Ch 3 Social Security Taxes

Form SS-4

Application for Employer Identification Number

Specifically Exempt Wages

-employer contribution to pension plan -employer-provided nondiscriminatory education assistance

Sick pay

-exempt wages only after 6 consecutive months off (personal injury) -any payment made to individuals due to personal injury or sickenss that does not constitute wages

Form 945

-Annual Return of Withheld Federal Income Tax -for non-payroll items (pensions, IRAs, etc)

taxable wages

-Cash (wages and salaries, bonuses and commissions) -Cash value of meals/lodging provided (if for employee's convenience) -Fair market value of noncash compensation -fringe benefits -bonuses -premiums on group term life insurance > $50,000 -vacation pay

Form 944

-Employer's Annual Federal Tax Return. The federal return used by filers with LESS THAN $1000 of federal employment tax liability IN THE PREVIOUS YEAR -used by new employers expecting to pay wages of $4000 or less per year

Household employees

-If they make cash wages of $2000 or more per year

Specific situations exempt from FICA

-In patriates (over 20 countries) -Expatriates subjected -Family employees (certain situations)

FICA & FIT

-always deposited together -Monthly - pay by 15th of following month -Semiweekly - if payday is W, TH, or F then due following W and if payday is S, S, M or T then due following F

SS-5

-application for a SS card to receive a SS #

SS-4

-application for an EIN (Employer Indentification Number) -used on all returns, forms, and correspondence with IRS

SECA and Independent Contractors

-can have W-2 and self employment income (count both towards calculating cap of $127,200) -must include SECA taxes in quarterly estimated payments

independent contractor

-conduct an independent trade or business -hiring agent does not pay/withhold FICA -liable for his/her own social security taxes on net earnings

Independent contractors covered by FICA

-full-time life insurance salespersons -agent and commission-drivers of food/beverages or dry cleaning -full-time traveling salespersons -individual working at home on products that employer supplies and are returned to furnished specifications

noncash compensation

-gifts over certain amounts -stock payments

Employer-provided nondiscriminatory education assistance

-job related educational expenses not subject to -FICA -payments for non-job related expenses up to $5,250

Penalties imposed for

-not filing employment tax returns on time -not paying full taxes when due -not making timely deposits -not furnishing W-2s to employees on timely basis -not filing information returns with IRS on time -not supplying identification numbers -writing bad checks

Failure-to-comply penalties

-will be added to tax and interest charges -negligence can also result in fines/imprisonment

Coverage under FICA

3 issues: -Are you an employee or an independent contractor? -Is service rendered considered employment? -Is compensation considered taxable wages?

Form 941 is divided into ________ parts.

5

Employee's FICA tax rates

6.2 percent and 1.45 percent

Net earnings

= Net income + distributive share of partnership income

common-law

A __________________relationship exists between an employee and an employer when the employer tells, or has a right to tell a worker how, when, and where to work.

EFTPS—Through a Financial Institution

A method where an electronic tax deposit is initiated by contacting an authorized financial institution. The financial institution and the treasury financial agent (TFA) process the transaction.

Form 9779

Business Enrollment Form for EFTPS

EFTPS—Direct

Electronic Federal Tax Payment System—withdraws funds from employer's bank account and route to Treasury

must withhold first paycheck after tips are reported

Employer calculates FICA on reported tips and ____

Form 941

Employer's Quarterly Federal Tax Return; form used to report accumulated amounts of FICA and federal income tax withheld from employees' earnings for the quarter, as well as FICA tax owed by the employer.

Nontaxable for FICA

Employer's matching contributions into employees' deferred compensation arrangements

FICA

Employers must collect ________taxes on tips reported by employees and for wages paid to tipped employees. Employers are also liable for their share of the ________taxes on the tips reported by employees and for wages paid to tipped employees.

12.4% OASDI 2.9% HI

How much FICA taxes are withheld from self-employment wages?

one-day rule

If $100,000 or more of federal payroll tax liability is due, taxpayer has until close of next banking day.

$200,000

If self-employment plus wages or self-employment alone exceed $_____________________, an additional 0.9% Medicare tax applies.

True

If the self-employed individual is also an employee of another company, the wages received can reduce the amount of self-employment income that is taxed.

Semiweekly depositor

More than $50,000 in employment taxes in the lookback period

$33,700

Ramsey Smith receives wages amounting $93,500. His net earnings from self-employment amount to $38,600. Smith must count ________ of his earnings in determining taxable self-employment income for OASDI taxes.

exceed $400

SECA and Independent Contractors Employee and employer portion of FICA is paid if net earnings ______________ $________________.

SECA (1951)

Self-Employment Contributions Act Tax upon net earnings of self-employed

Taxable for FICA

Severance pay

HI for 2017

Tax rate is 1.45% No wage base/max tax Additional 0.9% Medicare tax on wages in excess of $200,00

OASDI for 2017

Tax rate is 6.2% Wage base is $127,200 Max tax is $7,886.40

For social security purposes, what conditions must an individual meet to be classified as a "covered" employer?

The person must employ one or more individuals for the performance of services in the United States. The common-law relationship of employer and employee must exist.

ATIP (Attributed Tip Income Program)

a formula based on employer's credit card sales

When is Form 941 due?

last day of the month following close of quarter

EFTPS

most employers are now using with exception for businesses owing $2500 or less in quarterly tax liabilities

domestic employee, like a nanny or cook

must pay FICA if this type of employee is under your control

misclassifying employees

penatly equal to employer's share of FICA plus income taxes/FICA that were not withhelod from employees' earnings

Every person is an employer if...

person employs one or more individuals for performance of services in U.S.

Form 4070

tips greater than $20 or more per month can be reported by an employee to an employer using this form

Form 941-V

when making a payment or can pay by credit card