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H&r block sign in 5. H&r block sign in   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. H&r block sign in Making the election. H&r block sign in Form 3115. H&r block sign in Income TaxesAccrual of contested income taxes. H&r block sign in Employment Taxes Other TaxesAdditional Medicare Tax. H&r block sign in What's New Additional Medicare Tax. H&r block sign in  Beginning in 2013, you must withhold a 0. H&r block sign in 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. H&r block sign in Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. H&r block sign in See Employment Taxes , and Self-employment tax , later. H&r block sign in Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. H&r block sign in You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. H&r block sign in Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. H&r block sign in When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. H&r block sign in This applies whether you use the cash method or an accrual method of accounting. H&r block sign in Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. H&r block sign in You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . H&r block sign in Limit on accrual of taxes. H&r block sign in   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. H&r block sign in However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. H&r block sign in Example. H&r block sign in Your state imposes a tax on personal property used in a trade or business conducted in the state. H&r block sign in This tax is assessed and becomes a lien as of July 1 (accrual date). H&r block sign in In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. H&r block sign in Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. H&r block sign in You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. H&r block sign in Uniform capitalization rules. H&r block sign in   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. H&r block sign in They also apply to certain taxpayers who acquire property for resale. H&r block sign in Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. H&r block sign in For more information, see chapter 1. H&r block sign in Carrying charges. H&r block sign in   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. H&r block sign in You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. H&r block sign in For more information, see chapter 7. H&r block sign in Refunds of taxes. H&r block sign in   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. H&r block sign in For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. H&r block sign in    You must include in income any interest you receive on tax refunds. H&r block sign in Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. H&r block sign in The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. H&r block sign in Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. H&r block sign in See Taxes for local benefits , later. H&r block sign in If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. H&r block sign in However, you can elect to ratably accrue the taxes during the year. H&r block sign in See Electing to ratably accrue , later. H&r block sign in Taxes for local benefits. H&r block sign in   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. H&r block sign in These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. H&r block sign in You should increase the basis of your property by the amount of the assessment. H&r block sign in   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. H&r block sign in If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. H&r block sign in Example. H&r block sign in To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. H&r block sign in The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. H&r block sign in The city is paying the principal and interest with the annual payments made by the property owners. H&r block sign in The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. H&r block sign in The part of the payments used to pay the interest charges on the bonds is deductible as taxes. H&r block sign in Charges for services. H&r block sign in   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. H&r block sign in Purchase or sale of real estate. H&r block sign in   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. H&r block sign in   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. H&r block sign in Treat the seller as paying the taxes up to but not including the date of sale. H&r block sign in Treat the buyer as paying the taxes beginning with the date of sale. H&r block sign in You can usually find this information on the settlement statement you received at closing. H&r block sign in   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. H&r block sign in Example. H&r block sign in Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. H&r block sign in He has not elected to ratably accrue property taxes. H&r block sign in November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. H&r block sign in He sold the property on June 30, 2013. H&r block sign in Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. H&r block sign in He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. H&r block sign in Electing to ratably accrue. H&r block sign in   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. H&r block sign in Example. H&r block sign in Juan Sanchez is a calendar year taxpayer who uses an accrual method. H&r block sign in His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. H&r block sign in July 1 is the assessment and lien date. H&r block sign in If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. H&r block sign in Separate elections. H&r block sign in   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. H&r block sign in Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. H&r block sign in See Form 3115 , later. H&r block sign in Making the election. H&r block sign in   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. H&r block sign in The statement should show all the following items. H&r block sign in The trades or businesses to which the election applies and the accounting method or methods used. H&r block sign in The period to which the taxes relate. H&r block sign in The computation of the real estate tax deduction for that first year. H&r block sign in   Generally, you must file your return by the due date (including extensions). H&r block sign in However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). H&r block sign in Attach the statement to the amended return and write “Filed pursuant to section 301. H&r block sign in 9100-2” on the statement. H&r block sign in File the amended return at the same address where you filed the original return. H&r block sign in Form 3115. H&r block sign in    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. H&r block sign in For more information, including applicable time frames for filing, see the Instructions for Form 3115. H&r block sign in Note. H&r block sign in If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. H&r block sign in R. H&r block sign in B. H&r block sign in 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. H&r block sign in R. H&r block sign in B. H&r block sign in 689, and Revenue Procedure 2012-20, 2012-14 I. H&r block sign in R. H&r block sign in B. H&r block sign in 700, or any successor. H&r block sign in Revenue Procedure 2011-14 is available at  www. H&r block sign in irs. H&r block sign in gov/irb/2011-04IRB/ar08. H&r block sign in html. H&r block sign in Income Taxes This section discusses federal, state, local, and foreign income taxes. H&r block sign in Federal income taxes. H&r block sign in   You cannot deduct federal income taxes. H&r block sign in State and local income taxes. H&r block sign in   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. H&r block sign in An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). H&r block sign in   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. H&r block sign in Accrual of contested income taxes. H&r block sign in   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. H&r block sign in   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. H&r block sign in You cannot deduct them in the year in which the liability is finally determined. H&r block sign in    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. H&r block sign in Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. H&r block sign in   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. H&r block sign in You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. H&r block sign in For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. H&r block sign in Foreign income taxes. H&r block sign in   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. H&r block sign in S. H&r block sign in possession. H&r block sign in However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. H&r block sign in S. H&r block sign in tax under the foreign earned income exclusion or the foreign housing exclusion. H&r block sign in For information on these exclusions, see Publication 54, Tax Guide for U. H&r block sign in S. H&r block sign in Citizens and Resident Aliens Abroad. H&r block sign in For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. H&r block sign in Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. H&r block sign in Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. H&r block sign in You may also need to pay certain employment taxes from your own funds. H&r block sign in These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. H&r block sign in Note. H&r block sign in Additional Medicare Tax is only imposed on the employee. H&r block sign in There is no employer share of Additional Medicare Tax. H&r block sign in Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. H&r block sign in You can deduct the employment taxes you must pay from your own funds as taxes. H&r block sign in Example. H&r block sign in You pay your employee $18,000 a year. H&r block sign in However, after you withhold various taxes, your employee receives $14,500. H&r block sign in You also pay an additional $1,500 in employment taxes. H&r block sign in You should deduct the full $18,000 as wages. H&r block sign in You can deduct the $1,500 you pay from your own funds as taxes. H&r block sign in For more information on employment taxes, see Publication 15 (Circular E). H&r block sign in Unemployment fund taxes. H&r block sign in   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. H&r block sign in Deduct these payments as taxes. H&r block sign in Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. H&r block sign in Excise taxes. H&r block sign in   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. H&r block sign in However, see Fuel taxes , later. H&r block sign in   For more information on excise taxes, see Publication 510. H&r block sign in Franchise taxes. H&r block sign in   You can deduct corporate franchise taxes as a business expense. H&r block sign in Fuel taxes. H&r block sign in   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. H&r block sign in Do not deduct these taxes as a separate item. H&r block sign in   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. H&r block sign in For more information, see Publication 510. H&r block sign in Occupational taxes. H&r block sign in   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. H&r block sign in Personal property tax. H&r block sign in   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. H&r block sign in Sales tax. H&r block sign in   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. H&r block sign in If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. H&r block sign in If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. H&r block sign in If the property is depreciable, add the sales tax to the basis for depreciation. H&r block sign in For more information on basis, see Publication 551. H&r block sign in    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. H&r block sign in Also, do not include these taxes in gross receipts or sales. H&r block sign in Self-employment tax. H&r block sign in   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. H&r block sign in This deduction only affects your income tax. H&r block sign in It does not affect your net earnings from self-employment or your self-employment tax. H&r block sign in   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). H&r block sign in   For more information on self-employment tax, see Publication 334. H&r block sign in Additional Medicare Tax. H&r block sign in   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. H&r block sign in See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. H&r block sign in Prev  Up  Next   Home   More Online Publications
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H&r block sign in Publication 15 - Main Content Table of Contents 1. H&r block sign in Employer Identification Number (EIN) 2. H&r block sign in Who Are Employees?Relief provisions. H&r block sign in Business Owned and Operated by Spouses 3. H&r block sign in Family Employees 4. H&r block sign in Employee's Social Security Number (SSN)Registering for SSNVS. H&r block sign in 5. H&r block sign in Wages and Other CompensationAccountable plan. H&r block sign in Nonaccountable plan. H&r block sign in Per diem or other fixed allowance. H&r block sign in 50% test. H&r block sign in Health Savings Accounts and medical savings accounts. H&r block sign in Nontaxable fringe benefits. H&r block sign in When fringe benefits are treated as paid. H&r block sign in Valuation of fringe benefits. H&r block sign in Withholding on fringe benefits. H&r block sign in Depositing taxes on fringe benefits. H&r block sign in 6. H&r block sign in TipsOrdering rule. H&r block sign in 7. H&r block sign in Supplemental Wages 8. H&r block sign in Payroll Period 9. H&r block sign in Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. H&r block sign in Required Notice to Employees About the Earned Income Credit (EIC) 11. H&r block sign in Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. H&r block sign in Filing Form 941 or Form 944 13. H&r block sign in Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. H&r block sign in Federal Unemployment (FUTA) TaxSuccessor employer. H&r block sign in Household employees. H&r block sign in When to deposit. H&r block sign in Household employees. H&r block sign in Electronic filing by reporting agents. H&r block sign in 16. H&r block sign in How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. H&r block sign in Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. H&r block sign in The EIN is a nine-digit number the IRS issues. H&r block sign in The digits are arranged as follows: 00-0000000. H&r block sign in It is used to identify the tax accounts of employers and certain others who have no employees. H&r block sign in Use your EIN on all of the items you send to the IRS and SSA. H&r block sign in For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. H&r block sign in If you do not have an EIN, you may apply for one online. H&r block sign in Go to the IRS. H&r block sign in gov and click on the Apply for an EIN Online link under Tools. H&r block sign in 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&r block sign in Do not use an SSN in place of an EIN. H&r block sign in You should have only one EIN. H&r block sign in 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). H&r block sign in Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. H&r block sign in The IRS will tell you which number to use. H&r block sign in If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. H&r block sign in 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. H&r block sign in 2. H&r block sign in Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. H&r block sign in See Publication 15-A for details on statutory employees and nonemployees. H&r block sign in Employee status under common law. H&r block sign in   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&r block sign in This is so even when you give the employee freedom of action. H&r block sign in What matters is that you have the right to control the details of how the services are performed. H&r block sign in See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. H&r block sign in   Generally, people in business for themselves are not employees. H&r block sign in For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. H&r block sign in However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. H&r block sign in   If an employer-employee relationship exists, it does not matter what it is called. H&r block sign in The employee may be called an agent or independent contractor. H&r block sign in 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&r block sign in Statutory employees. H&r block sign in   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. H&r block sign in 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. H&r block sign in An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. H&r block sign in A full-time life insurance salesperson who sells primarily for one company. H&r block sign in 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. H&r block sign in 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. H&r block sign in The orders must be for merchandise for resale or supplies for use in the customer's business. H&r block sign in The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. H&r block sign in    Statutory nonemployees. H&r block sign in   Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. H&r block sign in They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. H&r block sign in H-2A agricultural workers. H&r block sign in   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. H&r block sign in Treating employees as nonemployees. H&r block sign in   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. H&r block sign in 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. H&r block sign in The applicable rates depend on whether you filed required Forms 1099. H&r block sign in 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. H&r block sign in You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. H&r block sign in You continue to owe the full employer share of social security and Medicare taxes. H&r block sign in The employee remains liable for the employee share of social security and Medicare taxes. H&r block sign in See Internal Revenue Code section 3509 for details. H&r block sign in Also see the Instructions for Form 941-X. H&r block sign in   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. H&r block sign in Section 3509 is not available for reclassifying statutory employees. H&r block sign in See Statutory employees , earlier in this section. H&r block sign in   If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. H&r block sign in 2% plus 20% of the employee rate (see the Instructions for Form 941-X). H&r block sign in For Medicare taxes; employer rate of 1. H&r block sign in 45% plus 20% of the employee rate of 1. H&r block sign in 45%, for a total rate of 1. H&r block sign in 74% of wages. H&r block sign in For Additional Medicare Tax; 0. H&r block sign in 18% (20% of the employee rate of 0. H&r block sign in 9%) of wages subject to Additional Medicare Tax. H&r block sign in For income tax withholding, the rate is 1. H&r block sign in 5% of wages. H&r block sign in   If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. H&r block sign in 2% plus 40% of the employee rate (see the Instructions for Form 941-X). H&r block sign in For Medicare taxes; employer rate of 1. H&r block sign in 45% plus 40% of the employee rate of 1. H&r block sign in 45%, for a total rate of 2. H&r block sign in 03% of wages. H&r block sign in For Additional Medicare Tax; 0. H&r block sign in 36% (40% of the employee rate of 0. H&r block sign in 9%) of wages subject to Additional Medicare Tax. H&r block sign in For income tax withholding, the rate is 3. H&r block sign in 0% of wages. H&r block sign in Relief provisions. H&r block sign in   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. H&r block sign in 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. H&r block sign in You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. H&r block sign in See Publication 1976, Do You Qualify for Relief Under Section 530. H&r block sign in IRS help. H&r block sign in   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. H&r block sign in Voluntary Classification Settlement Program (VCSP). H&r block sign in   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. H&r block sign in To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). H&r block sign in For more information visit IRS. H&r block sign in gov and enter “VCSP” in the search box. H&r block sign in 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. H&r block sign in See Publication 541, Partnerships, for more details. H&r block sign in The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. H&r block sign in Exception—Qualified joint venture. H&r block sign in   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&r block sign in 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&r block sign in   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&r block sign in Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. H&r block sign in   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. H&r block sign in 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&r block sign in Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. H&r block sign in 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&r block sign in    Note. H&r block sign in If your spouse is your employee, not your partner, see One spouse employed by another in section 3. H&r block sign in   For more information on qualified joint ventures, visit IRS. H&r block sign in gov and enter “qualified joint venture” in the search box. H&r block sign in Exception—Community income. H&r block sign in   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&r block sign in S. H&r block sign in possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. H&r block sign in You may still make an election to be taxed as a qualified joint venture instead of a partnership. H&r block sign in See Exception—Qualified joint venture , earlier. H&r block sign in 3. H&r block sign in Family Employees Child employed by parents. H&r block sign in   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. H&r block sign in 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. H&r block sign in However, see Covered services of a child or spouse , later in this section. H&r block sign in 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. H&r block sign in 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. H&r block sign in One spouse employed by another. H&r block sign in   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. H&r block sign in 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. H&r block sign in Covered services of a child or spouse. H&r block sign in   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. H&r block sign in Parent employed by son or daughter. H&r block sign in   When the employer is a son or daughter employing his or her parent the following rules apply. H&r block sign in 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. H&r block sign in 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. H&r block sign in    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. H&r block sign in   Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. H&r block sign in 4. H&r block sign in 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. H&r block sign in This requirement also applies to resident and nonresident alien employees. H&r block sign in You should ask your employee to show you his or her social security card. H&r block sign in The employee may show the card if it is available. H&r block sign in Do not accept a social security card that says “Not valid for employment. H&r block sign in ” A social security number issued with this legend does not permit employment. H&r block sign in You may, but are not required to, photocopy the social security card if the employee provides it. H&r block sign in 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. H&r block sign in See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. H&r block sign in Applying for a social security card. H&r block sign in   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. H&r block sign in You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. H&r block sign in socialsecurity. H&r block sign in gov/online/ss-5. H&r block sign in html. H&r block sign in The employee must complete and sign Form SS-5; it cannot be filed by the employer. H&r block sign in 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&r block sign in Applying for a social security number. H&r block sign in   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. H&r block sign in If you are filing electronically, enter all zeros (000-00-000) in the social security number field. H&r block sign in 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&r block sign in Furnish copies B, C, and 2 of Form W-2c to the employee. H&r block sign in 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. H&r block sign in For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. H&r block sign in socialsecurity. H&r block sign in gov/employer. H&r block sign in Advise your employee to correct the SSN on his or her original Form W-2. H&r block sign in Correctly record the employee's name and SSN. H&r block sign in   Record the name and number of each employee as they are shown on the employee's social security card. H&r block sign in 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&r block sign in 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&r block sign in 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. H&r block sign in 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. H&r block sign in IRS individual taxpayer identification numbers (ITINs) for aliens. H&r block sign in   Do not accept an ITIN in place of an SSN for employee identification or for work. H&r block sign in An ITIN is only available to resident and nonresident aliens who are not eligible for U. H&r block sign in S. H&r block sign in employment and need identification for other tax purposes. H&r block sign in 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). H&r block sign in    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. H&r block sign in 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. H&r block sign in Do not use an ITIN in place of an SSN on Form W-2. H&r block sign in Verification of social security numbers. H&r block sign in   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. H&r block sign in Visit www. H&r block sign in socialsecurity. H&r block sign in gov/employer/ssnv. H&r block sign in htm for more information. H&r block sign in Registering for SSNVS. H&r block sign in   You must register online and receive authorization from your employer to use SSNVS. H&r block sign in To register, visit SSA's website at www. H&r block sign in ssa. H&r block sign in gov/employer and click on the Business Services Online link. H&r block sign in Follow the registration instructions to obtain a user identification (ID) and password. H&r block sign in You will need to provide the following information about yourself and your company. H&r block sign in Name. H&r block sign in SSN. H&r block sign in Date of birth. H&r block sign in Type of employer. H&r block sign in EIN. H&r block sign in Company name, address, and telephone number. H&r block sign in Email address. H&r block sign in   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. H&r block sign in You must enter the activation code online to use SSNVS. H&r block sign in 5. H&r block sign in Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. H&r block sign in The pay may be in cash or in other forms. H&r block sign in It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. H&r block sign in It does not matter how you measure or make the payments. H&r block sign in 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. H&r block sign in Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. H&r block sign in More information. H&r block sign in   See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. H&r block sign in Also, see section 15 for exceptions to the general rules for wages. H&r block sign in Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. H&r block sign in 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. H&r block sign in Employee business expense reimbursements. H&r block sign in   A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. H&r block sign in How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. H&r block sign in If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. H&r block sign in   These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. H&r block sign in Accountable plan. H&r block sign in   To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. H&r block sign in They must have paid or incurred deductible expenses while performing services as your employees. H&r block sign in 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. H&r block sign in They must substantiate these expenses to you within a reasonable period of time. H&r block sign in They must return any amounts in excess of substantiated expenses within a reasonable period of time. H&r block sign in   Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. H&r block sign in   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. H&r block sign in 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. H&r block sign in   A reasonable period of time depends on the facts and circumstances. H&r block sign in 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. H&r block sign in 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. H&r block sign in Nonaccountable plan. H&r block sign in   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. H&r block sign in 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. H&r block sign in   See section 7 for more information on supplemental wages. H&r block sign in Per diem or other fixed allowance. H&r block sign in   You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. H&r block sign in In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. H&r block sign in The 2013 standard mileage rate for auto expenses was 56. H&r block sign in 5 cents per mile. H&r block sign in The rate for 2014 is 56 cents per mile. H&r block sign in   The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. H&r block sign in 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). H&r block sign in   If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. H&r block sign in This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. H&r block sign in Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. H&r block sign in ” Wages not paid in money. H&r block sign in   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. H&r block sign in ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. H&r block sign in 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. H&r block sign in   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. H&r block sign in Withhold income tax on these payments only if you and the employee agree to do so. H&r block sign in 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. H&r block sign in Moving expenses. H&r block sign in   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. H&r block sign in Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. H&r block sign in For more information on moving expenses, see Publication 521, Moving Expenses. H&r block sign in Meals and lodging. H&r block sign in   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. H&r block sign in 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. H&r block sign in    “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. H&r block sign in 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. H&r block sign in   However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. H&r block sign in A written statement that the meals or lodging are for your convenience is not sufficient. H&r block sign in 50% test. H&r block sign in   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. H&r block sign in 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. H&r block sign in For more information, see Publication 15-B. H&r block sign in Health insurance plans. H&r block sign in   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. H&r block sign in Generally, this exclusion also applies to qualified long-term care insurance contracts. H&r block sign in 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). H&r block sign in 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. H&r block sign in See Announcement 92-16 for more information. H&r block sign in You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. H&r block sign in Health Savings Accounts and medical savings accounts. H&r block sign in   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. H&r block sign in To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. H&r block sign in 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. H&r block sign in 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. H&r block sign in For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). H&r block sign in Medical care reimbursements. H&r block sign in   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. H&r block sign in See Publication 15-B for an exception for highly compensated employees. H&r block sign in Differential wage payments. H&r block sign in   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. H&r block sign in   Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. H&r block sign in Employers should report differential wage payments in box 1 of Form W-2. H&r block sign in For more information about the tax treatment of differential wage payments, visit IRS. H&r block sign in gov and enter “employees in a combat zone” in the search box. H&r block sign in Fringe benefits. H&r block sign in   You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). H&r block sign in The benefits are subject to income tax withholding and employment taxes. H&r block sign in 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. H&r block sign in 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. H&r block sign in There are other special rules you and your employees may use to value certain fringe benefits. H&r block sign in See Publication 15-B for more information. H&r block sign in Nontaxable fringe benefits. H&r block sign in   Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. H&r block sign in See Publication 15-B for details. H&r block sign in The following are some examples of nontaxable fringe benefits. H&r block sign in Services provided to your employees at no additional cost to you. H&r block sign in Qualified employee discounts. H&r block sign in Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. H&r block sign in Examples include a company car for business use and subscriptions to business magazines. H&r block sign in 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). H&r block sign in Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). H&r block sign in Qualified moving expense reimbursement. H&r block sign in See Moving expenses , earlier in this section, for details. H&r block sign in The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. H&r block sign in Qualified tuition reduction an educational organization provides to its employees for education. H&r block sign in For more information, see Publication 970, Tax Benefits for Education. H&r block sign in Employer-provided cell phones provided primarily for a noncompensatory business reason. H&r block sign in   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. H&r block sign in No-additional-cost services. H&r block sign in Qualified employee discounts. H&r block sign in Meals provided at an employer operated eating facility. H&r block sign in Reduced tuition for education. H&r block sign in  For more information, including the definition of a highly compensated employee, see Publication 15-B. H&r block sign in When fringe benefits are treated as paid. H&r block sign in   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. H&r block sign in You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. H&r block sign in You do not have to make this choice for all employees. H&r block sign in 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. H&r block sign in See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. H&r block sign in Valuation of fringe benefits. H&r block sign in   Generally, you must determine the value of fringe benefits no later than January 31 of the next year. H&r block sign in Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. H&r block sign in Withholding on fringe benefits. H&r block sign in   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. H&r block sign in However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. H&r block sign in   You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. H&r block sign in You must, however, withhold social security and Medicare taxes on the use of the vehicle. H&r block sign in See Publication 15-B for more information on this election. H&r block sign in Depositing taxes on fringe benefits. H&r block sign in   Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. H&r block sign in To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. H&r block sign in   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. H&r block sign in See Valuation of fringe benefits , earlier. H&r block sign in If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. H&r block sign in See section 11 for information on deposit penalties. H&r block sign in   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. H&r block sign in However, you must recover the income taxes before April 1 of the following year. H&r block sign in Sick pay. H&r block sign in   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. H&r block sign in These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. H&r block sign in In either case, these payments are subject to social security, Medicare, and FUTA taxes. H&r block sign in 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. H&r block sign in The payments are always subject to federal income tax. H&r block sign in See Publication 15-A for more information. H&r block sign in 6. H&r block sign in Tips Tips your employee receives from customers are generally subject to withholding. H&r block sign in Your employee must report cash tips to you by the 10th of the month after the month the tips are received. H&r block sign in 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. H&r block sign in Both directly and indirectly tipped employees must report tips to you. H&r block sign in No report is required for months when tips are less than $20. H&r block sign in Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. H&r block sign in 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. H&r block sign in 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. H&r block sign in You are permitted to establish a system for electronic tip reporting by employees. H&r block sign in See Regulations section 31. H&r block sign in 6053-1(d). H&r block sign in Collecting taxes on tips. H&r block sign in   You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. H&r block sign in 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. H&r block sign in If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. H&r block sign in   You can collect these taxes from the employee's wages or from other funds he or she makes available. H&r block sign in See Tips treated as supplemental wages in section 7 for more information. H&r block sign in 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. H&r block sign in You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. H&r block sign in You are responsible for the employer Medicare tax for the whole year on all wages and tips. H&r block sign in File Form 941 or Form 944 to report withholding and employment taxes on tips. H&r block sign in Ordering rule. H&r block sign in   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. H&r block sign in If there are not enough funds available, withhold taxes in the following order. H&r block sign in Withhold on regular wages and other compensation. H&r block sign in Withhold social security and Medicare taxes on tips. H&r block sign in Withhold income tax on tips. H&r block sign in Reporting tips. H&r block sign in   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). H&r block sign in Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. H&r block sign in Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. H&r block sign in ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. H&r block sign in See section 13 and the General Instructions for Forms W-2 and W-3. H&r block sign in   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. H&r block sign in See Revenue Ruling 2012-18, 2012-26 I. H&r block sign in R. H&r block sign in B. H&r block sign in 1032, available at www. H&r block sign in irs. H&r block sign in gov/irb/2012-26_IRB/ar07. H&r block sign in html. H&r block sign in Allocated tips. H&r block sign in   If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. H&r block sign in However, do not withhold income, social security, or Medicare taxes on allocated tips. H&r block sign in   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. H&r block sign in   The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. H&r block sign in 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. H&r block sign in For information on filing Form 8027 electronically with the IRS, see Publication 1239. H&r block sign in Tip Rate Determination and Education Program. H&r block sign in   Employers may participate in the Tip Rate Determination and Education Program. H&r block sign in 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. H&r block sign in The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). H&r block sign in A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. H&r block sign in To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. H&r block sign in Additionally, visit IRS. H&r block sign in gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. H&r block sign in 7. H&r block sign in Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. H&r block sign in 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. H&r block sign in Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. H&r block sign in How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. H&r block sign in See Regulations section 31. H&r block sign in 3402(g)-1 for additional guidance for wages paid after January 1, 2007. H&r block sign in Also see Revenue Ruling 2008-29, 2008-24 I. H&r block sign in R. H&r block sign in B. H&r block sign in 1149, available at www. H&r block sign in irs. H&r block sign in gov/irb/2008-24_IRB/ar08. H&r block sign in html. H&r block sign in Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. H&r block sign in   Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. H&r block sign in 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. H&r block sign in 6% (or the highest rate of income tax for the year). H&r block sign in Withhold using the 39. H&r block sign in 6% rate without regard to the employee's Form W-4. H&r block sign in In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. H&r block sign in For more information, see Treasury Decision 9276, 2006-37 I. H&r block sign in R. H&r block sign in B. H&r block sign in 423, available at www. H&r block sign in irs. H&r block sign in gov/irb/2006-37_IRB/ar09. H&r block sign in html. H&r block sign in Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. H&r block sign in   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. H&r block sign in Supplemental wages combined with regular wages. H&r block sign in   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. H&r block sign in Supplemental wages identified separately from regular wages. H&r block sign in   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. H&r block sign in 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. H&r block sign in Withhold a flat 25% (no other percentage allowed). H&r block sign in If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. H&r block sign in 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&r block sign in Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. H&r block sign in Subtract the tax withheld from the regular wages. H&r block sign in Withhold the remaining tax from the supplemental wages. H&r block sign in 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. H&r block sign in 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. H&r block sign in 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&r block sign in Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. H&r block sign in Example 1. H&r block sign in You pay John Peters a base salary on the 1st of each month. H&r block sign in He is single and claims one withholding allowance. H&r block sign in In January he is paid $1,000. H&r block sign in Using the wage bracket tables, you withhold $50 from this amount. H&r block sign in 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. H&r block sign in You figure the withholding based on the total of $3,000. H&r block sign in The correct withholding from the tables is $338. H&r block sign in Example 2. H&r block sign in You pay Sharon Warren a base salary on the 1st of each month. H&r block sign in She is single and claims one allowance. H&r block sign in Her May 1 pay is $2,000. H&r block sign in Using the wage bracket tables, you withhold $188. H&r block sign in On May 14 she receives a bonus of $1,000. H&r block sign in 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). H&r block sign in Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. H&r block sign in Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). H&r block sign in Withhold $150 from the bonus payment. H&r block sign in Example 3. H&r block sign in The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. H&r block sign in You withhold 25% of $1,000, or $250, from Sharon's bonus payment. H&r block sign in Example 4. H&r block sign in The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. H&r block sign in 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). H&r block sign in Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. H&r block sign in 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). H&r block sign in Withhold $443 from the second bonus payment. H&r block sign in Tips treated as supplemental wages. H&r block sign in   Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. H&r block sign in If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. H&r block sign in If you have not withheld income tax from the regular wages, add the tips to the regular wages. H&r block sign in Then withhold income tax on the total. H&r block sign in 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. H&r block sign in Vacation pay. H&r block sign in   Vacation pay is subject to withholding as if it were a regular wage payment. H&r block sign in When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. H&r block sign in 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. H&r block sign in 8. H&r block sign in Payroll Period Your payroll period is a period of service for which you usually pay wages. H&r block sign in When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. H&r block sign in No regular payroll period. H&r block sign in   When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. H&r block sign in Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. H&r block sign in 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. H&r block sign in Employee paid for period less than 1 week. H&r block sign in   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. H&r block sign in If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. H&r block sign in You then figure withholding based on the daily or miscellaneous period. H&r block sign in 9. H&r block sign in Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. H&r block sign in   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&r block sign in 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&r block sign in Advise your employees to use the IRS Withholding Calculator on the IRS website at www. H&r block sign in irs. H&r block sign in gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. H&r block sign in   Ask all new employees to give you a signed Form W-4 when they start work. H&r block sign in Make the form effective with the first wage payment. H&r block sign in 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. H&r block sign in Form in Spanish. H&r block sign in   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. H&r block sign in For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). H&r block sign in The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). H&r block sign in Electronic system to receive Form W-4. H&r block sign in   You may establish a system to electronically receive Forms W-4 from your employees. H&r block sign in See Regulations section 31. H&r block sign in 3402(f)(5)-1(c) for more information. H&r block sign in Effective date of Form W-4. H&r block sign in   A Form W-4 remains in effect until the employee gives you a new one. H&r block sign in 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. H&r block sign in 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. H&r block sign in 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&r block sign in A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. H&r block sign in Successor employer. H&r block sign in   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. H&r block sign in See Revenue Procedure 2004-53, 2004-34 I. H&r block sign in R. H&r block sign in B. H&r block sign in 320, available at www. H&r block sign in irs. H&r block sign in gov/irb/2004-34_IRB/ar13. H&r block sign in html. H&r block sign in Completing Form W-4. H&r block sign in   The amount of any federal income tax withholding must be based on marital status and withholding allowances. H&r block sign in Your employees may not base their withholding amounts on a fixed dollar amount or percentage. H&r block sign in 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. H&r block sign in Employees may claim fewer withholding allowances than they are entitled to claim. H&r block sign in 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. H&r block sign in See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. H&r block sign in Along with Form W-4, you may wish to order Publication 505 for use by your employees. H&r block sign in Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. H&r block sign in 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. H&r block sign in Exemption from federal income tax withholding. H&r block sign in   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. H&r block sign in See the Form W-4 instructions for more information. H&r block sign in However, the wages are still subject to social security and Medicare taxes. H&r block sign in See also Invalid Forms W-4 , later in this section. H&r block sign in   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. H&r block sign in 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&r block sign in 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. H&r block sign in 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. H&r block sign in Withholding income taxes on the wages of nonresident alien employees. H&r block sign in   In general, you must withhold federal income taxes on the wages of nonresident alien employees. H&r block sign in However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. H&r block sign in Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. H&r block sign in Withholding adjustment for nonresident alien employees. H&r block sign in   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. H&r block sign in Nonresident alien students from India and business apprentices from India are not subject to this procedure. H&r block sign in Instructions. H&r block sign in   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. H&r block sign in Step 1. H&r block sign in   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. H&r block sign in    Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only   Payroll Period Add Additional     Weekly $ 43. H&r block sign in 30     Biweekly 86. H&r block sign in 50     Semimonthly 93. H&r block sign in 80     Monthly 187. H&r block sign in 50     Quarterly 562. H&r block sign in 50     Semiannually 1,125. H&r block sign in 00     Annually 2,250. H&r block sign in 00     Daily or Miscellaneous (each day of the payroll period) 8. H&r block sign in 70   Step 2. H&r block sign in   Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. H&r block sign in Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. H&r block sign in Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. H&r block sign in 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. H&r block sign in 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. H&r block sign in The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. H&r block sign in 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. H&r block sign in 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. H&r block sign in This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. H&r block sign in Example. H&r block sign in An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. H&r block sign in 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). H&r block sign in 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. H&r block sign in 50 from the chart under Step 1 ($586. H&r block sign in 50 total). H&r block sign in The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). H&r block sign in 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. H&r block sign in The $86. H&r block sign in 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. H&r block sign in Also, the $86. H&r block sign in 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. H&r block sign in Supplemental wage payment. H&r block sign in   This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. H&r block sign in 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. H&r block sign in Nonresident alien employee's Form W-4. H&r block sign in   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. H&r block sign in   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. H&r block sign in 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&r block sign in Form 8233. H&r block sign in   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&r block sign in See Publication 515 for details. H&r block sign in IRS review of requested Forms W-4. H&r block sign in   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. H&r block sign in You may also be directed to send certain Forms W-4 to the IRS. H&r block sign in 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&r block sign in 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&r block sign in 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. H&r block sign in R. H&r block sign in B. H&r block sign in 455, which is available at www. H&r block sign in irs. H&r block sign in gov/irb/2007-35_IRB/ar10. H&r block sign in html. H&r block sign in When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. H&r block sign in 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). H&r block sign in 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