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Free State Tax Efiling

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Free State Tax Efiling

Free state tax efiling Publication 560 - Additional Material This image is too large to be displayed in the current screen. Free state tax efiling Please click the link to view the image. Free state tax efiling Tax Publications Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Nebraska Office of the Attorney General

Website: Nebraska Office of the Attorney General

Address: Nebraska Office of the Attorney General
Consumer Protection Division
2115 State Capitol
Lincoln, NE 68509

Phone Number: 402-471-2682

Toll-free: 1-800-727-6432 (NE) 1-888-850-7555 (in Spanish)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Banking and Finance

Website: Department of Banking and Finance

Address: Department of Banking and Finance
PO Box 95006
Lincoln, NE 68509-5006

Phone Number: 402-471-2171

Toll-free: 1-877-471-3445

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
PO Box 82089
Lincoln, NE 68501-2089

Phone Number: 402-471-2201

Toll-free: 1-877-564-7323 (NE)

TTY: 1-800-833-7352

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Banking and Finance

Website: Department of Banking and Finance

Address: Department of Banking and Finance
Bureau of Securities
PO Box 95006
Lincoln, NE 68509-5006

Phone Number: 402-471-3445

Toll-free: 1-877-471-3445

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
1200 N St., Suite 300
Lincoln, NE 68508

Phone Number: 402-471-3101

Toll-free: 1-800-526-0017 (NE)

TTY: 402-471-0213

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The Free State Tax Efiling

Free state tax efiling Publication 15 - Main Content Table of Contents 1. Free state tax efiling Employer Identification Number (EIN) 2. Free state tax efiling Who Are Employees?Relief provisions. Free state tax efiling Business Owned and Operated by Spouses 3. Free state tax efiling Family Employees 4. Free state tax efiling Employee's Social Security Number (SSN)Registering for SSNVS. Free state tax efiling 5. Free state tax efiling Wages and Other CompensationAccountable plan. Free state tax efiling Nonaccountable plan. Free state tax efiling Per diem or other fixed allowance. Free state tax efiling 50% test. Free state tax efiling Health Savings Accounts and medical savings accounts. Free state tax efiling Nontaxable fringe benefits. Free state tax efiling When fringe benefits are treated as paid. Free state tax efiling Valuation of fringe benefits. Free state tax efiling Withholding on fringe benefits. Free state tax efiling Depositing taxes on fringe benefits. Free state tax efiling 6. Free state tax efiling TipsOrdering rule. Free state tax efiling 7. Free state tax efiling Supplemental Wages 8. Free state tax efiling Payroll Period 9. Free state tax efiling Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. Free state tax efiling Required Notice to Employees About the Earned Income Credit (EIC) 11. Free state tax efiling Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. Free state tax efiling Filing Form 941 or Form 944 13. Free state tax efiling Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. Free state tax efiling Federal Unemployment (FUTA) TaxSuccessor employer. Free state tax efiling Household employees. Free state tax efiling When to deposit. Free state tax efiling Household employees. Free state tax efiling Electronic filing by reporting agents. Free state tax efiling 16. Free state tax efiling How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. Free state tax efiling Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. Free state tax efiling The EIN is a nine-digit number the IRS issues. Free state tax efiling The digits are arranged as follows: 00-0000000. Free state tax efiling It is used to identify the tax accounts of employers and certain others who have no employees. Free state tax efiling Use your EIN on all of the items you send to the IRS and SSA. Free state tax efiling For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. Free state tax efiling If you do not have an EIN, you may apply for one online. Free state tax efiling Go to the IRS. Free state tax efiling gov and click on the Apply for an EIN Online link under Tools. Free state tax efiling 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. Free state tax efiling Do not use an SSN in place of an EIN. Free state tax efiling You should have only one EIN. Free state tax efiling 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). Free state tax efiling Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Free state tax efiling The IRS will tell you which number to use. Free state tax efiling If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. Free state tax efiling 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. Free state tax efiling 2. Free state tax efiling Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Free state tax efiling See Publication 15-A for details on statutory employees and nonemployees. Free state tax efiling Employee status under common law. Free state tax efiling   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. Free state tax efiling This is so even when you give the employee freedom of action. Free state tax efiling What matters is that you have the right to control the details of how the services are performed. Free state tax efiling See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Free state tax efiling   Generally, people in business for themselves are not employees. Free state tax efiling For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. Free state tax efiling However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. Free state tax efiling   If an employer-employee relationship exists, it does not matter what it is called. Free state tax efiling The employee may be called an agent or independent contractor. Free state tax efiling It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Free state tax efiling Statutory employees. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. Free state tax efiling A full-time life insurance salesperson who sells primarily for one company. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling The orders must be for merchandise for resale or supplies for use in the customer's business. Free state tax efiling The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Free state tax efiling    Statutory nonemployees. Free state tax efiling   Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. Free state tax efiling They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. Free state tax efiling H-2A agricultural workers. Free state tax efiling   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Free state tax efiling Treating employees as nonemployees. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling The applicable rates depend on whether you filed required Forms 1099. Free state tax efiling 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. Free state tax efiling You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. Free state tax efiling You continue to owe the full employer share of social security and Medicare taxes. Free state tax efiling The employee remains liable for the employee share of social security and Medicare taxes. Free state tax efiling See Internal Revenue Code section 3509 for details. Free state tax efiling Also see the Instructions for Form 941-X. Free state tax efiling   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. Free state tax efiling Section 3509 is not available for reclassifying statutory employees. Free state tax efiling See Statutory employees , earlier in this section. Free state tax efiling   If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Free state tax efiling 2% plus 20% of the employee rate (see the Instructions for Form 941-X). Free state tax efiling For Medicare taxes; employer rate of 1. Free state tax efiling 45% plus 20% of the employee rate of 1. Free state tax efiling 45%, for a total rate of 1. Free state tax efiling 74% of wages. Free state tax efiling For Additional Medicare Tax; 0. Free state tax efiling 18% (20% of the employee rate of 0. Free state tax efiling 9%) of wages subject to Additional Medicare Tax. Free state tax efiling For income tax withholding, the rate is 1. Free state tax efiling 5% of wages. Free state tax efiling   If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Free state tax efiling 2% plus 40% of the employee rate (see the Instructions for Form 941-X). Free state tax efiling For Medicare taxes; employer rate of 1. Free state tax efiling 45% plus 40% of the employee rate of 1. Free state tax efiling 45%, for a total rate of 2. Free state tax efiling 03% of wages. Free state tax efiling For Additional Medicare Tax; 0. Free state tax efiling 36% (40% of the employee rate of 0. Free state tax efiling 9%) of wages subject to Additional Medicare Tax. Free state tax efiling For income tax withholding, the rate is 3. Free state tax efiling 0% of wages. Free state tax efiling Relief provisions. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Free state tax efiling See Publication 1976, Do You Qualify for Relief Under Section 530. Free state tax efiling IRS help. Free state tax efiling   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. Free state tax efiling Voluntary Classification Settlement Program (VCSP). Free state tax efiling   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. Free state tax efiling To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Free state tax efiling For more information visit IRS. Free state tax efiling gov and enter “VCSP” in the search box. Free state tax efiling 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. Free state tax efiling See Publication 541, Partnerships, for more details. Free state tax efiling The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Free state tax efiling Exception—Qualified joint venture. Free state tax efiling   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. Free state tax efiling 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). Free state tax efiling   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. Free state tax efiling Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Free state tax efiling   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Free state tax efiling 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. Free state tax efiling Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Free state tax efiling 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. Free state tax efiling    Note. Free state tax efiling If your spouse is your employee, not your partner, see One spouse employed by another in section 3. Free state tax efiling   For more information on qualified joint ventures, visit IRS. Free state tax efiling gov and enter “qualified joint venture” in the search box. Free state tax efiling Exception—Community income. Free state tax efiling   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. Free state tax efiling S. Free state tax efiling possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Free state tax efiling You may still make an election to be taxed as a qualified joint venture instead of a partnership. Free state tax efiling See Exception—Qualified joint venture , earlier. Free state tax efiling 3. Free state tax efiling Family Employees Child employed by parents. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling However, see Covered services of a child or spouse , later in this section. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling One spouse employed by another. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling Covered services of a child or spouse. Free state tax efiling   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. Free state tax efiling Parent employed by son or daughter. Free state tax efiling   When the employer is a son or daughter employing his or her parent the following rules apply. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling    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. Free state tax efiling   Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. Free state tax efiling 4. Free state tax efiling 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. Free state tax efiling This requirement also applies to resident and nonresident alien employees. Free state tax efiling You should ask your employee to show you his or her social security card. Free state tax efiling The employee may show the card if it is available. Free state tax efiling Do not accept a social security card that says “Not valid for employment. Free state tax efiling ” A social security number issued with this legend does not permit employment. Free state tax efiling You may, but are not required to, photocopy the social security card if the employee provides it. Free state tax efiling 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. Free state tax efiling See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Free state tax efiling Applying for a social security card. Free state tax efiling   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. Free state tax efiling You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. Free state tax efiling socialsecurity. Free state tax efiling gov/online/ss-5. Free state tax efiling html. Free state tax efiling The employee must complete and sign Form SS-5; it cannot be filed by the employer. Free state tax efiling 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. Free state tax efiling Applying for a social security number. Free state tax efiling   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. Free state tax efiling If you are filing electronically, enter all zeros (000-00-000) in the social security number field. Free state tax efiling 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. Free state tax efiling Furnish copies B, C, and 2 of Form W-2c to the employee. Free state tax efiling 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. Free state tax efiling For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Free state tax efiling socialsecurity. Free state tax efiling gov/employer. Free state tax efiling Advise your employee to correct the SSN on his or her original Form W-2. Free state tax efiling Correctly record the employee's name and SSN. Free state tax efiling   Record the name and number of each employee as they are shown on the employee's social security card. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling IRS individual taxpayer identification numbers (ITINs) for aliens. Free state tax efiling   Do not accept an ITIN in place of an SSN for employee identification or for work. Free state tax efiling An ITIN is only available to resident and nonresident aliens who are not eligible for U. Free state tax efiling S. Free state tax efiling employment and need identification for other tax purposes. Free state tax efiling 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). Free state tax efiling    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Free state tax efiling 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. Free state tax efiling Do not use an ITIN in place of an SSN on Form W-2. Free state tax efiling Verification of social security numbers. Free state tax efiling   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. Free state tax efiling Visit www. Free state tax efiling socialsecurity. Free state tax efiling gov/employer/ssnv. Free state tax efiling htm for more information. Free state tax efiling Registering for SSNVS. Free state tax efiling   You must register online and receive authorization from your employer to use SSNVS. Free state tax efiling To register, visit SSA's website at www. Free state tax efiling ssa. Free state tax efiling gov/employer and click on the Business Services Online link. Free state tax efiling Follow the registration instructions to obtain a user identification (ID) and password. Free state tax efiling You will need to provide the following information about yourself and your company. Free state tax efiling Name. Free state tax efiling SSN. Free state tax efiling Date of birth. Free state tax efiling Type of employer. Free state tax efiling EIN. Free state tax efiling Company name, address, and telephone number. Free state tax efiling Email address. Free state tax efiling   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Free state tax efiling You must enter the activation code online to use SSNVS. Free state tax efiling 5. Free state tax efiling Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. Free state tax efiling The pay may be in cash or in other forms. Free state tax efiling It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. Free state tax efiling It does not matter how you measure or make the payments. Free state tax efiling 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. Free state tax efiling Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. Free state tax efiling More information. Free state tax efiling   See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. Free state tax efiling Also, see section 15 for exceptions to the general rules for wages. Free state tax efiling Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. Free state tax efiling 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. Free state tax efiling Employee business expense reimbursements. Free state tax efiling   A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. Free state tax efiling How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. Free state tax efiling If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. Free state tax efiling   These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. Free state tax efiling Accountable plan. Free state tax efiling   To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. Free state tax efiling They must have paid or incurred deductible expenses while performing services as your employees. Free state tax efiling 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. Free state tax efiling They must substantiate these expenses to you within a reasonable period of time. Free state tax efiling They must return any amounts in excess of substantiated expenses within a reasonable period of time. Free state tax efiling   Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling   A reasonable period of time depends on the facts and circumstances. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling Nonaccountable plan. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling   See section 7 for more information on supplemental wages. Free state tax efiling Per diem or other fixed allowance. Free state tax efiling   You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. Free state tax efiling In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. Free state tax efiling The 2013 standard mileage rate for auto expenses was 56. Free state tax efiling 5 cents per mile. Free state tax efiling The rate for 2014 is 56 cents per mile. Free state tax efiling   The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. Free state tax efiling 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). Free state tax efiling   If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. Free state tax efiling This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Free state tax efiling Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. Free state tax efiling ” Wages not paid in money. Free state tax efiling   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. Free state tax efiling ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. Free state tax efiling 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. Free state tax efiling   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. Free state tax efiling Withhold income tax on these payments only if you and the employee agree to do so. Free state tax efiling 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. Free state tax efiling Moving expenses. Free state tax efiling   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. Free state tax efiling Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. Free state tax efiling For more information on moving expenses, see Publication 521, Moving Expenses. Free state tax efiling Meals and lodging. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling    “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. Free state tax efiling 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. Free state tax efiling   However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. Free state tax efiling A written statement that the meals or lodging are for your convenience is not sufficient. Free state tax efiling 50% test. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling For more information, see Publication 15-B. Free state tax efiling Health insurance plans. Free state tax efiling   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. Free state tax efiling Generally, this exclusion also applies to qualified long-term care insurance contracts. Free state tax efiling 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). Free state tax efiling 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. Free state tax efiling See Announcement 92-16 for more information. Free state tax efiling You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Free state tax efiling Health Savings Accounts and medical savings accounts. Free state tax efiling   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. Free state tax efiling To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). Free state tax efiling Medical care reimbursements. Free state tax efiling   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. Free state tax efiling See Publication 15-B for an exception for highly compensated employees. Free state tax efiling Differential wage payments. Free state tax efiling   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. Free state tax efiling   Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. Free state tax efiling Employers should report differential wage payments in box 1 of Form W-2. Free state tax efiling For more information about the tax treatment of differential wage payments, visit IRS. Free state tax efiling gov and enter “employees in a combat zone” in the search box. Free state tax efiling Fringe benefits. Free state tax efiling   You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). Free state tax efiling The benefits are subject to income tax withholding and employment taxes. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling There are other special rules you and your employees may use to value certain fringe benefits. Free state tax efiling See Publication 15-B for more information. Free state tax efiling Nontaxable fringe benefits. Free state tax efiling   Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Free state tax efiling See Publication 15-B for details. Free state tax efiling The following are some examples of nontaxable fringe benefits. Free state tax efiling Services provided to your employees at no additional cost to you. Free state tax efiling Qualified employee discounts. Free state tax efiling Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. Free state tax efiling Examples include a company car for business use and subscriptions to business magazines. Free state tax efiling 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). Free state tax efiling Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). Free state tax efiling Qualified moving expense reimbursement. Free state tax efiling See Moving expenses , earlier in this section, for details. Free state tax efiling The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. Free state tax efiling Qualified tuition reduction an educational organization provides to its employees for education. Free state tax efiling For more information, see Publication 970, Tax Benefits for Education. Free state tax efiling Employer-provided cell phones provided primarily for a noncompensatory business reason. Free state tax efiling   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. Free state tax efiling No-additional-cost services. Free state tax efiling Qualified employee discounts. Free state tax efiling Meals provided at an employer operated eating facility. Free state tax efiling Reduced tuition for education. Free state tax efiling  For more information, including the definition of a highly compensated employee, see Publication 15-B. Free state tax efiling When fringe benefits are treated as paid. Free state tax efiling   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. Free state tax efiling You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. Free state tax efiling You do not have to make this choice for all employees. Free state tax efiling 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. Free state tax efiling See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. Free state tax efiling Valuation of fringe benefits. Free state tax efiling   Generally, you must determine the value of fringe benefits no later than January 31 of the next year. Free state tax efiling Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Free state tax efiling Withholding on fringe benefits. Free state tax efiling   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. Free state tax efiling However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. Free state tax efiling   You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. Free state tax efiling You must, however, withhold social security and Medicare taxes on the use of the vehicle. Free state tax efiling See Publication 15-B for more information on this election. Free state tax efiling Depositing taxes on fringe benefits. Free state tax efiling   Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. Free state tax efiling To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. Free state tax efiling   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. Free state tax efiling See Valuation of fringe benefits , earlier. Free state tax efiling If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. Free state tax efiling See section 11 for information on deposit penalties. Free state tax efiling   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. Free state tax efiling However, you must recover the income taxes before April 1 of the following year. Free state tax efiling Sick pay. Free state tax efiling   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. Free state tax efiling These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. Free state tax efiling In either case, these payments are subject to social security, Medicare, and FUTA taxes. Free state tax efiling 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. Free state tax efiling The payments are always subject to federal income tax. Free state tax efiling See Publication 15-A for more information. Free state tax efiling 6. Free state tax efiling Tips Tips your employee receives from customers are generally subject to withholding. Free state tax efiling Your employee must report cash tips to you by the 10th of the month after the month the tips are received. Free state tax efiling 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. Free state tax efiling Both directly and indirectly tipped employees must report tips to you. Free state tax efiling No report is required for months when tips are less than $20. Free state tax efiling Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling You are permitted to establish a system for electronic tip reporting by employees. Free state tax efiling See Regulations section 31. Free state tax efiling 6053-1(d). Free state tax efiling Collecting taxes on tips. Free state tax efiling   You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. Free state tax efiling 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. Free state tax efiling If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. Free state tax efiling   You can collect these taxes from the employee's wages or from other funds he or she makes available. Free state tax efiling See Tips treated as supplemental wages in section 7 for more information. Free state tax efiling 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. Free state tax efiling You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. Free state tax efiling You are responsible for the employer Medicare tax for the whole year on all wages and tips. Free state tax efiling File Form 941 or Form 944 to report withholding and employment taxes on tips. Free state tax efiling Ordering rule. Free state tax efiling   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. Free state tax efiling If there are not enough funds available, withhold taxes in the following order. Free state tax efiling Withhold on regular wages and other compensation. Free state tax efiling Withhold social security and Medicare taxes on tips. Free state tax efiling Withhold income tax on tips. Free state tax efiling Reporting tips. Free state tax efiling   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). Free state tax efiling Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Free state tax efiling Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. Free state tax efiling ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. Free state tax efiling See section 13 and the General Instructions for Forms W-2 and W-3. Free state tax efiling   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. Free state tax efiling See Revenue Ruling 2012-18, 2012-26 I. Free state tax efiling R. Free state tax efiling B. Free state tax efiling 1032, available at www. Free state tax efiling irs. Free state tax efiling gov/irb/2012-26_IRB/ar07. Free state tax efiling html. Free state tax efiling Allocated tips. Free state tax efiling   If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. Free state tax efiling However, do not withhold income, social security, or Medicare taxes on allocated tips. Free state tax efiling   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. Free state tax efiling   The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. Free state tax efiling 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. Free state tax efiling For information on filing Form 8027 electronically with the IRS, see Publication 1239. Free state tax efiling Tip Rate Determination and Education Program. Free state tax efiling   Employers may participate in the Tip Rate Determination and Education Program. Free state tax efiling 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. Free state tax efiling The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Free state tax efiling A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. Free state tax efiling To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. Free state tax efiling Additionally, visit IRS. Free state tax efiling gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. Free state tax efiling 7. Free state tax efiling Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. Free state tax efiling 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. Free state tax efiling Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Free state tax efiling How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. Free state tax efiling See Regulations section 31. Free state tax efiling 3402(g)-1 for additional guidance for wages paid after January 1, 2007. Free state tax efiling Also see Revenue Ruling 2008-29, 2008-24 I. Free state tax efiling R. Free state tax efiling B. Free state tax efiling 1149, available at www. Free state tax efiling irs. Free state tax efiling gov/irb/2008-24_IRB/ar08. Free state tax efiling html. Free state tax efiling Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. Free state tax efiling   Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. Free state tax efiling 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. Free state tax efiling 6% (or the highest rate of income tax for the year). Free state tax efiling Withhold using the 39. Free state tax efiling 6% rate without regard to the employee's Form W-4. Free state tax efiling In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. Free state tax efiling For more information, see Treasury Decision 9276, 2006-37 I. Free state tax efiling R. Free state tax efiling B. Free state tax efiling 423, available at www. Free state tax efiling irs. Free state tax efiling gov/irb/2006-37_IRB/ar09. Free state tax efiling html. Free state tax efiling Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. Free state tax efiling   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. Free state tax efiling Supplemental wages combined with regular wages. Free state tax efiling   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. Free state tax efiling Supplemental wages identified separately from regular wages. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling Withhold a flat 25% (no other percentage allowed). Free state tax efiling If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Free state tax efiling 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. Free state tax efiling Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Free state tax efiling Subtract the tax withheld from the regular wages. Free state tax efiling Withhold the remaining tax from the supplemental wages. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Free state tax efiling Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. Free state tax efiling Example 1. Free state tax efiling You pay John Peters a base salary on the 1st of each month. Free state tax efiling He is single and claims one withholding allowance. Free state tax efiling In January he is paid $1,000. Free state tax efiling Using the wage bracket tables, you withhold $50 from this amount. Free state tax efiling 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. Free state tax efiling You figure the withholding based on the total of $3,000. Free state tax efiling The correct withholding from the tables is $338. Free state tax efiling Example 2. Free state tax efiling You pay Sharon Warren a base salary on the 1st of each month. Free state tax efiling She is single and claims one allowance. Free state tax efiling Her May 1 pay is $2,000. Free state tax efiling Using the wage bracket tables, you withhold $188. Free state tax efiling On May 14 she receives a bonus of $1,000. Free state tax efiling 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). Free state tax efiling Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. Free state tax efiling Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). Free state tax efiling Withhold $150 from the bonus payment. Free state tax efiling Example 3. Free state tax efiling The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. Free state tax efiling You withhold 25% of $1,000, or $250, from Sharon's bonus payment. Free state tax efiling Example 4. Free state tax efiling The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. Free state tax efiling 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). Free state tax efiling Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. Free state tax efiling 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). Free state tax efiling Withhold $443 from the second bonus payment. Free state tax efiling Tips treated as supplemental wages. Free state tax efiling   Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. Free state tax efiling If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. Free state tax efiling If you have not withheld income tax from the regular wages, add the tips to the regular wages. Free state tax efiling Then withhold income tax on the total. Free state tax efiling 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. Free state tax efiling Vacation pay. Free state tax efiling   Vacation pay is subject to withholding as if it were a regular wage payment. Free state tax efiling When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. Free state tax efiling 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. Free state tax efiling 8. Free state tax efiling Payroll Period Your payroll period is a period of service for which you usually pay wages. Free state tax efiling When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. Free state tax efiling No regular payroll period. Free state tax efiling   When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. Free state tax efiling Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. Free state tax efiling 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. Free state tax efiling Employee paid for period less than 1 week. Free state tax efiling   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. Free state tax efiling If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. Free state tax efiling You then figure withholding based on the daily or miscellaneous period. Free state tax efiling 9. Free state tax efiling Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. Free state tax efiling   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Free state tax efiling 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. Free state tax efiling Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Free state tax efiling irs. Free state tax efiling gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. Free state tax efiling   Ask all new employees to give you a signed Form W-4 when they start work. Free state tax efiling Make the form effective with the first wage payment. Free state tax efiling 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. Free state tax efiling Form in Spanish. Free state tax efiling   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. Free state tax efiling For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Free state tax efiling The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). Free state tax efiling Electronic system to receive Form W-4. Free state tax efiling   You may establish a system to electronically receive Forms W-4 from your employees. Free state tax efiling See Regulations section 31. Free state tax efiling 3402(f)(5)-1(c) for more information. Free state tax efiling Effective date of Form W-4. Free state tax efiling   A Form W-4 remains in effect until the employee gives you a new one. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Free state tax efiling Successor employer. Free state tax efiling   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. Free state tax efiling See Revenue Procedure 2004-53, 2004-34 I. Free state tax efiling R. Free state tax efiling B. Free state tax efiling 320, available at www. Free state tax efiling irs. Free state tax efiling gov/irb/2004-34_IRB/ar13. Free state tax efiling html. Free state tax efiling Completing Form W-4. Free state tax efiling   The amount of any federal income tax withholding must be based on marital status and withholding allowances. Free state tax efiling Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Free state tax efiling 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. Free state tax efiling Employees may claim fewer withholding allowances than they are entitled to claim. Free state tax efiling 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. Free state tax efiling See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Free state tax efiling Along with Form W-4, you may wish to order Publication 505 for use by your employees. Free state tax efiling Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Free state tax efiling 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. Free state tax efiling Exemption from federal income tax withholding. Free state tax efiling   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. Free state tax efiling See the Form W-4 instructions for more information. Free state tax efiling However, the wages are still subject to social security and Medicare taxes. Free state tax efiling See also Invalid Forms W-4 , later in this section. Free state tax efiling   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling Withholding income taxes on the wages of nonresident alien employees. Free state tax efiling   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Free state tax efiling However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Free state tax efiling Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. Free state tax efiling Withholding adjustment for nonresident alien employees. Free state tax efiling   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. Free state tax efiling Nonresident alien students from India and business apprentices from India are not subject to this procedure. Free state tax efiling Instructions. Free state tax efiling   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. Free state tax efiling Step 1. Free state tax efiling   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. Free state tax efiling    Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only   Payroll Period Add Additional     Weekly $ 43. Free state tax efiling 30     Biweekly 86. Free state tax efiling 50     Semimonthly 93. Free state tax efiling 80     Monthly 187. Free state tax efiling 50     Quarterly 562. Free state tax efiling 50     Semiannually 1,125. Free state tax efiling 00     Annually 2,250. Free state tax efiling 00     Daily or Miscellaneous (each day of the payroll period) 8. Free state tax efiling 70   Step 2. Free state tax efiling   Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. Free state tax efiling Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. Free state tax efiling Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. Free state tax efiling Example. Free state tax efiling An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. Free state tax efiling 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). Free state tax efiling 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. Free state tax efiling 50 from the chart under Step 1 ($586. Free state tax efiling 50 total). Free state tax efiling The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). Free state tax efiling 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. Free state tax efiling The $86. Free state tax efiling 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. Free state tax efiling Also, the $86. Free state tax efiling 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. Free state tax efiling Supplemental wage payment. Free state tax efiling   This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. Free state tax efiling 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. Free state tax efiling Nonresident alien employee's Form W-4. Free state tax efiling   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. Free state tax efiling   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. Free state tax efiling 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. Free state tax efiling Form 8233. Free state tax efiling   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. Free state tax efiling See Publication 515 for details. Free state tax efiling IRS review of requested Forms W-4. Free state tax efiling   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Free state tax efiling You may also be directed to send certain Forms W-4 to the IRS. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling 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. Free state tax efiling R. Free state tax efiling B. Free state tax efiling 455, which is available at www. Free state tax efiling irs. Free state tax efiling gov/irb/2007-35_IRB/ar10. Free state tax efiling html. Free state tax efiling When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Free state tax efiling 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). Free state tax efiling 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