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Tag Archive for Form 941

Trust Fund Recovery: Penalties & Pitfalls

Manasa Nadig

I for one am glad that 2016 finally ended. Coming out of a contentious election with a boat load of vitriol thrown around, I don’t know about you, but I was swinging between the need for relief for it all to be over and the fear of who would take over the presidency and if it would go into capable hands. I am so glad tax season started so I can get to the business of preparing returns!

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A Practical Guide To The Enhanced R&D Tax Credit Program For Eligible Small Businesses And Eligible Start-Ups

Peter Scalise

The Federal-Level Research and Development Tax Credit Program (hereinafter “RTCP” or “RTC”) was originally enacted into the Internal Revenue Code (hereinafter “the Code”) through the Economic Recovery Tax Act of 1981 as a temporary provision of the Code at a time when research and development jobs were significantly declining throughout the United States. Notably, the RTCP was introduced into the Code to encourage businesses to invest in significant research and development efforts with the high expectations that such an advantageous tax incentive program would facilitate in stimulating economic growth and investment throughout the United States and prevent further jobs from being outsourced to other countries.

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August 2015 Business Due Dates

August 10 – Social Security, Medicare and Withheld Income Tax

File Form 941 for the second quarter of 2015. This due date applies only if you deposited the tax for the quarter in full and on time.

August 17 – Social Security, Medicare and Withheld Income Tax

If the monthly deposit rule applies, deposit the tax for payments in July.

August 17 – Non-Payroll Withholding

If the monthly deposit rule applies, deposit the tax for payments in July. Read more

May 2015 Business Due Dates

May 11 – Social Security, Medicare and Withheld Income Tax

File Form 941 for the first quarter of 2015. This due date applies only if you deposited the tax for the quarter in full and on time.

May 15 – Employer’s Monthly Deposit Due

If you are an employer and the monthly deposit rules apply, May 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for April 2015. This is also the due date for the non-payroll withholding deposit for April 2015 if the monthly deposit rule applies.

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Offbeat Questions Are The “Spices of Life” Regarding Simplified Employee Pension (SEP)

Can You Establish a SEP Plan if you are a Sole Proprietor? What if that Sole Proprietorship Had Historically Passive Income?

Regardless of their nature or topic matter, offbeat questions are one of the spices of life. When it comes to the realm of taxation generally speaking the answers frequently distill down to – it depends.

These two questions were asked of me on my last trip to New York City and I couldn’t restrain a spontaneous sarcastic guffaw as we were in the middle of the Museum of Modern Art attempting to comprehend the Matisse Cut-Out Exhibit and I was day dreaming that my 10 year old daughter may perhaps be an artistic genius. Read more

Tax Shock for Foreign Employer With US Employees: Learn Your Withholding Duties

TaxConnections Picture - IncomeIt may come as a shock to foreign (non-US) companies and other foreign businesses to learn that they may have US tax withholding obligations with respect to their US employees, even if the foreign business is not in any way involved in US activity. Pursuant to the US Internal Revenue Code, an employer is required to withhold federal income and social security taxes from the wages of its US employees. Every quarter, the employer must file a Form 941, the Employer’s Quarterly Tax Return, reporting the amount of income and social security tax withheld during the period. A Federal Tax Deposit Form must be filed with the remittance of the withholding taxes the month following the close of each quarter.

Income Tax Withholding

With certain exceptions, every employer making payment of “wages” to US employees is required to deduct and withhold upon those wages an income tax determined in accordance with Internal Revenue Services procedures.

For income tax withholding purposes, “wages” is defined, with certain exceptions, as all remuneration for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash. The term “wages” includes remuneration for services performed by a citizen or resident of the United States as an employee of a nonresident alien individual, foreign partnership, or foreign corporation whether or not such alien individual or foreign entity is engaged in a trade or business within the United States. Thus, for example, a foreign partnership without any US activities is responsible for income tax withholding on wages paid to its US person employees. Read more

Retroactive Procedures Implement Qualified Transportation Fringe Benefits Parity For 2012

Edited and Posted by: Harold Goedde, CPA, CMA, Ph.D.

The IRS has provided procedures for employers to use to handle the retroactive application of the increased amount of the 2012 income exclusion for monthly transit benefits. The American Taxpayer Relief Act of 2012, P.L. 112-240 (the Act), retroactively reinstated parity between the benefits for parking and the benefit for transportation in a commuter highway vehicle or a transit pass for 2012 under Sec. 132.

The parity expired at the end of 2011, so that for all of 2012 the maximum that could be excluded from income for transportation in a commuter highway vehicle or a transit pass was $125 per month, while the amount allowed for parking was $240 per month. As a practical matter, taxpayers received their benefits for 2012 at these rates, and it was unclear what the mechanism would be to refund the income and FICA tax paid on amounts that would have been excluded from income under the higher $240 a month level (referred to as “excess transit benefits”).

On January 16, the IRS released Notice 2013-8 to provide simplified procedures for employers to use in filing Form 941, Employer’s Quarterly Federal Tax Return, for the fourth quarter of 2012  to reflect changes in the excludable amount for transit benefits provided in all quarters of 2012, and in filing Forms W-2, Wage and Tax Statement.

The procedures address only the over-collected FICA taxes resulting from the lower transit benefit amount. In cases of over-collected FICA tax, employers are generally required to repay or reimburse to employees the amount of over-collected  FICA tax. However, employers cannot adjust over payments of income tax after the end of the calendar year (Regs. Sec. 31.6413(a)_1(b)).

Special rules for employers that have not yet filed their final Form 941 for 2012:

To use this special FICA tax on the excess transit benefits for all four quarters of 2012 on or before filing the fourth quarter Form 941. The employer, in reporting amounts on its fourth quarter Form 941, may reduce the fourth quarter “Wages, tips, and compensation” reported on line 2, “Taxable social security wages” reported on line 5a, and “Taxable Medicare wages & tips” reported on line 5c, by the excess transit benefits for all four quarters of 2012. Employers who use this special administrative procedure will avoid having to file Forms 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, and Forms W-2c, Corrected Wage and Tax Statement.

Employers may correct only the employer share of FICA tax that corresponds to the employees’ share of FICA tax that has been repaid or reimbursed to the employees. Employers using this special procedure do not need to obtain written statements from each employee confirming that the employee did not make a claim (or if the employee did make a claim, the claim was rejected) and will not make a claim for refund of FICA tax over-collected in a prior year, which is usually required when employers refund FICA tax to employees.

Employers that have not repaid or reimbursed some or all employees who received excess transit benefits in 2012 by the time they file their fourth quarter Form 941 must use Form 941-X  to make an adjustment or claim for refund for the excess transit benefits provided to those employees and must follow the normal procedures, which include obtaining a statement from employees.

Rule for employers that already filed final fourth quarter Form 941 for 2012:

Employers that already filed a final fourth quarter Form 941 for 2012 must use Form 941-X to make an adjustment or claim a refund for any quarter in 2012 for the overpayment of tax on the excess transit benefits, after repaying or reimbursing the employees or, for refund claims, securing consents from employees.

Special instructions for Forms W-2:

Those employers that have not yet provided 2012 Forms W-2 to their employees should take into account the increased exclusion for transit benefits in calculating the amount of wages reported in box 1, “Wages, tips, other compensation”; box 3, “Social security wages”; and box 5, “Medicare wages and tips.” Employers that have already repaid or reimbursed their employees for the over-collected FICA taxes before furnishing Form W-2 should reduce the amounts of withheld tax reported in box 4, “Social security tax withheld,” and box 6, “Medicare tax withheld,” by those amounts. Employers, however, must report in box 2, “Federal income tax withheld,” the amount of income tax actually withheld during 2012. The employee will be able to apply this additional income tax withholding against the employee’s taxes on Form 1040, U.S. Individual Income Tax Return, for 2012.

For those employers that repaid or reimbursed their employees for the over-collected FICA taxes after they furnished Forms W-2 to their employees, but before filing Forms W-2 with the Social Security Administration (SSA), the procedures require them to check the Void box at the top of each incorrect Form W-2 (Copy A), prepare new Forms W-2 with the correct information, and send these new Forms W-2 to the SSA. The employers should also provide the employees new copies of Form W-2 marked “CORRECTED.” Employers that have already filed with SSA their 2012 Forms W-2 must file Forms W-2c to reflect the increased exclusion for transit benefits.

[Sally P. Schreiber (sschreiber@aicpa.org), senior editor, Journal of Accountancy, on-line ed. January 16, 2013]

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