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H And R Block Free Edition

H and r block free edition Index A Additional Medicare Tax, Reminders, Reporting sick pay on Form W-2. H and r block free edition Agents, reporting, Agents Agricultural workers, H-2A agricultural workers. H and r block free edition Alternative methods of withholding, 9. H and r block free edition Alternative Methods for Figuring Withholding Annuity payments, 8. H and r block free edition Pensions and Annuities Assistance (see Tax help) Awards, employee achievement, Employee Achievement Awards B Back pay, Back Pay Below-market rate loans, Interest-Free and Below-Market-Interest-Rate Loans C Comments on publication, Comments and suggestions. H and r block free edition Common paymaster, Common Paymaster Common-law employees, Common-Law Employees Common-law rules, Common-Law Rules Corporate officers, Common-Law Employees D Deferred compensation plans, nonqualified, Nonqualified Deferred Compensation Plans Direct sellers, Direct sellers. H and r block free edition Director of corporation, Common-Law Employees E Electronic Form W-2, Reminders Employee achievement awards, Employee Achievement Awards Employee or contractor Attorney, Attorney Automobile industry, Automobile Industry Building industry, Building and Construction Industry Computer industry, Computer Industry Salesperson, Salesperson Taxicab driver, Taxicab Driver Trucking industry, Trucking Industry Employee's taxes paid by employer, Employee's Portion of Taxes Paid by Employer Employees Common-law rules, Common-Law Rules Industry examples, Industry Examples Statutory, Statutory Employees Employees defined, 1. H and r block free edition Who Are Employees? Employees misclassification, Misclassification of Employees Excessive termination payments (golden parachute), Golden Parachute Payments Exempt organizations, 3. H and r block free edition Employees of Exempt Organizations F Fellowship payments, Scholarship and Fellowship Payments Form W-2, electronic filing, Reminders G Golden parachute, Golden Parachute Payments I Idle time, Withholding for Idle Time Independent contractors, Independent Contractors Indian gaming profits, 10. H and r block free edition Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members Interest-free loans, Interest-Free and Below-Market-Interest-Rate Loans International social security agreements, International Social Security Agreements L Leased employees, Leased employees. H and r block free edition Leave sharing plans, Leave Sharing Plans Loans, interest-free or below-market rate, Interest-Free and Below-Market-Interest-Rate Loans M Ministers, Ministers. H and r block free edition Misclassification of employees, Misclassification of Employees N Nonqualified plans, Nonqualified Deferred Compensation Plans O Officer of corporation, Common-Law Employees Outplacement services, Outplacement Services P Pension payments, 8. H and r block free edition Pensions and Annuities Publications (see Tax help) R Real estate agents, Licensed real estate agents. H and r block free edition Religious exemptions, 4. H and r block free edition Religious Exemptions and Special Rules for Ministers Reporting agents, Agents S Scholarship payments, Scholarship and Fellowship Payments Sick pay, 6. H and r block free edition Sick Pay Reporting SIMPLE retirement plans, SIMPLE Retirement Plans Simplified employee pension, Contributions to a Simplified Employee Pension (SEP) Statutory employees, Statutory Employees Statutory nonemployees, Statutory Nonemployees Suggestions for publication, Comments and suggestions. H and r block free edition Supplemental unemployment benefits, Supplemental Unemployment Benefits T Tax help, How To Get Tax Help Tax-exempt organizations, 3. H and r block free edition Employees of Exempt Organizations Tax-sheltered annuities, Tax-Sheltered Annuities Technical service specialists, Technical service specialists. H and r block free edition Third-party sick pay, Sick Pay Paid by Third Party , Third-party sick pay recap Forms W-2 and W-3. H and r block free edition TTY/TDD information, How To Get Tax Help W Withholding Alternative methods, 9. H and r block free edition Alternative Methods for Figuring Withholding Idle time payments, Withholding for Idle Time Indian gaming profits, 10. H and r block free edition Tables for Withholding on Distributions of Indian Gaming Profits to Tribal Members Pensions and annuities, Federal Income Tax Withholding Sick pay, Income Tax Withholding on Sick Pay Prev  Up     Home   More Online Publications
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IRA One-Rollover-Per-Year Rule

Beginning as early as January 1, 2015, you can make only one rollover from a traditional IRA to another (or the same) traditional IRA in any 12-month period, regardless of the number of IRAs you own (Announcement  2014-15). A similar limitation will apply to rollovers between Roth IRAs. You can, however, continue to make as many trustee-to-trustee transfers between IRAs as you want. Amounts transferred between traditional IRAs, either by rollover or trustee-to-trustee transfer, are excluded from your gross income.

Current law

You don’t have to include in your gross income any amount distributed to you from a traditional IRA if you deposit the amount into another (or the same) traditional IRA within 60 days (Internal Revenue Code Section 408(d)(3)). Under Internal Revenue Code Section 408(d)(3)(B), only one IRA-to-IRA rollover can be made in any 12-month period. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), published in 1981, and IRS Publication 590, Individual Retirement Arrangements (IRAs) interpret this limitation as applying on an IRA-by-IRA basis, meaning a rollover from one IRA to another would not affect a rollover involving other IRAs of the same individual.

U.S. Tax Court decision

The Tax Court recently held that you can’t make a non-taxable rollover from one IRA to another if you have already made a rollover from any of your IRAs in the preceding 1-year period (Bobrow v. Commissioner, T.C. Memo. 2014-21). Following the holding in this decision means:

  • you must include in gross income any previously untaxed amounts distributed from an IRA if you made an IRA-to-IRA rollover in the preceding 12 months, and
  • you may be subject to the 10% early withdrawal tax on the amount you include in gross income.

Additionally, if you pay these amounts into another (or the same) IRA, they may be:

Prospective application

The IRS intends to follow the Tax Court’s interpretation of Internal Revenue Code Section 408(d)(3)(B). However, to give IRA owners and trustees time to adjust, the IRS will delay implementation until January 1, 2015, at the earliest. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii) will be withdrawn and Publication 590 will be revised to reflect the new interpretation.

Only rollovers will be affected

This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers.

Additional resources

Page Last Reviewed or Updated: 26-Mar-2014

The H And R Block Free Edition

H and r block free edition Publication 51 - Main Content Table of Contents 1. H and r block free edition Taxpayer Identification NumbersWhen you receive your EIN. H and r block free edition Registering for SSNVS. H and r block free edition 2. H and r block free edition Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. H and r block free edition Wages and Other Compensation 4. H and r block free edition Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. H and r block free edition Federal Income Tax WithholdingImplementation of lock-in letter. H and r block free edition Seasonal employees and employees not currently performing services. H and r block free edition Termination and re-hire of employees. H and r block free edition How To Figure Federal Income Tax Withholding 6. H and r block free edition Required Notice to Employees About Earned Income Credit (EIC) 7. H and r block free edition Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. H and r block free edition Form 943 9. H and r block free edition Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. H and r block free edition Federal Unemployment (FUTA) Tax 11. H and r block free edition Reconciling Wage Reporting Forms 13. H and r block free edition Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. H and r block free edition Taxpayer Identification Numbers If you are required to withhold any federal income, social security, or Medicare taxes, you will need an employer identification number (EIN) for yourself. H and r block free edition Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. H and r block free edition Employer identification number (EIN). H and r block free edition   An employer identification number (EIN) is a nine-digit number that the IRS issues. H and r block free edition The digits are arranged as follows: 00-0000000. H and r block free edition It is used to identify the tax accounts of employers and certain others who have no employees. H and r block free edition Use your EIN on all of the items that you send to the IRS and SSA. H and r block free edition   If you do not have an EIN, you may apply for one online. H and r block free edition Visit IRS. H and r block free edition gov and click on the Apply for an EIN Online link under Tools. H and r block free edition 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. H and r block free edition Do not use a SSN in place of an EIN. H and r block free edition   If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied for it in the space shown for the number. H and r block free edition If you took over another employer's business, do not use that employer's EIN. H and r block free edition   You should have only one EIN. H and r block free edition If you have more than one, and are not sure which one to use, call the toll-free Business and Specialty Tax Line at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). H and r block free edition Provide the EINs that you have, the name and address to which each number was assigned, and the address of your principal place of business. H and r block free edition The IRS will tell you which EIN to use. H and r block free edition   For more information, see Publication 1635 or Publication 583. H and r block free edition When you receive your EIN. H and r block free edition   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS). H and r block free edition You will receive information in your Employer Identification Number (EIN) Package about Express Enrollment and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. H and r block free edition Call the toll-free number located in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your employment tax deposits. H and r block free edition If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. H and r block free edition Social security number (SSN). H and r block free edition   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. H and r block free edition You must obtain each employee's name and SSN as shown on the employee's social security card because you must enter them on Form W-2. H and r block free edition Do not accept a social security card that says “Not valid for employment. H and r block free edition ” A social security number issued with this legend does not permit employment. H and r block free edition You may, but are not required to, photocopy the social security card if the employee provides it. H and r block free edition If you do not show the employee's correct name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. H and r block free edition See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. H and r block free edition Applying for a social security card. H and r block free edition   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 to SSA. H and r block free edition You can get Form SS-5 at SSA offices, by calling 1-800-772-1213 or 1-800-325-0778 (TTY), or from the SSA website at www. H and r block free edition socialsecurity. H and r block free edition gov/online/ss-5. H and r block free edition html. H and r block free edition The employee must complete and sign Form SS-5; it cannot be filed by the employer. H and r block free edition 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. H and r block free edition Applying for a social security number. H and r block free edition   If you file Form W-2 on paper and your employee has applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. H and r block free edition If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. H and r block free edition 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. H and r block free edition Furnish Copies B, C, and 2 of Form W-2c to the employee. H and r block free edition Up to 25 Forms W-2c per Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. H and r block free edition For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. H and r block free edition socialsecurity. H and r block free edition gov/employer. H and r block free edition Advise your employee to correct the SSN on his or her original Form W-2. H and r block free edition Correctly record the employee's name and SSN. H and r block free edition   Record the name and number of each employee as they are shown on the employee's social security card. H and r block free edition 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. H and r block free edition 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. H and r block free edition   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 on the most recently filed Form W-2. H and r block free edition It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. H and r block free edition IRS individual taxpayer identification numbers (ITINs) for aliens. H and r block free edition   Do not accept an ITIN in place of an SSN for employee identification or for work. H and r block free edition An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. H and r block free edition S. H and r block free edition employment. H and r block free edition The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). H and r block free edition However, it begins with the number “9” and has either a “7” or “8” as the fourth digit (for example, 9NN-7N-NNNN or 9NN-8N-NNNN). H and r block free edition    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. H and r block free edition 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 in this section. H and r block free edition Do not use an ITIN in place of an SSN on Form W-2. H and r block free edition Verification of social security numbers. H and r block free edition   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 employee names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive results the next business day. H and r block free edition Visit www. H and r block free edition socialsecurity. H and r block free edition gov/employer/ssnv. H and r block free edition htm for more information. H and r block free edition Registering for SSNVS. H and r block free edition   You must register online and receive authorization from your employer to use SSNVS. H and r block free edition To register, visit SSA's website at www. H and r block free edition socialsecurity. H and r block free edition gov/employer and click on the Business Services Online link. H and r block free edition Follow the registration instructions to obtain a user identification (ID) and password. H and r block free edition You will need to provide the following information about yourself and your company. H and r block free edition Name. H and r block free edition SSN. H and r block free edition Date of birth. H and r block free edition Type of employer. H and r block free edition EIN. H and r block free edition Company name, address, and telephone number. H and r block free edition Email address. H and r block free edition When you have completed the online registration process, SSA will mail a one-time activation code to your employer. H and r block free edition You must enter the activation code online to use SSNVS. H and r block free edition 2. H and r block free edition Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. H and r block free edition See Publication 15-A for details on statutory employees and nonemployees. H and r block free edition Employee status under common law. H and r block free edition   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. H and r block free edition This is so even when you give the employee freedom of action. H and r block free edition What matters is that you have the right to control the details of how the services are performed. H and r block free edition See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. H and r block free edition If an employer-employee relationship exists, it does not matter what it is called. H and r block free edition The employee may be called an agent or independent contractor. H and r block free edition It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. H and r block free edition You are responsible for withholding and paying employment taxes for your employees. H and r block free edition You are also required to file employment tax returns. H and r block free edition These requirements do not apply to amounts that you pay to independent contractors. H and r block free edition The rules discussed in this publication apply only to workers who are your employees. H and r block free edition In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. H and r block free edition For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. H and r block free edition Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. H and r block free edition The table in section 12, How Do Employment Taxes Apply to Farmwork , distinguishes between farm and nonfarm activities, and also addresses rules that apply in special situations. H and r block free edition Crew Leaders If you are a crew leader, you are an employer of farmworkers. H and r block free edition A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. H and r block free edition If there is no written agreement between you and the farm operator stating that you are his or her employee and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. H and r block free edition For FUTA tax rules, see section 10. H and r block free edition Business Owned and Operated by Spouses If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. H and r block free edition See Publication 541, Partnerships, for more details. H and r block free edition The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. H and r block free edition Exception—Qualified joint venture. H and r block free edition   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. H and r block free edition 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). H and r block free edition   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. H and r block free edition Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. H and r block free edition   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. H and r block free edition 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. H and r block free edition Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. H and r block free edition 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. H and r block free edition    Note. H and r block free edition If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. H and r block free edition   For more information on qualified joint ventures, visit IRS. H and r block free edition gov and enter “qualified joint venture” in the search box. H and r block free edition Exception—Community income. H and r block free edition   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. H and r block free edition S. H and r block free edition possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. H and r block free edition You may still make an election to be taxed as a qualified joint venture instead of a partnership. H and r block free edition See Exception—Qualified joint venture , earlier in this section. H and r block free edition 3. H and r block free edition Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. H and r block free edition You may also be required to withhold, deposit, and report Additional Medicare Tax. H and r block free edition See section 4 for more information. H and r block free edition If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. H and r block free edition You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. H and r block free edition FUTA tax is discussed in section 10. H and r block free edition Cash wages include checks, money orders, etc. H and r block free edition Do not count as cash wages the value of food, lodging, and other noncash items. H and r block free edition For more information on what payments are considered taxable wages, see Publication 15 (Circular E). H and r block free edition Commodity wages. H and r block free edition   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. H and r block free edition However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. H and r block free edition These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. H and r block free edition Other compensation. H and r block free edition   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. H and r block free edition Family members. H and r block free edition   Generally, the wages that you pay to family members who are your employees are subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax. H and r block free edition However, certain exemptions may apply for your child, spouse, or parent. H and r block free edition See the table, How Do Employment Taxes Apply to Farmwork , in section 12. H and r block free edition Household employees. H and r block free edition   The wages of an employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,900 in 2014. H and r block free edition   Social security and Medicare taxes do not apply to cash wages for housework in your private home if it was done by your spouse or your child under age 21. H and r block free edition Nor do the taxes apply to housework done by your parent unless: You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter, and You are a widow or widower, or divorced and not remarried, or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. H and r block free edition   For more information, see Publication 926, Household Employer's Tax Guide. H and r block free edition    Wages for household work may not be a deductible farm expense. H and r block free edition See Publication 225, Farmer's Tax Guide. H and r block free edition Share farmers. H and r block free edition   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. H and r block free edition Compensation paid to H-2A visa holders. H and r block free edition   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2 but do not report it as social security wages (box 3) or Medicare wages (box 5) on Form W-2 because compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes. H and r block free edition On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. H and r block free edition   An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. H and r block free edition In that case, the worker must give the employer a completed Form W-4. H and r block free edition Federal income tax withheld should be reported in box 2 of Form W-2. H and r block free edition These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. H and r block free edition For rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. H and r block free edition 4. H and r block free edition Social Security and Medicare Taxes Generally, you must withhold social security and Medicare taxes on all cash wage payments that you make to your employees. H and r block free edition You may also be required to withhold Additional Medicare Tax. H and r block free edition For more information, see Additional Medicare Tax withholding , later. H and r block free edition The $150 Test or the $2,500 Test All cash wages that you pay to an employee during the year for farmwork are subject to social security and Medicare taxes and federal income tax withholding if either of the two tests below is met. H and r block free edition You pay cash wages to an employee of $150 or more in a year for farmwork (count all cash wages paid on a time, piecework, or other basis). H and r block free edition The $150 test applies separately to each farmworker that you employ. H and r block free edition If you employ a family of workers, each member is treated separately. H and r block free edition Do not count wages paid by other employers. H and r block free edition The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. H and r block free edition Exceptions. H and r block free edition   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes, or federal income tax withholding, even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. H and r block free edition   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. H and r block free edition Social Security and Medicare Tax Withholding The social security tax rate is 6. H and r block free edition 2%, for both the employee and employer, on the first $117,000 paid to each employee. H and r block free edition You must withhold at this rate from each employee and pay a matching amount. H and r block free edition The Medicare tax rate is 1. H and r block free edition 45% each for the employee and employer on all wages. H and r block free edition You must withhold at this rate from each employee and pay a matching amount. H and r block free edition There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. H and r block free edition Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. H and r block free edition For details, see Publication 15-A. H and r block free edition Additional Medicare Tax withholding. H and r block free edition   In addition to withholding Medicare tax at 1. H and r block free edition 45%, you must withhold a 0. H and r block free edition 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. H and r block free edition You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. H and r block free edition Additional Medicare Tax is only imposed on the employee. H and r block free edition There is no employer share of Additional Medicare Tax. H and r block free edition All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. H and r block free edition   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). H and r block free edition For more information on Additional Medicare Tax, visit IRS. H and r block free edition gov and enter “Additional Medicare Tax” in the search box. H and r block free edition Employee share paid by employer. H and r block free edition   If you would rather pay a household or agricultural employee's share of the social security and Medicare taxes without withholding them from his or her wages, you may do so. H and r block free edition If you do not withhold the taxes, however, you must still pay them. H and r block free edition Any employee social security and Medicare taxes that you pay is additional income to the employee. H and r block free edition Include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages and do not include it in boxes 3 and 5. H and r block free edition Also, do not count the additional income as wages for FUTA tax purposes. H and r block free edition Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. H and r block free edition See section 7 of Publication 15-A. H and r block free edition Withholding social security and Medicare taxes on nonresident alien employees. H and r block free edition   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. H and r block free edition S. H and r block free edition citizen or resident alien. H and r block free edition However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. H and r block free edition Also see Compensation paid to H-2A visa holders in section 3. H and r block free edition Religious exemption. H and r block free edition    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. H and r block free edition This exemption is available only if both the employee and the employer are members of the sect. H and r block free edition   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. H and r block free edition 5. H and r block free edition Federal Income Tax Withholding Farmers and crew leaders must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes. H and r block free edition The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. H and r block free edition You may use one of several methods to determine the amount of federal income tax withholding. H and r block free edition They are discussed in section 13. H and r block free edition Form W-4. H and r block free edition   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. H and r block free edition 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. H and r block free edition Advise your employees to use the IRS Withholding Calculator on the IRS website at www. H and r block free edition irs. H and r block free edition gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. H and r block free edition   Ask each new employee to give you a signed Form W-4 when starting work. H and r block free edition Make the form effective with the first wage payment. H and r block free edition If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. H and r block free edition Forms in Spanish. H and r block free edition   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. H and r block free edition For more information, see Publicación 17(SP). H and r block free edition Effective date of Form W-4. H and r block free edition   A Form W-4 remains in effect until the employee gives you a new one. H and r block free edition When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. H and r block free edition Do not adjust withholding retroactively. H and r block free edition If an employee gives you a replacement 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. H and r block free edition 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. H and r block free edition A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. H and r block free edition Completing Form W-4. H and r block free edition   The amount of federal income tax withholding is based on marital status and withholding allowances. H and r block free edition Your employees may not base their withholding amounts on a fixed dollar amount or percentage. H and r block free edition However, the 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. H and r block free edition   Employees may claim fewer withholding allowances than they are entitled to claim. H and r block free edition They may do this to ensure that they have enough withholding or to offset other sources of taxable income that are not subject to withholding. H and r block free edition   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. H and r block free edition Along with Form W-4, you may wish to order Publication 505 for use by your employees. H and r block free edition    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. H and r block free edition If an employee wants additional withholding, he or she 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. H and r block free edition Exemption from federal income tax withholding. H and r block free edition   Generally, an employee may claim exemption from federal income tax withholding because he or she had no federal income tax liability last year and expects none this year. H and r block free edition See the Form W-4 instructions for more information. H and r block free edition However, the wages are still subject to social security and Medicare taxes. H and r block free edition   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. H and r block free edition 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. H and r block free edition If the employee does not give you a new Form W-4 by February 15, withhold tax based on the last valid Form W-4 you have for the employee that did not claim an exemption from withholding or, if one does not exist, withhold as if he or she is single with zero withholding allowances. H and r block free edition If the employee provides a new Form W-4 claiming an exemption from withholding on February 16 or later, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. H and r block free edition Withholding income taxes on the wages of nonresident alien employees. H and r block free edition   In general, you must withhold federal income taxes on the wages of nonresident alien employees. H and r block free edition However, see Publication 515 for exceptions to this general rule. H and r block free edition Also see Compensation paid to H-2A visa workers in section 3. H and r block free edition Withholding adjustment for nonresident alien employees. H and r block free edition   A special procedure applies for figuring the amount of income tax to withhold from wages of nonresident alien employees performing services within the United States for wages paid in 2014. H and r block free edition This procedure requires a special chart to be used with the withholding tables to determine the amount to withhold from the wages of the nonresident alien employee. H and r block free edition See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). H and r block free edition Nonresident alien employee's Form W-4. H and r block free edition   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 Korea, 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. H and r block free edition   If you maintain an electronic Form W-4 system, you should provide a field for nonresident alien employees to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. H and r block free edition    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. H and r block free edition Form 8233. H and r block free edition   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. H and r block free edition See Publication 515 for details. H and r block free edition IRS review of requested Forms W-4. H and r block free edition   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. H and r block free edition You may also be directed to send certain Forms W-4 to the IRS. H and r block free edition 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. H and r block free edition 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. H and r block free edition The IRS may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. H and r block free edition When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. H and r block free edition   After submitting a copy of the 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). H and r block free edition However, if the IRS later notifies you in writing that the employee is not entitled to claim a complete exemption from withholding or more than the maximum number of withholding allowances specified by the IRS in the written notice, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the notice (commonly referred to as a “lock-in letter”). H and r block free edition Initial lock-in letter. H and r block free edition   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. H and r block free edition In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee. H and r block free edition You will also receive a copy for the employee that identifies the maximum number of withholding allowances permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding allowances. H and r block free edition If the employee is employed by you as of the date of the notice, you must furnish the employee copy to the employee within 10 business days of receipt. H and r block free edition You may follow any reasonable business practice to furnish the employee copy to the employee. H and r block free edition Implementation of lock-in letter. H and r block free edition   When you receive the notice specifying the maximum number of withholding allowances and marital status permitted, you may not withhold immediately on the basis of the notice. H and r block free edition You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. H and r block free edition The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee to contact the IRS. H and r block free edition Seasonal employees and employees not currently performing services. H and r block free edition   If you receive a notice for an employee who is not currently performing services for you, you are still required to furnish the employee copy to the employee and withhold based on the notice if any of the following apply. H and r block free edition You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. H and r block free edition You reasonably expect the employee to resume services within 12 months of the date of the notice. H and r block free edition The employee is on a bona fide leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence. H and r block free edition Termination and re-hire of employees. H and r block free edition   If you are required to furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. H and r block free edition You must also withhold based on the notice or modification notice (explained next) if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship. H and r block free edition Modification notice. H and r block free edition   After issuing the notice specifying the maximum number of withholding allowances and marital status permitted, the IRS may issue a subsequent notice (modification notice) that modifies the original notice. H and r block free edition The modification notice may change the marital status and/or the number of withholding allowances permitted. H and r block free edition You must withhold federal income tax based on the effective date specified in the modification notice. H and r block free edition New Form W-4 after IRS notice. H and r block free edition   After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, you must disregard the new Form W-4. H and r block free edition You are required to withhold on the basis of the notice or modification notice unless the IRS subsequently notifies you to withhold based on the new Form W-4. H and r block free edition If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS. H and r block free edition   If, after you receive an IRS notice or modification notice, your employee provides you with a new Form W-4 that does not claim exemption from federal income tax withholding and claims a marital status, a number of withholding allowances, and any additional withholding that results in more withholding than would result under the notice or modification notice, you must withhold tax on the basis of that new Form W-4. H and r block free edition Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. H and r block free edition Substitute Forms W-4. H and r block free edition   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. H and r block free edition Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. H and r block free edition gov to obtain copies of Form W-4. H and r block free edition   You may use a substitute version of Form W-4 to meet your business needs. H and r block free edition However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. H and r block free edition At the time that you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W-4. H and r block free edition   You cannot accept a substitute Form W-4 developed by an employee, and the employee submitting such form will be treated as failing to furnish a Form W-4. H and r block free edition However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. H and r block free edition Invalid Forms W-4. H and r block free edition   Any unauthorized change or addition to Form W-4 makes it invalid. H and r block free edition This includes taking out any language by which the employee certifies that the form is correct. H and r block free edition A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. H and r block free edition An employee who submits a false Form W-4 may be subject to a $500 penalty. H and r block free edition You may treat a Form W-4 as invalid if the employee wrote “exempt” on line 7 and also entered a number on line 5 or an amount on line 6. H and r block free edition   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. H and r block free edition Tell the employee that it is invalid and ask for another one. H and r block free edition If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. H and r block free edition However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. H and r block free edition   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. H and r block free edition R. H and r block free edition B. H and r block free edition 455, available at www. H and r block free edition irs. H and r block free edition gov/irb/2007-35_IRB/ar10. H and r block free edition html. H and r block free edition Amounts exempt from levy on wages, salary, and other income. H and r block free edition   If you receive a Notice of Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), or 668-W(ICS), you must withhold amounts as described in the instructions for these forms. H and r block free edition Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), and 668-W(ICS), shows the exempt amount. H and r block free edition If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount. H and r block free edition How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. H and r block free edition Wage bracket tables. H and r block free edition See section 13 for directions on how to use the tables. H and r block free edition Percentage method. H and r block free edition See section 13 for directions on how to use the percentage method. H and r block free edition Alternative formula tables for percentage method withholding. H and r block free edition See Publication 15-A. H and r block free edition Wage bracket percentage method withholding tables. H and r block free edition See Publication 15-A. H and r block free edition Other alternative methods. H and r block free edition See Publication 15-A. H and r block free edition Employers with automated payroll systems will find the two alternative formula tables and the two alternative wage bracket percentage method tables in Publication 15-A useful. H and r block free edition If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. H and r block free edition Supplemental wages. H and r block free edition   Supplemental wages are wage payments to an employee that are not regular wages. H and r block free edition They include, but are not limited to, bonuses, commissions, overtime pay, accumulated sick leave, severance pay, awards, prizes, back pay and retroactive pay increases for current employees, and payments for nondeductible moving expenses. H and r block free edition Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. H and r block free edition   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total was a single payment for a regular payroll period. H and r block free edition   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 federal income tax from your employee's regular wages. H and r block free edition If you withheld federal 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. H and r block free edition Withhold a flat 25% (no other percentage allowed). H and r block free edition If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. H and r block free edition 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. H and r block free edition Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. H and r block free edition Subtract the tax withheld from the regular wages. H and r block free edition Withhold the remaining tax from the supplemental wages. H and r block free edition 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 previous supplemental wage payments, and withhold the remaining tax from the current payment of supplemental wages. H and r block free edition If you did not withhold federal income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b above. H and r block free edition This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. H and r block free edition    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. H and r block free edition See section 7 in Publication 15 (Circular E) for details. H and r block free edition   Regardless of the method that you use to withhold federal income tax on supplemental wages, they are generally subject to social security, Medicare, and FUTA taxes. H and r block free edition 6. H and r block free edition Required Notice to Employees About Earned Income Credit (EIC) You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC. H and r block free edition Although you do not have to notify employees who claim exemption from withholding on Form W-4 about the EIC, you are encouraged to notify any employees whose wages for 2013 were less than $46,227 ($51,567 if married filing jointly) that they may be eligible to claim the credit for 2013. H and r block free edition This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. H and r block free edition You will meet the notification requirement if you issue to the employee Form W-2 with the EIC notice on the back of Copy B, or a substitute Form W-2 with the same statement. H and r block free edition You may also meet the requirement by providing Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. H and r block free edition If a substitute Form W-2 is given to the employee on time but does not have the required statement, you must notify the employee within 1 week of the date that the substitute Form W-2 is given. H and r block free edition If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement by the date that Form W-2 is required to be given. H and r block free edition If Form W-2 is not required, you must notify the employee by February 7, 2014. H and r block free edition 7. H and r block free edition Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. H and r block free edition You must use electronic funds transfer to make all federal tax deposits. H and r block free edition See How To Deposit , later in this section. H and r block free edition The credit against employment taxes for COBRA premium assistance payments is treated as a deposit of taxes on the first day of your return period. H and r block free edition For more information, see COBRA premium assistance credit under Introduction. H and r block free edition Payment with return. H and r block free edition   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. H and r block free edition You report less than a $2,500 tax liability for the year (Form 943, line 11; Form 945, line 3) and you pay in full with a return that is filed on time. H and r block free edition However, if you are unsure that you will report less than $2,500, deposit under the rules explained in this section so that you will not be subject to failure-to-deposit penalties. H and r block free edition You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. H and r block free edition This payment may be $2,500 or more. H and r block free edition Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. H and r block free edition Semiweekly schedule depositors must timely deposit the amount. H and r block free edition See Accuracy of Deposits Rule and How To Deposit, later in this section. H and r block free edition When To Deposit If you employ both farm and nonfarm workers, do not combine the taxes reportable on Forms 941 or 944 with Form 943 to decide whether to make a deposit. H and r block free edition See Employers of Both Farm and Nonfarm Workers, later in this section. H and r block free edition The rules for determining when to deposit Form 943 taxes are discussed below. H and r block free edition See section 10 for the separate rules that apply to FUTA tax. H and r block free edition Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. H and r block free edition The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often your business pays its employees or how often you are required to make deposits. H and r block free edition The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). H and r block free edition The deposit schedule that you must use for a calendar year is determined from the tax liability reported on your Form 943, line 9, for the lookback period, discussed next. H and r block free edition If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. H and r block free edition If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. H and r block free edition Lookback period. H and r block free edition   The lookback period is the second calendar year preceding the current calendar year. H and r block free edition For example, the lookback period for 2014 is 2012. H and r block free edition Example of deposit schedule based on lookback period. H and r block free edition Rose Co. H and r block free edition reported taxes on Form 943 as follows. H and r block free edition 2012 — $48,000 2013 — $60,000 Rose Co. H and r block free edition is a monthly schedule depositor for 2014 because its taxes for the lookback period ($48,000 for calendar year 2012) were not more than $50,000. H and r block free edition However, for 2015, Rose Co. H and r block free edition is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. H and r block free edition Adjustments to lookback period taxes. H and r block free edition   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). H and r block free edition Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. H and r block free edition Example of adjustments. H and r block free edition An employer originally reported total tax of $45,000 for the lookback period in 2012. H and r block free edition The employer discovered during March 2014 that the tax reported for the lookback period was understated by $10,000 and corrected this error by filing Form 943-X. H and r block free edition The total tax reported in the lookback period is still $45,000. H and r block free edition The $10,000 adjustment is also not treated as part of the 2014 taxes. H and r block free edition Deposit period. H and r block free edition   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. H and r block free edition For monthly schedule depositors, the deposit period is a calendar month. H and r block free edition The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. H and r block free edition Monthly Deposit Schedule If the tax liability reported on Form 943, line 9, for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. H and r block free edition You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. H and r block free edition Monthly schedule example. H and r block free edition   Red Co. H and r block free edition is a seasonal employer and a monthly schedule depositor. H and r block free edition It pays wages each Friday. H and r block free edition It paid wages during August 2014, but did not pay any wages during September. H and r block free edition Red Co. H and r block free edition must deposit the combined tax liabilities for the August paydays by September 15. H and r block free edition Red Co. H and r block free edition does not have a deposit requirement for September (that is, due by October 15, 2014) because no wages were paid in September; therefore, it did not have a tax liability for September. H and r block free edition New employers. H and r block free edition   For agricultural employers, your tax liability for any year in the lookback period before the date you started or acquired your business is considered to be zero. H and r block free edition Therefore, you are a monthly schedule depositor for the first and second calendar years of your agricultural business (but see the $100,000 Next-Day Deposit Rule , later in this section). H and r block free edition Semiweekly Deposit Schedule You are a semiweekly schedule depositor for a calendar year if the tax liability on Form 943, line 9, during your lookback period was more than $50,000. H and r block free edition Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. H and r block free edition Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. H and r block free edition Semiweekly depositors are not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule (discussed later in this section) applies. H and r block free edition For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 by the following Wednesday. H and r block free edition If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. H and r block free edition Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. H and r block free edition Semiweekly Deposit Schedule IF the payday falls on a. H and r block free edition . H and r block free edition . H and r block free edition THEN deposit taxes by the following. H and r block free edition . H and r block free edition . H and r block free edition Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. H and r block free edition   Green, Inc. H and r block free edition , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. H and r block free edition Green, Inc. H and r block free edition , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. H and r block free edition Green, Inc. H and r block free edition 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). H and r block free edition Semiweekly deposit period spanning two quarters. H and r block free edition   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. H and r block free edition For example, if you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. H and r block free edition Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). H and r block free edition Deposits on Business Days Only If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. H and r block free edition A business day is any day other than a Saturday, Sunday, or legal holiday. H and r block free edition For example, if a deposit is required to be made on Friday and Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). H and r block free edition Semiweekly schedule depositors   will always have 3 business days to make a deposit. H and r block free edition That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the deposit. H and r block free edition For example, if a semiweekly schedule depositor accumulated taxes on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). H and r block free edition Legal holiday. H and r block free edition   The term “legal holiday” means any legal holiday in the District of Columbia. H and r block free edition Legal holidays for 2014 are listed below. H and r block free edition January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. H and r block free edition February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans' Day November 27— Thanksgiving Day December 25— Christmas Day $100,000 Next-Day Deposit Rule If you accumulate $100,000 or more of Form 943 taxes (that is, taxes reported on Form 943, line 11) on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. H and r block free edition For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. H and r block free edition For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 liability on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. H and r block free edition Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. H and r block free edition However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. H and r block free edition For example, Fir Co. H and r block free edition is a semiweekly schedule depositor. H and r block free edition On Monday, Fir Co. H and r block free edition accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. H and r block free edition On Tuesday, Fir Co. H and r block free edition accumulates additional taxes of $30,000. H and r block free edition Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. H and r block free edition does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). H and r block free edition If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year. H and r block free edition Example of the $100,000 next-day deposit rule. H and r block free edition   Elm, Inc. H and r block free edition , started its business on May 1, 2014. H and r block free edition Because Elm, Inc. H and r block free edition , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. H and r block free edition , is a monthly schedule depositor. H and r block free edition On May 8, Elm, Inc. H and r block free edition , paid wages for the first time and accumulated taxes of $50,000. H and r block free edition On May 9 (Friday), Elm, Inc. H and r block free edition , paid wages and accumulated taxes of $60,000, for a total of $110,000. H and r block free edition Because Elm, Inc. H and r block free edition , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. H and r block free edition Elm, Inc. H and r block free edition , became a semiweekly schedule depositor on May 10. H and r block free edition It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. H and r block free edition Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. H and r block free edition However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. H and r block free edition Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. H and r block free edition The deposit shortfall is paid or deposited by the shortfall makeup date as described below. H and r block free edition Makeup Date for Deposit Shortfall:    Monthly Schedule Depositor—Deposit the shortfall or pay it with your return by the due date of your Form 943. H and r block free edition You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. H and r block free edition Semiweekly Schedule Depositor—Deposit by the earlier of (a) the first Wednesday or Friday (whichever comes first) that falls on or after the 15th of the month following the month in which the shortfall occurred, or (b) the due date for Form 943. H and r block free edition For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). H and r block free edition How To Deposit You must deposit employment taxes by electronic funds transfer. H and r block free edition See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. H and r block free edition Electronic deposit requirement. H and r block free edition   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). H and r block free edition Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). H and r block free edition If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. H and r block free edition   EFTPS is a free service provided by the Department of Treasury. H and r block free edition To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD). H and r block free edition You can also visit the EFTPS website at www. H and r block free edition eftps. H and r block free edition gov. H and r block free edition Additional information about EFTPS is also available in Publication 966. H and r block free edition New employers that have a federal tax obligation will be pre-enrolled in EFTPS. H and r block free edition Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. H and r block free edition See When you receive your EIN in section 1 for more information. H and r block free edition Deposit record. H and r block free edition   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. H and r block free edition The number can be used as a receipt or to trace the payment. H and r block free edition Depositing on time. H and r block free edition   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. H and r block free edition m. H and r block free edition Eastern time the day before the date a deposit is due. H and r block free edition If you use a third party to make a deposit on your behalf, they may have different cutoff times. H and r block free edition Same-day payment option. H and r block free edition   If you fail to initiate a deposit transaction on EFTPS by 8 p. H and r block free edition m. H and r block free edition Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). H and r block free edition To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. H and r block free edition Please check with your financial institution regarding availability, deadlines, and costs. H and r block free edition Your financial institution may charge you a fee for payments made this way. H and r block free edition To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. H and r block free edition eftps. H and r block free edition gov to download the Same-Day Payment Worksheet. H and r block free edition Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. H and r block free edition The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. H and r block free edition IRS may also waive deposit penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. H and r block free edition For amounts not properly deposited or not deposited on time, the penalty rates are shown next. H and r block free edition Penalty Charged for. H and r block free edition . H and r block free edition . H and r block free edition 2% Deposits made 1 to 5 days late. H and r block free edition 5% Deposits made 6 to 15 days late. H and r block free edition 10% Deposits made 16 or more days late. H and r block free edition Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. H and r block free edition 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. H and r block free edition See Payment with return , earlier in this section, for exceptions. H and r block free edition 15% Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. H and r block free edition Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. H and r block free edition Order in which deposits are applied. H and r block free edition   Deposits generally are applied to the most recent tax liability within the year. H and r block free edition If you receive a failure-to-deposit penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. H and r block free edition Follow the instructions on the penalty notice that you received. H and r block free edition For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. H and r block free edition You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. H and r block free edition irs. H and r block free edition gov/pub/irs-irbs/irb01-50. H and r block free edition pdf. H and r block free edition Example. H and r block free edition Cedar, Inc. H and r block free edition , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. H and r block free edition It does not make the deposit on July 15. H and r block free edition On August 15, Cedar, Inc. H and r block free edition , deposits $2,000. H and r block free edition Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. H and r block free edition Accordingly, $500 of the July 15 liability remains undeposited. H and r block free edition The penalty on this underdeposit will apply as explained above. H and r block free edition Trust fund recovery penalty. H and r block free edition   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. H and r block free edition The penalty is the full amount of the unpaid trust fund tax. H and r block free edition This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. H and r block free edition   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. H and r block free edition   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. H and r block free edition A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. H and r block free edition    Willfully means voluntarily, consciously, and intentionally. H and r block free edition A responsible person acts willfully if the person knows that the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. H and r block free edition “Average” failure-to-deposit penalty. H and r block free edition   IRS may assess an “averaged” failure-to-deposit penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 943, line 17, when your tax liability shown on Form 943, line 11, was $2,500 or more. H and r block free edition IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 943, line 11, was $2,500 or more and you did any of the following. H and r block free edition Completed Form 943, line 17, instead of Form 943-A. H and r block free edition Failed to attach a properly completed Form 943-A. H and r block free edition Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. H and r block free edition   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. H and r block free edition Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. H and r block free edition   You can avoid the penalty by reviewing your return before filing it. H and r block free edition Follow these steps before filing your Form 943. H and r block free edition If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. H and r block free edition If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Form 943-A in the lines that represent the dates you paid your employees. H and r block free edition Verify that your total liability shown on Form 943, line 17, or Form 943-A, line M, equals your tax liability shown on Form 943, line 11. H and r block free edition Do not show negative amounts on Form 943, line 17, or Form 943-A. H and r block free edition For prior period errors discovered after December 31, 2008, do not adjust your tax liabilities reported on Form 943, line 17, or on Form 943-A. H and r block free edition Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941 and 944 taxes). H and r block free edition Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. H and r block free edition If a deposit is due, deposi