed There is a 90 day period of limitations If any due date falls on a Saturday, Sunday or legal holiday, the form may be filed on the next business day ©The Payroll Advisor, 2014 Due Date—Underreported Tax 61 If correcting underreported tax the form must be filed by the due date of the return for the period in which the error was discovered and must pay the amount owed by the time of filing If the error is discovered in Form 941-X is due 1. January, February, March April 30 2. April, May, June July 31 3. July, August, September October 31 4. October, November, December January 31 The dates shown in this table apply only to corrections of underreported amounts. ©The Payroll Advisor, 2014 Due Date Over-reported Taxes 62 For over-reported taxes there are two choices: Credit: If you choose to apply the credit to a Form 941 file the Form 941-X soon after the error is discovered but more than 90 days before the period of limitations on the credit or refund for the Form 941 expires Claim: if you choose to file a claim must do so before the period of limitations on credit or refund expires for Form 941 ©The Payroll Advisor, 2014 Completing the Form 63 It is a five-section form plus the employer information area 25 lines are available for completion Part 1– Selecting the Process lines 1 and 2 Part 2: The Certifications Lines 3 - 5 Part 3: Corrections Lines 6 – 22 Part 4: Explanations of corrections Lines 23 – 25 Part 5: Signature ©The Payroll Advisor, 2014 Completing the Form 64 All of the information concerning the employer must be provided In Part 1 one box (but not both) must be checked Part 2 the box on line 3 must be checked and any applicable boxes on line 4 and 5 Part 3: if any line does not apply leave it blank Show negative amounts or reductions with minus sign (-) and positive amounts to show additional tax ©The Payroll Advisor, 2014 Final Polling Question of the Day 65 Let’s pause before we finish discussing the Form 941-X to take our final polling question of the day… ©2014 The Payroll Advisor Info Area 66 Enter the EIN, name and address of the employer Also enter on the top of pages 2 and 3 and any attachments If the address has changed enter the new address and the IRS will update the records ©The Payroll Advisor, 2014 Info Area 67 Indicate the return being corrected Check the appropriate box for the one quarter being corrected Enter the calendar year of the Form 941 being corrected Enter the date the error is discovered ©The Payroll Advisor, 2014 Part 1: Select ONLY one process 68 Because Form 941-X may be used to file either an adjusted employment tax return or a claim for refund or abatement one box must be checked in Part 1 Do not check both boxes ©The Payroll Advisor, 2014 Part 1: Select ONLY one process 69 Check the box on line 1 if correcting underreported amounts or over-reported amounts and the adjustment process will be used to correct the errors Box 1 must be checked if correcting both underreported and over-reported amounts X ©The Payroll Advisor, 2014 Part 1: Select ONLY one process 70 Any negative amount on line 22 will be applied as a credit (tax deposit) to the Form 941 for the period in which the form is being filed X ©The Payroll Advisor, 2014 Part 1: Select ONLY one process 71 Check the box on line 2 to use the claim process if correcting over-reported amounts only and claiming a refund or abatement for the negative amount (credit) shown on line 22 Do not check this box if correcting any underreported amounts on the form X ©The Payroll Advisor, 2014 Part 2: Complete the certifications 72 ©The Payroll Advisor, 2014 Part 3: Enter the Corrections for this Quarter 73 This is where the corrections are entered Enter all the amounts for all of the employees not just the amounts being corrected Enter both over-reported amounts and underreported amounts—explain the details on line 25 Column 1 is the total corrected amount Column 2 is the amount originally reported Column 3 is the difference between the two Column 4 is the tax correction ©The Payroll Advisor, 2014 Part 4: Line 24 74 Were any workers reclassified? This box is checked ©The Payroll Advisor, 2014 Part 4: Line 25 75 You must explain all corrections made And no “made an error” will no longer work Must give details including all the facts relied upon to support each correction entered on lines 6 – 20d Attach additional sheets if more space is needed Must describe the events that caused the overpayment or underpayment ©The Payroll Advisor, 2014 Part 4: Line 25 76 Cannot just use “social security was overstated” Provide the following for each correction: Form 941-X line number(s) affected Date error was discovered Difference (amount of error) Cause of the error ©The Payroll Advisor, 2014 Part 4: Line 25--Example 77 The $1,000 difference shown in column 3 on lines 6, 8, and 10 was discovered on May 16, 2013, during an internal payroll audit. We discovered that we included $1,000 of wages for one of our employees twice. This correction removes the reported wages that were never paid ©The Payroll Advisor, 2014 And Finally You Must Sign 78 ©The Payroll Advisor, 2014 Reconciling Form 941 79 Quarterly to the payroll records Quarterly to the Form W2 files Annually to the payroll records Annually to the Form W-2 prior to filing with the SSA ©The Payroll Advisor, 2014 SSA Reconciliation Points 80 Compare the amounts to be reported to SSA on Form W-3 to the sum of the amounts you reported to IRS on Forms 941, 943, 944, or Schedule H for the tax year. The following amounts on the IRS and SSA report should match: Item W-2 Block 941 Line 944 Line Social Security Wages 3 5a 4a Social Security Tips 7 5b 4b Medicare Wages/Tips 5 5c 4c Additional Medicare Wages/Tips 5 5d 4d Federal Income Tax Withheld 2 3 2 ©The Payroll Advisor, 2014 Reconciliation of Form 941 to Form W-2 81 Lines on Form 941 2—Total Wages and tips and other compensation 3—Total income tax withheld from wages, tips and other compensation 5a – Taxable Social Security wages column 1 5a column 2 T o T o T o T o T o Boxes on Form W-2 1—Wages, tips other compensation 2–Federal income tax withheld 3—Social security wages 4 – Social security tax withheld 5c –Taxable Medicare wages and tips column 1 5d—Taxable wages & tips subject to Additional Medicare Tax withholding 5c & 5d column 2 combined ©The Payroll Advisor, 2014 T o 5 – Medicare wages and tips T o 6 – Medicare tax withheld ©The Payroll Advisor, 2014 82 83 ©The Payroll Advisor, 2014 Handling IRS Notices 84 Any correspondence from IRS is an IRS Notice. Always respond in writing—never call unless you have a “friend” at the IRS. State the problem, state the findings, state the solution, request the penalties and interest be removed. ©The Payroll Advisor, 2014 Tips for Dealing With the IRS 85 Always be courteous Give them three chances— no more and no less Send the same letter every time 6 weeks at a time Always ask for a “freeze” on your account ©The Payroll Advisor, 2014 What We Covered Today… 86 What’s new for 2014 Line by line review of the form Tips for completing the Schedule B Tips for balancing and reconciling the forms Due dates Penalties Correcting the form ©The Payroll Advisor, 2014 Are There Any Questions? 87 ©The Payroll Advisor, 2014 How Can Ascentis Help Me? 88 Relax with Ascentis Tax Service Convenient and cost-effective solution for managing your payroll taxes Never pay another payroll tax penalty again for late filing Compliant with the Electronic Federal Tax Payment System (EFTPS) for all tax payments Electronic filing of your monthly and quarterly tax returns Ascentis stays up-to-date on all the tax law changes so you don’t have to Knowledgeable tax operations staff available to answer questions and help avoid problems Eliminate the hassle of year-end preparation and filing of W-2s and 1099s Customized and detailed tax summary statements RCH Credit 89 Once approved, to earn RCH, you must Stay on the webinar for the full 60 minutes Be watching the webinar using your unique URL Certificates delivered electronically, to email address with which you registered Certificates delivered no later than March 19th ©The Payroll Advisor, 2014 Download Slides? Watch again? 90 ©The Payroll Advisor, 2014 On-Demand Webinars? 91 The ABC’s of Payroll Frequencies Form 941: All You Need to Know Going Paperless in Payroll Handling Unclaimed Wages Travel Pay Fringe Benefits Third Party Sick Pay And many more Watch from anywhere, at anytime, at no cost to you! ©The Payroll Advisor, 2014 Contact Us 92 [email protected] www.ascentis.com 800.229.2713 ©The Payroll Advisor, 2014
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