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BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM

BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM. Indian Tribal Governments Specialists in Alaska. Judy Pearson Phone 907-271-6949. Mary Jo Audette Phone 907-271-6874. Call: Customer Account Services toll-free (877) 829-5500

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BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM

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  1. BIA PROVIDERS CONFERENCE December 4, 2013 COMMON PAYROLL ERRORS and HOW TO AVOID THEM

  2. Indian Tribal Governments Specialists in Alaska Judy PearsonPhone 907-271-6949 Mary Jo AudettePhone 907-271-6874 • Call: Customer Account Services • toll-free (877) 829-5500 • Visit: Indian Tribal Governments • Web site at www.irs.gov/tribes

  3. Why do you get PENALTIES on your Form 941? Didn’t makeFederal Tax Deposits! • You must deposit ALL federal payroll taxes (withheld from employees pay and matched by employer) for every payday/paycheck • You must use EFTPS (Electronic Federal Tax Payment System) to make your deposits • On EFTPS, select “Federal Tax Deposit”:do not select any other type of payment

  4. Why do you get PENALTIES on your Form 941? Didn’t fill out Form 941 correctly! • Fill out line 16 (page 2) completely • Check proper box in line 16 and follow instructions: • Taxes owed on return are less than $2500 • Monthly depositor – fill out monthly liability • Semi-weekly depositor – fill out Schedule B and attach it to Form 941 • How do you know which type of depositor you are???

  5. Why do you get PENALTIES on your Form 941? Didn’t FILE Form 941 with IRS by DUE DATE • Quarter 1 (Jan, Feb, March) – due 4/30 • Quarter 2 (April, May, June) – due 7/31 • Quarter 3 (July, Aug, Sept) – due 10/31 • Quarter 4 (Oct, Nov, Dec) – due 1/31 • IMPORTANT NOTE: If you make all required federal tax deposits on time, in the correct amount and use EFTPS, you will NOT get a late filing penalty even if you file Form 941 late!

  6. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Reconciliation notices from SSA or IRS • 941 & W-2 wages do not match • Notice asks you to explain and/or fix • If you do not respond • Tax assessment or • Civil penalty Remedy • Open all notices and follow up • Respond to notices

  7. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Reconciliation notices from SSA or IRS • Reasons 941 & W-2 do not match • Did not reconcile before filing • Did not file all W-2s with SSA • Did not file all 941s with IRS • Sent in duplicate W-2s • Did not use “void” box when applicable • Remedy • Change “did not” to do for all the above

  8. Check “void” box so W-2 will be ignored X XXX-78-1234 XX-0000001 1100.00 1100.00 Tribal Government E PO Box 123 Village E, AK 99999 100.00 This W-2 has errors. What can I do? Check the “void” box so SSA will ignore it. Irma Councilmember PO Box 006 ¾ Village E, AK 99999

  9. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Reconciliation notices from SSA or IRS • Reasons 941 & W-2 do not match • Council Member pay reported incorrectly • Not subject to SocSec/Med taxes • W-2: Box 1 only • 941: Line 2 only • If the wages are higher on Forms 941: • Are you missing one or more Form W-2s ? • If the wages are higher on Forms W-2: • Are there one or more duplicate W-2s? • Was a payroll omitted from the 941?

  10. Trends & ErrorsDiscussion of items that often have errors, i.e., trends More that one 941 filed for quarter • Multiple programs/departments • Each program/department is responsible for their own payroll • Single employer identification number - EIN • Each makes their own deposits (fine) • Each files their own 941 (bad) • Service Center may not post as intend Remedy • Combine information and file a single 941

  11. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Form 940 Federal Unemployment Tax-FUTA • Newly hired bookkeeper files 940 • Newly hired 3rd party payroll service files 940 Tribes are exempt from FUTA tax as long as they are current with State of Alaska Quarterly Contribution Reports Remedy • Stop filing Form 940 • If you filed and paid Form 940 • file an amended Form 940 for refund

  12. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Deposits posted to wrong quarter • Often happens the last payday of the quarter • Example: • Payday was September 27th (3rd quarter) • Deposit is due Wednesday, October 2nd • Deposit is made on October 1st • 4th quarter is selected in error • Remedy • When using EFTPS to make deposit, choose the correct quarter • Contact IRS/ITG and request payment movement

  13. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Form W-3 Transmittal not filed with W-2s When an error is found on a W-2 • no action (wrong) • filing a second W-2 (wrong) • filing a W-2c (correct)

  14. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Council Members pay • Not reporting (wrong) • Setting up as a vendor (wrong) • Reporting on Form 1099-MISC (wrong) • Harms the Council Member • 15.3% Self-employment tax now due

  15. Trends & ErrorsDiscussion of items that often have errors, i.e., trends Council Members pay • Set up as QuickBook payroll item (correct) • Report on Form W-2 (correct) • $$ entry in boxes 1, 3, 5 (wrong) • No memo entry in box 14 (wrong) • $$ entry in box 1 only (correct) • Memo entry in box 14 (correct) • Rev Rul 59-354

  16. W-2forTribalCouncilMember XXX-78-1234 XX-0000001 1100.00 Tribal Government E PO Box 123 Village E, AK 99999 Irma Councilmember PO Box 006 ¾ Village E, AK 99999 Rev Rul 59-354

  17. Tribal Council Member Pay Do NOT withholdany federal income tax, Social Security tax or Medicare Tax However, a tribal council member may request VOLUNTARY federal income tax withholding See Revenue Rule 59-354 Do not issue Form 1099 Harms the Council Member Self-employment tax due at 15.3%

  18. Form W-4 for Council Member who wants VOLUNTARY income tax withholding 15.00

  19. Form W-9 Not securing from vendors (wrong) Remedy: Secure Form W-9 from vendors (correct) Keep copies in vendor file (correct) Use W-9 to prepare accurate Forms 1099 MISC, when required Correct EIN or SSN Correct name Correct address Trends & ErrorsDiscussion of items that often have errors, i.e., trends

  20. Form 1099 MISC Not issuing Forms 1099 MISC when required (wrong) Not preparing Forms 1099 MISC to report rent payments or childcare payments, in particular (wrong) Remedy: Educate yourself on 1099s filing requirements Review all vendor payments (correct) Identify those that require Form 1099 MISC (correct) $600 or more total for year For services, rents & prizes Note: 1099’s not required to report payments to corporations except for medical and legal service payments Secure W-9’s for accurate payee information Trends & ErrorsDiscussion of items that often have errors, i.e., trends

  21. If your tribe is “in trouble” with IRS If you owe unpaid taxes If you have unfiled tax returns Don’t ignore the problem—it won’t go away! If you are overwhelmed, start by making federal tax deposits for current quarter File and pay current tax returns Work your way backwards for filing and paying Ask for assistance from IRS (ITG)

  22. Trends & Errors Form 11-C not being filed Occupational Tax & Registration Return for Wagering used to register: • A tribe who is in the business of accepting taxable wagers for their own account (aka the Principal) • An agent (seller) who accepts taxable wagers for the tribe • Taxable wagers include sales of pull tabs & raffle tickets

  23. Trends & Errors Form 11-C is due: • Initially, before wagers are accepted • By July 1 of each year thereafter Amount of Tax • $50 if all wagers accepted are authorized under state law or… • $500 for all other wagers

  24. Form 11CTribeExample

  25. Seller’s Form 11-C Entity Info and Part I

  26. Form 11-C Occupational Tax and Registration Return Part III and Signature for Agent

  27. Wagering Taxes Form 730 Monthly Tax Return for Wagers • due monthly, by the last day of the following month • must be filed if you are in the business of • selling pull tabs • conducting a raffle

  28. Wagering Taxes Pull tabs which are manually dispensed are subject to the wagering tax Amount of Tax • .25% of the wager if authorized under state law • 2% of the wager if it is not authorized under the state

  29. Form 730 – Tribe

  30. Mail the return and payment as follows: • Form 11-C: • Internal Revenue Service • Cincinnati, OH 45999-0101 • Form 730: • Internal Revenue Service • Cincinnati, OH 45999-0100 Where to file

  31. Questions?

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