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Hrblockonline 5. Hrblockonline Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Hrblockonline Making the election. Hrblockonline Form 3115. Hrblockonline Income TaxesAccrual of contested income taxes. Hrblockonline Employment Taxes Other TaxesAdditional Medicare Tax. Hrblockonline What's New Additional Medicare Tax. Hrblockonline Beginning in 2013, you must withhold a 0. Hrblockonline 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Hrblockonline Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Hrblockonline See Employment Taxes , and Self-employment tax , later. Hrblockonline Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Hrblockonline You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Hrblockonline Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Hrblockonline When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Hrblockonline This applies whether you use the cash method or an accrual method of accounting. Hrblockonline Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Hrblockonline You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Hrblockonline Limit on accrual of taxes. Hrblockonline A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Hrblockonline However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Hrblockonline Example. Hrblockonline Your state imposes a tax on personal property used in a trade or business conducted in the state. Hrblockonline This tax is assessed and becomes a lien as of July 1 (accrual date). Hrblockonline In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Hrblockonline Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Hrblockonline You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Hrblockonline Uniform capitalization rules. Hrblockonline Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Hrblockonline They also apply to certain taxpayers who acquire property for resale. Hrblockonline Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Hrblockonline For more information, see chapter 1. Hrblockonline Carrying charges. Hrblockonline Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Hrblockonline You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Hrblockonline For more information, see chapter 7. Hrblockonline Refunds of taxes. Hrblockonline If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Hrblockonline For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Hrblockonline You must include in income any interest you receive on tax refunds. Hrblockonline Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Hrblockonline The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Hrblockonline Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Hrblockonline See Taxes for local benefits , later. Hrblockonline If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Hrblockonline However, you can elect to ratably accrue the taxes during the year. Hrblockonline See Electing to ratably accrue , later. Hrblockonline Taxes for local benefits. Hrblockonline Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Hrblockonline These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Hrblockonline You should increase the basis of your property by the amount of the assessment. Hrblockonline You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Hrblockonline If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Hrblockonline Example. Hrblockonline To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Hrblockonline The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Hrblockonline The city is paying the principal and interest with the annual payments made by the property owners. Hrblockonline The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Hrblockonline The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Hrblockonline Charges for services. Hrblockonline Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Hrblockonline Purchase or sale of real estate. Hrblockonline If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Hrblockonline The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Hrblockonline Treat the seller as paying the taxes up to but not including the date of sale. Hrblockonline Treat the buyer as paying the taxes beginning with the date of sale. Hrblockonline You can usually find this information on the settlement statement you received at closing. Hrblockonline If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Hrblockonline Example. Hrblockonline Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Hrblockonline He has not elected to ratably accrue property taxes. Hrblockonline November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Hrblockonline He sold the property on June 30, 2013. Hrblockonline Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Hrblockonline He is treated as having accrued his part of the tax, 181/366 (January 1–June 29), on June 30, and he can deduct it for 2013. Hrblockonline Electing to ratably accrue. Hrblockonline If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Hrblockonline Example. Hrblockonline Juan Sanchez is a calendar year taxpayer who uses an accrual method. Hrblockonline His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Hrblockonline July 1 is the assessment and lien date. Hrblockonline If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Hrblockonline Separate elections. Hrblockonline You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Hrblockonline Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Hrblockonline See Form 3115 , later. Hrblockonline Making the election. Hrblockonline If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Hrblockonline The statement should show all the following items. Hrblockonline The trades or businesses to which the election applies and the accounting method or methods used. Hrblockonline The period to which the taxes relate. Hrblockonline The computation of the real estate tax deduction for that first year. Hrblockonline Generally, you must file your return by the due date (including extensions). Hrblockonline However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Hrblockonline Attach the statement to the amended return and write “Filed pursuant to section 301. Hrblockonline 9100-2” on the statement. Hrblockonline File the amended return at the same address where you filed the original return. Hrblockonline Form 3115. Hrblockonline If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Hrblockonline For more information, including applicable time frames for filing, see the Instructions for Form 3115. Hrblockonline Note. Hrblockonline If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Hrblockonline R. Hrblockonline B. Hrblockonline 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Hrblockonline R. Hrblockonline B. Hrblockonline 689, and Revenue Procedure 2012-20, 2012-14 I. Hrblockonline R. Hrblockonline B. Hrblockonline 700, or any successor. Hrblockonline Revenue Procedure 2011-14 is available at www. Hrblockonline irs. Hrblockonline gov/irb/2011-04IRB/ar08. Hrblockonline html. Hrblockonline Income Taxes This section discusses federal, state, local, and foreign income taxes. Hrblockonline Federal income taxes. Hrblockonline You cannot deduct federal income taxes. Hrblockonline State and local income taxes. Hrblockonline A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Hrblockonline An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Hrblockonline However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Hrblockonline Accrual of contested income taxes. Hrblockonline If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Hrblockonline If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Hrblockonline You cannot deduct them in the year in which the liability is finally determined. Hrblockonline The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Hrblockonline Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Hrblockonline However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Hrblockonline You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Hrblockonline For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Hrblockonline Foreign income taxes. Hrblockonline Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Hrblockonline S. Hrblockonline possession. Hrblockonline However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Hrblockonline S. Hrblockonline tax under the foreign earned income exclusion or the foreign housing exclusion. Hrblockonline For information on these exclusions, see Publication 54, Tax Guide for U. Hrblockonline S. Hrblockonline Citizens and Resident Aliens Abroad. Hrblockonline For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Hrblockonline Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Hrblockonline Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Hrblockonline You may also need to pay certain employment taxes from your own funds. Hrblockonline These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Hrblockonline Note. Hrblockonline Additional Medicare Tax is only imposed on the employee. Hrblockonline There is no employer share of Additional Medicare Tax. Hrblockonline Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Hrblockonline You can deduct the employment taxes you must pay from your own funds as taxes. Hrblockonline Example. Hrblockonline You pay your employee $18,000 a year. Hrblockonline However, after you withhold various taxes, your employee receives $14,500. Hrblockonline You also pay an additional $1,500 in employment taxes. Hrblockonline You should deduct the full $18,000 as wages. Hrblockonline You can deduct the $1,500 you pay from your own funds as taxes. Hrblockonline For more information on employment taxes, see Publication 15 (Circular E). Hrblockonline Unemployment fund taxes. Hrblockonline As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Hrblockonline Deduct these payments as taxes. Hrblockonline Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Hrblockonline Excise taxes. Hrblockonline Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Hrblockonline However, see Fuel taxes , later. Hrblockonline For more information on excise taxes, see Publication 510. Hrblockonline Franchise taxes. Hrblockonline You can deduct corporate franchise taxes as a business expense. Hrblockonline Fuel taxes. Hrblockonline Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Hrblockonline Do not deduct these taxes as a separate item. Hrblockonline You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Hrblockonline For more information, see Publication 510. Hrblockonline Occupational taxes. Hrblockonline You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Hrblockonline Personal property tax. Hrblockonline You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Hrblockonline Sales tax. Hrblockonline Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Hrblockonline If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Hrblockonline If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Hrblockonline If the property is depreciable, add the sales tax to the basis for depreciation. Hrblockonline For more information on basis, see Publication 551. Hrblockonline Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Hrblockonline Also, do not include these taxes in gross receipts or sales. Hrblockonline Self-employment tax. Hrblockonline You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Hrblockonline This deduction only affects your income tax. Hrblockonline It does not affect your net earnings from self-employment or your self-employment tax. Hrblockonline To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Hrblockonline For more information on self-employment tax, see Publication 334. Hrblockonline Additional Medicare Tax. Hrblockonline Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Hrblockonline See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Hrblockonline Prev Up Next Home More Online Publications
Better Business Bureaus in North Carolina
Better Business Bureaus (BBBs) are nonprofit organizations that encourage honest advertising and selling practices and are supported primarily by local businesses. They offer a variety of consumer services, including consumer education materials; business reports, particularly unanswered or unsettled complaints or other problems; mediation and arbitration services; and information about charities and other organizations that are seeking public donations. They also provide ratings (A, B, C, D, or F) of local companies to express the BBB's confidence that the company operates in a trustworthy manner and demonstrates a willingness to resolve customer concerns.
Hrblockonline Publication 15 - Main Content Table of Contents 1. Hrblockonline Employer Identification Number (EIN) 2. Hrblockonline Who Are Employees?Relief provisions. Hrblockonline Business Owned and Operated by Spouses 3. Hrblockonline Family Employees 4. Hrblockonline Employee's Social Security Number (SSN)Registering for SSNVS. Hrblockonline 5. Hrblockonline Wages and Other CompensationAccountable plan. Hrblockonline Nonaccountable plan. Hrblockonline Per diem or other fixed allowance. Hrblockonline 50% test. Hrblockonline Health Savings Accounts and medical savings accounts. Hrblockonline Nontaxable fringe benefits. Hrblockonline When fringe benefits are treated as paid. Hrblockonline Valuation of fringe benefits. Hrblockonline Withholding on fringe benefits. Hrblockonline Depositing taxes on fringe benefits. Hrblockonline 6. Hrblockonline TipsOrdering rule. Hrblockonline 7. Hrblockonline Supplemental Wages 8. Hrblockonline Payroll Period 9. Hrblockonline Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. Hrblockonline Required Notice to Employees About the Earned Income Credit (EIC) 11. Hrblockonline Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. Hrblockonline Filing Form 941 or Form 944 13. Hrblockonline Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. Hrblockonline Federal Unemployment (FUTA) TaxSuccessor employer. Hrblockonline Household employees. Hrblockonline When to deposit. Hrblockonline Household employees. Hrblockonline Electronic filing by reporting agents. Hrblockonline 16. Hrblockonline How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. Hrblockonline Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. Hrblockonline The EIN is a nine-digit number the IRS issues. Hrblockonline The digits are arranged as follows: 00-0000000. Hrblockonline It is used to identify the tax accounts of employers and certain others who have no employees. Hrblockonline Use your EIN on all of the items you send to the IRS and SSA. Hrblockonline For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. Hrblockonline If you do not have an EIN, you may apply for one online. Hrblockonline Go to the IRS. Hrblockonline gov and click on the Apply for an EIN Online link under Tools. Hrblockonline You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Hrblockonline Do not use an SSN in place of an EIN. Hrblockonline You should have only one EIN. Hrblockonline If you have more than one and are not sure which one to use, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Hrblockonline Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Hrblockonline The IRS will tell you which number to use. Hrblockonline If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. Hrblockonline If you have applied for an EIN but do not have your EIN by the time a return is due, file a paper return and write “Applied For” and the date you applied for it in the space shown for the number. Hrblockonline 2. Hrblockonline Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Hrblockonline See Publication 15-A for details on statutory employees and nonemployees. Hrblockonline Employee status under common law. Hrblockonline Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Hrblockonline This is so even when you give the employee freedom of action. Hrblockonline What matters is that you have the right to control the details of how the services are performed. Hrblockonline See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Hrblockonline Generally, people in business for themselves are not employees. Hrblockonline For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. Hrblockonline However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. Hrblockonline If an employer-employee relationship exists, it does not matter what it is called. Hrblockonline The employee may be called an agent or independent contractor. Hrblockonline It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Hrblockonline Statutory employees. Hrblockonline If someone who works for you is not an employee under the common law rules discussed earlier, do not withhold federal income tax from his or her pay, unless backup withholding applies. Hrblockonline Although the following persons may not be common law employees, they are considered employees by statute for social security, Medicare, and FUTA tax purposes under certain conditions. Hrblockonline An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. Hrblockonline A full-time life insurance salesperson who sells primarily for one company. Hrblockonline A homeworker who works by guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. Hrblockonline A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. Hrblockonline The orders must be for merchandise for resale or supplies for use in the customer's business. Hrblockonline The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Hrblockonline Statutory nonemployees. Hrblockonline Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. Hrblockonline They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. Hrblockonline H-2A agricultural workers. Hrblockonline On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Hrblockonline Treating employees as nonemployees. Hrblockonline You will generally be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold these taxes because you treated an employee as a nonemployee. Hrblockonline You may be able to calculate your liability using special section 3509 rates for the employee share of social security and Medicare taxes and the federal income tax withholding. Hrblockonline The applicable rates depend on whether you filed required Forms 1099. Hrblockonline You cannot recover the employee share of social security, or Medicare tax, or income tax withholding from the employee if the tax is paid under section 3509. Hrblockonline You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. Hrblockonline You continue to owe the full employer share of social security and Medicare taxes. Hrblockonline The employee remains liable for the employee share of social security and Medicare taxes. Hrblockonline See Internal Revenue Code section 3509 for details. Hrblockonline Also see the Instructions for Form 941-X. Hrblockonline Section 3509 rates are not available if you intentionally disregard the requirement to withhold taxes from the employee or if you withheld income taxes but not social security or Medicare taxes. Hrblockonline Section 3509 is not available for reclassifying statutory employees. Hrblockonline See Statutory employees , earlier in this section. Hrblockonline If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Hrblockonline 2% plus 20% of the employee rate (see the Instructions for Form 941-X). Hrblockonline For Medicare taxes; employer rate of 1. Hrblockonline 45% plus 20% of the employee rate of 1. Hrblockonline 45%, for a total rate of 1. Hrblockonline 74% of wages. Hrblockonline For Additional Medicare Tax; 0. Hrblockonline 18% (20% of the employee rate of 0. Hrblockonline 9%) of wages subject to Additional Medicare Tax. Hrblockonline For income tax withholding, the rate is 1. Hrblockonline 5% of wages. Hrblockonline If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Hrblockonline 2% plus 40% of the employee rate (see the Instructions for Form 941-X). Hrblockonline For Medicare taxes; employer rate of 1. Hrblockonline 45% plus 40% of the employee rate of 1. Hrblockonline 45%, for a total rate of 2. Hrblockonline 03% of wages. Hrblockonline For Additional Medicare Tax; 0. Hrblockonline 36% (40% of the employee rate of 0. Hrblockonline 9%) of wages subject to Additional Medicare Tax. Hrblockonline For income tax withholding, the rate is 3. Hrblockonline 0% of wages. Hrblockonline Relief provisions. Hrblockonline If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Hrblockonline To get this relief, you must file all required federal tax returns, including information returns, on a basis consistent with your treatment of the worker. Hrblockonline You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Hrblockonline See Publication 1976, Do You Qualify for Relief Under Section 530. Hrblockonline IRS help. Hrblockonline If you want the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Hrblockonline Voluntary Classification Settlement Program (VCSP). Hrblockonline Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Hrblockonline To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Hrblockonline For more information visit IRS. Hrblockonline gov and enter “VCSP” in the search box. Hrblockonline Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Hrblockonline See Publication 541, Partnerships, for more details. Hrblockonline The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Hrblockonline Exception—Qualified joint venture. Hrblockonline For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. Hrblockonline A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). Hrblockonline To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. Hrblockonline Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Hrblockonline Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Hrblockonline If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Hrblockonline Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Hrblockonline However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Hrblockonline Note. Hrblockonline If your spouse is your employee, not your partner, see One spouse employed by another in section 3. Hrblockonline For more information on qualified joint ventures, visit IRS. Hrblockonline gov and enter “qualified joint venture” in the search box. Hrblockonline Exception—Community income. Hrblockonline If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Hrblockonline S. Hrblockonline possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Hrblockonline You may still make an election to be taxed as a qualified joint venture instead of a partnership. Hrblockonline See Exception—Qualified joint venture , earlier. Hrblockonline 3. Hrblockonline Family Employees Child employed by parents. Hrblockonline Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Hrblockonline If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21. Hrblockonline However, see Covered services of a child or spouse , later in this section. Hrblockonline Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to FUTA tax. Hrblockonline Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work. Hrblockonline One spouse employed by another. Hrblockonline The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. Hrblockonline However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, are not subject to social security, Medicare, and FUTA taxes. Hrblockonline Covered services of a child or spouse. Hrblockonline The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for: A corporation, even if it is controlled by the child's parent or the individual's spouse; A partnership, even if the child's parent is a partner, unless each partner is a parent of the child; A partnership, even if the individual's spouse is a partner; or An estate, even if it is the estate of a deceased parent. Hrblockonline Parent employed by son or daughter. Hrblockonline When the employer is a son or daughter employing his or her parent the following rules apply. Hrblockonline Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes. Hrblockonline Payments for the services of a parent not in the son’s or daughter’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes. Hrblockonline Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply: The parent is employed by his or her son or daughter; The son or daughter (the employer) has a child or stepchild living in the home; The son or daughter (the employer) is a widow or widower, divorced, or living with a spouse who, because of a mental or physical condition, cannot care for the child or stepchild for at least 4 continuous weeks in a calendar quarter; and The child or stepchild is either under age 18 or requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition. Hrblockonline Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. Hrblockonline 4. Hrblockonline Employee's Social Security Number (SSN) You are required to get each employee's name and SSN and to enter them on Form W-2. Hrblockonline This requirement also applies to resident and nonresident alien employees. Hrblockonline You should ask your employee to show you his or her social security card. Hrblockonline The employee may show the card if it is available. Hrblockonline Do not accept a social security card that says “Not valid for employment. Hrblockonline ” A social security number issued with this legend does not permit employment. Hrblockonline You may, but are not required to, photocopy the social security card if the employee provides it. Hrblockonline If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Hrblockonline See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Hrblockonline Applying for a social security card. Hrblockonline Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. Hrblockonline You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. Hrblockonline socialsecurity. Hrblockonline gov/online/ss-5. Hrblockonline html. Hrblockonline The employee must complete and sign Form SS-5; it cannot be filed by the employer. Hrblockonline You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Hrblockonline Applying for a social security number. Hrblockonline If you file Form W-2 on paper and your employee applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Hrblockonline If you are filing electronically, enter all zeros (000-00-000) in the social security number field. Hrblockonline When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Hrblockonline Furnish copies B, C, and 2 of Form W-2c to the employee. Hrblockonline Up to 25 Forms W-2c for each Form W-3c, Transmittal of Corrected Wage and Tax Statements, may now be filed per session over the Internet, with no limit on the number of sessions. Hrblockonline For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Hrblockonline socialsecurity. Hrblockonline gov/employer. Hrblockonline Advise your employee to correct the SSN on his or her original Form W-2. Hrblockonline Correctly record the employee's name and SSN. Hrblockonline Record the name and number of each employee as they are shown on the employee's social security card. Hrblockonline If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Hrblockonline Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. Hrblockonline If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported for the most recently filed Form W-2. Hrblockonline It is not necessary to correct other years if the previous name and number were used for years before the most recent Form W-2. Hrblockonline IRS individual taxpayer identification numbers (ITINs) for aliens. Hrblockonline Do not accept an ITIN in place of an SSN for employee identification or for work. Hrblockonline An ITIN is only available to resident and nonresident aliens who are not eligible for U. Hrblockonline S. Hrblockonline employment and need identification for other tax purposes. Hrblockonline You can identify an ITIN because it is a nine-digit number, beginning with the number “9” with either a “7” or “8” as the fourth digit and is formatted like an SSN (for example, 9NN-7N-NNNN). Hrblockonline An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Hrblockonline If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier. Hrblockonline Do not use an ITIN in place of an SSN on Form W-2. Hrblockonline Verification of social security numbers. Hrblockonline Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. Hrblockonline Visit www. Hrblockonline socialsecurity. Hrblockonline gov/employer/ssnv. Hrblockonline htm for more information. Hrblockonline Registering for SSNVS. Hrblockonline You must register online and receive authorization from your employer to use SSNVS. Hrblockonline To register, visit SSA's website at www. Hrblockonline ssa. Hrblockonline gov/employer and click on the Business Services Online link. Hrblockonline Follow the registration instructions to obtain a user identification (ID) and password. Hrblockonline You will need to provide the following information about yourself and your company. Hrblockonline Name. Hrblockonline SSN. Hrblockonline Date of birth. Hrblockonline Type of employer. Hrblockonline EIN. Hrblockonline Company name, address, and telephone number. Hrblockonline Email address. Hrblockonline When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Hrblockonline You must enter the activation code online to use SSNVS. Hrblockonline 5. Hrblockonline Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. Hrblockonline The pay may be in cash or in other forms. Hrblockonline It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. Hrblockonline It does not matter how you measure or make the payments. Hrblockonline Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Hrblockonline Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. Hrblockonline More information. Hrblockonline See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. Hrblockonline Also, see section 15 for exceptions to the general rules for wages. Hrblockonline Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. Hrblockonline Publication 15-B provides information on other forms of compensation, including: Accident and health benefits, Achievement awards, Adoption assistance, Athletic facilities, De minimis (minimal) benefits, Dependent care assistance, Educational assistance, Employee discounts, Employee stock options, Employer-provided cell phones, Group-term life insurance coverage, Health Savings Accounts, Lodging on your business premises, Meals, Moving expense reimbursements, No-additional-cost services, Retirement planning services, Transportation (commuting) benefits, Tuition reduction, and Working condition benefits. Hrblockonline Employee business expense reimbursements. Hrblockonline A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. Hrblockonline How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. Hrblockonline If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. Hrblockonline These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. Hrblockonline Accountable plan. Hrblockonline To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. Hrblockonline They must have paid or incurred deductible expenses while performing services as your employees. Hrblockonline The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee. Hrblockonline They must substantiate these expenses to you within a reasonable period of time. Hrblockonline They must return any amounts in excess of substantiated expenses within a reasonable period of time. Hrblockonline Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. Hrblockonline If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. Hrblockonline This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time. Hrblockonline A reasonable period of time depends on the facts and circumstances. Hrblockonline Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Hrblockonline Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days. Hrblockonline Nonaccountable plan. Hrblockonline Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. Hrblockonline Your payments are treated as paid under a nonaccountable plan if: Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses, You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or You pay an amount as a reimbursement you would have otherwise paid as wages. Hrblockonline See section 7 for more information on supplemental wages. Hrblockonline Per diem or other fixed allowance. Hrblockonline You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. Hrblockonline In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. Hrblockonline The 2013 standard mileage rate for auto expenses was 56. Hrblockonline 5 cents per mile. Hrblockonline The rate for 2014 is 56 cents per mile. Hrblockonline The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. Hrblockonline Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). Hrblockonline If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. Hrblockonline This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Hrblockonline Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. Hrblockonline ” Wages not paid in money. Hrblockonline If in the course of your trade or business you pay your employees in a medium that is neither cash nor a readily negotiable instrument, such as a check, you are said to pay them “in kind. Hrblockonline ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. Hrblockonline Generally, the fair market value of such payments at the time they are provided is subject to federal income tax withholding and social security, Medicare, and FUTA taxes. Hrblockonline However, noncash payments for household work, agricultural labor, and service not in the employer's trade or business are exempt from social security, Medicare, and FUTA taxes. Hrblockonline Withhold income tax on these payments only if you and the employee agree to do so. Hrblockonline Nonetheless, noncash payments for agricultural labor, such as commodity wages, are treated as cash payments subject to employment taxes if the substance of the transaction is a cash payment. Hrblockonline Moving expenses. Hrblockonline Reimbursed and employer-paid qualified moving expenses (those that would otherwise be deductible by the employee) paid under an accountable plan are not includible in an employee's income unless you have knowledge the employee deducted the expenses in a prior year. Hrblockonline Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. Hrblockonline For more information on moving expenses, see Publication 521, Moving Expenses. Hrblockonline Meals and lodging. Hrblockonline The value of meals is not taxable income and is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. Hrblockonline The value of lodging is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furnished for the employer's convenience, on the employer's premises, and as a condition of employment. Hrblockonline “For the convenience of the employer” means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. Hrblockonline For example, meals you provide at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for your convenience. Hrblockonline However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. Hrblockonline A written statement that the meals or lodging are for your convenience is not sufficient. Hrblockonline 50% test. Hrblockonline If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. Hrblockonline If this 50% test is met, the value of the meals is excludable from income for all employees and is not subject to federal income tax withholding or employment taxes. Hrblockonline For more information, see Publication 15-B. Hrblockonline Health insurance plans. Hrblockonline If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Hrblockonline Generally, this exclusion also applies to qualified long-term care insurance contracts. Hrblockonline However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). Hrblockonline For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the wages only for employees and their dependents or for a class or classes of employees and their dependents. Hrblockonline See Announcement 92-16 for more information. Hrblockonline You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Hrblockonline Health Savings Accounts and medical savings accounts. Hrblockonline Your contributions to an employee's Health Savings Account (HSA) or Archer medical savings account (MSA) are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they will be excludable from the income of the employee. Hrblockonline To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. Hrblockonline Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. Hrblockonline However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. Hrblockonline For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). Hrblockonline Medical care reimbursements. Hrblockonline Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding. Hrblockonline See Publication 15-B for an exception for highly compensated employees. Hrblockonline Differential wage payments. Hrblockonline Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represent all or a portion of the wages the individual would have received from the employer if the individual were performing services for the employer. Hrblockonline Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. Hrblockonline Employers should report differential wage payments in box 1 of Form W-2. Hrblockonline For more information about the tax treatment of differential wage payments, visit IRS. Hrblockonline gov and enter “employees in a combat zone” in the search box. Hrblockonline Fringe benefits. Hrblockonline You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). Hrblockonline The benefits are subject to income tax withholding and employment taxes. Hrblockonline Fringe benefits include cars you provide, flights on aircraft you provide, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. Hrblockonline In general, the amount you must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount the law excludes. Hrblockonline There are other special rules you and your employees may use to value certain fringe benefits. Hrblockonline See Publication 15-B for more information. Hrblockonline Nontaxable fringe benefits. Hrblockonline Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Hrblockonline See Publication 15-B for details. Hrblockonline The following are some examples of nontaxable fringe benefits. Hrblockonline Services provided to your employees at no additional cost to you. Hrblockonline Qualified employee discounts. Hrblockonline Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. Hrblockonline Examples include a company car for business use and subscriptions to business magazines. Hrblockonline Certain minimal value fringes (including an occasional cab ride when an employee must work overtime and meals you provide at eating places you run for your employees if the meals are not furnished at below cost). Hrblockonline Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). Hrblockonline Qualified moving expense reimbursement. Hrblockonline See Moving expenses , earlier in this section, for details. Hrblockonline The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. Hrblockonline Qualified tuition reduction an educational organization provides to its employees for education. Hrblockonline For more information, see Publication 970, Tax Benefits for Education. Hrblockonline Employer-provided cell phones provided primarily for a noncompensatory business reason. Hrblockonline However, do not exclude the following fringe benefits from the income of highly compensated employees unless the benefit is available to other employees on a nondiscriminatory basis. Hrblockonline No-additional-cost services. Hrblockonline Qualified employee discounts. Hrblockonline Meals provided at an employer operated eating facility. Hrblockonline Reduced tuition for education. Hrblockonline For more information, including the definition of a highly compensated employee, see Publication 15-B. Hrblockonline When fringe benefits are treated as paid. Hrblockonline You may choose to treat certain noncash fringe benefits as paid by the pay period, by the quarter, or on any other basis you choose as long as you treat the benefits as paid at least once a year. Hrblockonline You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. Hrblockonline You do not have to make this choice for all employees. Hrblockonline You may change methods as often as you like, as long as you treat all benefits provided in a calendar year as paid by December 31 of the calendar year. Hrblockonline See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. Hrblockonline Valuation of fringe benefits. Hrblockonline Generally, you must determine the value of fringe benefits no later than January 31 of the next year. Hrblockonline Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Hrblockonline Withholding on fringe benefits. Hrblockonline You may add the value of fringe benefits to regular wages for a payroll period and figure withholding taxes on the total, or you may withhold federal income tax on the value of the fringe benefits at the optional flat 25% supplemental wage rate. Hrblockonline However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. Hrblockonline You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. Hrblockonline You must, however, withhold social security and Medicare taxes on the use of the vehicle. Hrblockonline See Publication 15-B for more information on this election. Hrblockonline Depositing taxes on fringe benefits. Hrblockonline Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. Hrblockonline To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. Hrblockonline If you determine by January 31 you overestimated the value of a fringe benefit at the time you withheld and deposited for it, you may claim a refund for the overpayment or have it applied to your next employment tax return. Hrblockonline See Valuation of fringe benefits , earlier. Hrblockonline If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. Hrblockonline See section 11 for information on deposit penalties. Hrblockonline If you deposited the required amount of taxes but withheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on his or her behalf, and included in the employee's Form W-2. Hrblockonline However, you must recover the income taxes before April 1 of the following year. Hrblockonline Sick pay. Hrblockonline In general, sick pay is any amount you pay under a plan to an employee who is unable to work because of sickness or injury. Hrblockonline These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. Hrblockonline In either case, these payments are subject to social security, Medicare, and FUTA taxes. Hrblockonline Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. Hrblockonline The payments are always subject to federal income tax. Hrblockonline See Publication 15-A for more information. Hrblockonline 6. Hrblockonline Tips Tips your employee receives from customers are generally subject to withholding. Hrblockonline Your employee must report cash tips to you by the 10th of the month after the month the tips are received. Hrblockonline The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Hrblockonline Both directly and indirectly tipped employees must report tips to you. Hrblockonline No report is required for months when tips are less than $20. Hrblockonline Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. Hrblockonline The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period the report covers, and The total of tips received during the month or period. Hrblockonline Both Forms 4070 and 4070-A, Employee's Daily Record of Tips, are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer. Hrblockonline You are permitted to establish a system for electronic tip reporting by employees. Hrblockonline See Regulations section 31. Hrblockonline 6053-1(d). Hrblockonline Collecting taxes on tips. Hrblockonline You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. Hrblockonline The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. Hrblockonline If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. Hrblockonline You can collect these taxes from the employee's wages or from other funds he or she makes available. Hrblockonline See Tips treated as supplemental wages in section 7 for more information. Hrblockonline Stop collecting the employee social security tax when his or her wages and tips for tax year 2014 reach $117,000; collect the income and employee Medicare taxes for the whole year on all wages and tips. Hrblockonline You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. Hrblockonline You are responsible for the employer Medicare tax for the whole year on all wages and tips. Hrblockonline File Form 941 or Form 944 to report withholding and employment taxes on tips. Hrblockonline Ordering rule. Hrblockonline If, by the 10th of the month after the month for which you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you no longer have to collect it. Hrblockonline If there are not enough funds available, withhold taxes in the following order. Hrblockonline Withhold on regular wages and other compensation. Hrblockonline Withhold social security and Medicare taxes on tips. Hrblockonline Withhold income tax on tips. Hrblockonline Reporting tips. Hrblockonline Report tips and any collected and uncollected social security and Medicare taxes on Form W-2 and on Form 941, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). Hrblockonline Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Hrblockonline Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. Hrblockonline ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. Hrblockonline See section 13 and the General Instructions for Forms W-2 and W-3. Hrblockonline Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. Hrblockonline See Revenue Ruling 2012-18, 2012-26 I. Hrblockonline R. Hrblockonline B. Hrblockonline 1032, available at www. Hrblockonline irs. Hrblockonline gov/irb/2012-26_IRB/ar07. Hrblockonline html. Hrblockonline Allocated tips. Hrblockonline If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. Hrblockonline However, do not withhold income, social security, or Medicare taxes on allocated tips. Hrblockonline A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary, and where there were normally more than 10 employees on a typical business day during the preceding year. Hrblockonline The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. Hrblockonline For information about these allocation methods, including the requirement to file Forms 8027 electronically if 250 or more forms are filed, see the Instructions for Form 8027. Hrblockonline For information on filing Form 8027 electronically with the IRS, see Publication 1239. Hrblockonline Tip Rate Determination and Education Program. Hrblockonline Employers may participate in the Tip Rate Determination and Education Program. Hrblockonline The program primarily consists of two voluntary agreements developed to improve tip income reporting by helping taxpayers to understand and meet their tip reporting responsibilities. Hrblockonline The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Hrblockonline A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. Hrblockonline To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. Hrblockonline Additionally, visit IRS. Hrblockonline gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. Hrblockonline 7. Hrblockonline Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. Hrblockonline They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Hrblockonline Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Hrblockonline How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. Hrblockonline See Regulations section 31. Hrblockonline 3402(g)-1 for additional guidance for wages paid after January 1, 2007. Hrblockonline Also see Revenue Ruling 2008-29, 2008-24 I. Hrblockonline R. Hrblockonline B. Hrblockonline 1149, available at www. Hrblockonline irs. Hrblockonline gov/irb/2008-24_IRB/ar08. Hrblockonline html. Hrblockonline Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. Hrblockonline Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. Hrblockonline If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39. Hrblockonline 6% (or the highest rate of income tax for the year). Hrblockonline Withhold using the 39. Hrblockonline 6% rate without regard to the employee's Form W-4. Hrblockonline In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. Hrblockonline For more information, see Treasury Decision 9276, 2006-37 I. Hrblockonline R. Hrblockonline B. Hrblockonline 423, available at www. Hrblockonline irs. Hrblockonline gov/irb/2006-37_IRB/ar09. Hrblockonline html. Hrblockonline Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. Hrblockonline If the supplemental wages paid to the employee during the calendar year are less than or equal to $1 million, the following rules apply in determining the amount of income tax to be withheld. Hrblockonline Supplemental wages combined with regular wages. Hrblockonline If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period. Hrblockonline Supplemental wages identified separately from regular wages. Hrblockonline If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. Hrblockonline If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Hrblockonline Withhold a flat 25% (no other percentage allowed). Hrblockonline If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Hrblockonline If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Hrblockonline Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Hrblockonline Subtract the tax withheld from the regular wages. Hrblockonline Withhold the remaining tax from the supplemental wages. Hrblockonline If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax. Hrblockonline If you did not withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b. Hrblockonline This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Hrblockonline Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. Hrblockonline Example 1. Hrblockonline You pay John Peters a base salary on the 1st of each month. Hrblockonline He is single and claims one withholding allowance. Hrblockonline In January he is paid $1,000. Hrblockonline Using the wage bracket tables, you withhold $50 from this amount. Hrblockonline In February, he receives salary of $1,000 plus a commission of $2,000, which you combine with regular wages and do not separately identify. Hrblockonline You figure the withholding based on the total of $3,000. Hrblockonline The correct withholding from the tables is $338. Hrblockonline Example 2. Hrblockonline You pay Sharon Warren a base salary on the 1st of each month. Hrblockonline She is single and claims one allowance. Hrblockonline Her May 1 pay is $2,000. Hrblockonline Using the wage bracket tables, you withhold $188. Hrblockonline On May 14 she receives a bonus of $1,000. Hrblockonline Electing to use supplemental wage withholding method 1-b, you: Add the bonus amount to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 = $3,000). Hrblockonline Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. Hrblockonline Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). Hrblockonline Withhold $150 from the bonus payment. Hrblockonline Example 3. Hrblockonline The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. Hrblockonline You withhold 25% of $1,000, or $250, from Sharon's bonus payment. Hrblockonline Example 4. Hrblockonline The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. Hrblockonline Using supplemental wage withholding method 1-b, you: Add the first and second bonus amounts to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 + $2,000 = $5,000). Hrblockonline Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. Hrblockonline Subtract the amounts withheld from wages on the most recent base salary pay date (May 1) and the amounts withheld from the first bonus payment from the combined withholding amount ($781 – $188 – $150 = $443). Hrblockonline Withhold $443 from the second bonus payment. Hrblockonline Tips treated as supplemental wages. Hrblockonline Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. Hrblockonline If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. Hrblockonline If you have not withheld income tax from the regular wages, add the tips to the regular wages. Hrblockonline Then withhold income tax on the total. Hrblockonline If you withheld income tax from the regular wages, you can withhold on the tips by method 1-a or 1-b discussed earlier in this section under Supplemental wages identified separately from regular wages. Hrblockonline Vacation pay. Hrblockonline Vacation pay is subject to withholding as if it were a regular wage payment. Hrblockonline When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. Hrblockonline If the vacation pay is for a time longer than your usual payroll period, spread it over the pay periods for which you pay it. Hrblockonline 8. Hrblockonline Payroll Period Your payroll period is a period of service for which you usually pay wages. Hrblockonline When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. Hrblockonline No regular payroll period. Hrblockonline When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. Hrblockonline Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. Hrblockonline If the wages are unrelated to a specific length of time (for example, commissions paid on completion of a sale), count back the number of days from the payment period to the latest of: The last wage payment made during the same calendar year, The date employment began, if during the same calendar year, or January 1 of the same year. Hrblockonline Employee paid for period less than 1 week. Hrblockonline When you pay an employee for a period of less than one week, and the employee signs a statement under penalties of perjury indicating he or she is not working for any other employer during the same week for wages subject to withholding, figure withholding based on a weekly payroll period. Hrblockonline If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. Hrblockonline You then figure withholding based on the daily or miscellaneous period. Hrblockonline 9. Hrblockonline Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. Hrblockonline To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Hrblockonline Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. Hrblockonline Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Hrblockonline irs. Hrblockonline gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. Hrblockonline Ask all new employees to give you a signed Form W-4 when they start work. Hrblockonline Make the form effective with the first wage payment. Hrblockonline If a new employee does not give you a completed Form W-4, withhold income tax as if he or she is single, with no withholding allowances. Hrblockonline Form in Spanish. Hrblockonline You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, to your Spanish-speaking employees. Hrblockonline For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Hrblockonline The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). Hrblockonline Electronic system to receive Form W-4. Hrblockonline You may establish a system to electronically receive Forms W-4 from your employees. Hrblockonline See Regulations section 31. Hrblockonline 3402(f)(5)-1(c) for more information. Hrblockonline Effective date of Form W-4. Hrblockonline A Form W-4 remains in effect until the employee gives you a new one. Hrblockonline When you receive a new Form W-4 from an employee, do not adjust withholding for pay periods before the effective date of the new form. Hrblockonline If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Hrblockonline For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. Hrblockonline A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Hrblockonline Successor employer. Hrblockonline If you are a successor employer (see Successor employer , later in this section), secure new Forms W-4 from the transferred employees unless the “Alternative Procedure” in section 5 of Revenue Procedure 2004-53 applies. Hrblockonline See Revenue Procedure 2004-53, 2004-34 I. Hrblockonline R. Hrblockonline B. Hrblockonline 320, available at www. Hrblockonline irs. Hrblockonline gov/irb/2004-34_IRB/ar13. Hrblockonline html. Hrblockonline Completing Form W-4. Hrblockonline The amount of any federal income tax withholding must be based on marital status and withholding allowances. Hrblockonline Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Hrblockonline However, an employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Hrblockonline Employees may claim fewer withholding allowances than they are entitled to claim. Hrblockonline They may wish to claim fewer allowances to ensure they have enough withholding or to offset the tax on other sources of taxable income not subject to withholding. Hrblockonline See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Hrblockonline Along with Form W-4, you may wish to order Publication 505 for use by your employees. Hrblockonline Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Hrblockonline If they require additional withholding, they should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Hrblockonline Exemption from federal income tax withholding. Hrblockonline Generally, an employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year. Hrblockonline See the Form W-4 instructions for more information. Hrblockonline However, the wages are still subject to social security and Medicare taxes. Hrblockonline See also Invalid Forms W-4 , later in this section. Hrblockonline A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Hrblockonline To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. Hrblockonline If the employee does not give you a new Form W-4 by February 15, begin withholding based on the last Form W-4 for the employee that did not claim an exemption from withholding or, if one was not filed, then withhold tax as if he or she is single with zero withholding allowances. Hrblockonline If the employee provides a new Form W-4 claiming exemption from withholding on February 16 or later, you may apply it to future wages but do not refund any taxes already withheld. Hrblockonline Withholding income taxes on the wages of nonresident alien employees. Hrblockonline In general, you must withhold federal income taxes on the wages of nonresident alien employees. Hrblockonline However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Hrblockonline Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. Hrblockonline Withholding adjustment for nonresident alien employees. Hrblockonline For 2014, apply the procedure discussed next to figure the amount of income tax to withhold from the wages of nonresident alien employees performing services within the United States. Hrblockonline Nonresident alien students from India and business apprentices from India are not subject to this procedure. Hrblockonline Instructions. Hrblockonline To figure how much income tax to withhold from the wages paid to a nonresident alien employee performing services in the United States, use the following steps. Hrblockonline Step 1. Hrblockonline Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period. Hrblockonline Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only Payroll Period Add Additional Weekly $ 43. Hrblockonline 30 Biweekly 86. Hrblockonline 50 Semimonthly 93. Hrblockonline 80 Monthly 187. Hrblockonline 50 Quarterly 562. Hrblockonline 50 Semiannually 1,125. Hrblockonline 00 Annually 2,250. Hrblockonline 00 Daily or Miscellaneous (each day of the payroll period) 8. Hrblockonline 70 Step 2. Hrblockonline Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. Hrblockonline Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. Hrblockonline Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. Hrblockonline If you are using the Percentage Method Tables for Income Tax Withholding, provided on pages 43–44, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure the income tax withholding. Hrblockonline If you are using the Wage Bracket Method for Income Tax Withholding, provided on pages 45–64, use the amount figured in Step 1 and the number of withholding allowances to figure income tax withholding. Hrblockonline The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. Hrblockonline The amounts from the chart should not be included in any box on the employee's Form W-2 and do not increase the income tax liability of the employee. Hrblockonline Also, the amounts from the chart do not increase the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Hrblockonline This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. Hrblockonline Example. Hrblockonline An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. Hrblockonline The nonresident alien has properly completed Form W-4, entering marital status as “single” with one withholding allowance and indicating status as a nonresident alien on Form W-4, line 6 (see Nonresident alien employee's Form W-4 , later in this section). Hrblockonline The employer determines the wages to be used in the withholding tables by adding to the $500 amount of wages paid the amount of $86. Hrblockonline 50 from the chart under Step 1 ($586. Hrblockonline 50 total). Hrblockonline The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). Hrblockonline Reminder: If you use the Percentage Method Tables for Income Tax Withholding, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure income tax withholding. Hrblockonline The $86. Hrblockonline 50 added to wages for calculating income tax withholding is not reported on Form W-2, and does not increase the income tax liability of the employee. Hrblockonline Also, the $86. Hrblockonline 50 added to wages does not affect the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Hrblockonline Supplemental wage payment. Hrblockonline This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. Hrblockonline 6% mandatory flat rate withholding applies or if the 25% optional flat rate withholding is being used to calculate income tax withholding on the supplemental wage payment. Hrblockonline Nonresident alien employee's Form W-4. Hrblockonline When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding, Request withholding as if they are single, regardless of their actual marital status, Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student or business apprentice from India, he or she may claim more than one allowance), and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Hrblockonline If you maintain an electronic Form W-4 system, you should provide a field for nonresident aliens to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Hrblockonline A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. Hrblockonline Form 8233. Hrblockonline If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. Hrblockonline See Publication 515 for details. Hrblockonline IRS review of requested Forms W-4. Hrblockonline When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Hrblockonline You may also be directed to send certain Forms W-4 to the IRS. Hrblockonline You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. Hrblockonline Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. Hrblockonline The IRS may also require you to submit copies of Form W-4 to the IRS as directed by Treasury Decision 9337, 2007-35 I. Hrblockonline R. Hrblockonline B. Hrblockonline 455, which is available at www. Hrblockonline irs. Hrblockonline gov/irb/2007-35_IRB/ar10. Hrblockonline html. Hrblockonline When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Hrblockonline After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Hrblockonline However, if the IRS later notifies you in writing the employee is not entitled to claim exemption from withholding or a claimed number of withholding allowances, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the IRS notice (commonly referred to as a "lock-in letter