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Irs And Form 1040

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Irs And Form 1040

Irs and form 1040 Publication 51 - Main Content Table of Contents 1. Irs and form 1040 Taxpayer Identification NumbersWhen you receive your EIN. Irs and form 1040 Registering for SSNVS. Irs and form 1040 2. Irs and form 1040 Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. Irs and form 1040 Wages and Other Compensation 4. Irs and form 1040 Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. Irs and form 1040 Federal Income Tax WithholdingImplementation of lock-in letter. Irs and form 1040 Seasonal employees and employees not currently performing services. Irs and form 1040 Termination and re-hire of employees. Irs and form 1040 How To Figure Federal Income Tax Withholding 6. Irs and form 1040 Required Notice to Employees About Earned Income Credit (EIC) 7. Irs and form 1040 Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. Irs and form 1040 Form 943 9. Irs and form 1040 Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. Irs and form 1040 Federal Unemployment (FUTA) Tax 11. Irs and form 1040 Reconciling Wage Reporting Forms 13. Irs and form 1040 Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. Irs and form 1040 Taxpayer Identification Numbers If you are required to withhold any federal income, social security, or Medicare taxes, you will need an employer identification number (EIN) for yourself. Irs and form 1040 Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. Irs and form 1040 Employer identification number (EIN). Irs and form 1040   An employer identification number (EIN) is a nine-digit number that the IRS issues. Irs and form 1040 The digits are arranged as follows: 00-0000000. Irs and form 1040 It is used to identify the tax accounts of employers and certain others who have no employees. Irs and form 1040 Use your EIN on all of the items that you send to the IRS and SSA. Irs and form 1040   If you do not have an EIN, you may apply for one online. Irs and form 1040 Visit IRS. Irs and form 1040 gov and click on the Apply for an EIN Online link under Tools. Irs and form 1040 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. Irs and form 1040 Do not use a SSN in place of an EIN. Irs and form 1040   If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied for it in the space shown for the number. Irs and form 1040 If you took over another employer's business, do not use that employer's EIN. Irs and form 1040   You should have only one EIN. Irs and form 1040 If you have more than one, and are not sure which one to use, call the toll-free Business and Specialty Tax Line at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Irs and form 1040 Provide the EINs that you have, the name and address to which each number was assigned, and the address of your principal place of business. Irs and form 1040 The IRS will tell you which EIN to use. Irs and form 1040   For more information, see Publication 1635 or Publication 583. Irs and form 1040 When you receive your EIN. Irs and form 1040   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS). Irs and form 1040 You will receive information in your Employer Identification Number (EIN) Package about Express Enrollment and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. Irs and form 1040 Call the toll-free number located in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your employment tax deposits. Irs and form 1040 If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. Irs and form 1040 Social security number (SSN). Irs and form 1040   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. Irs and form 1040 You must obtain each employee's name and SSN as shown on the employee's social security card because you must enter them on Form W-2. Irs and form 1040 Do not accept a social security card that says “Not valid for employment. Irs and form 1040 ” A social security number issued with this legend does not permit employment. Irs and form 1040 You may, but are not required to, photocopy the social security card if the employee provides it. Irs and form 1040 If you do not show the employee's correct name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Irs and form 1040 See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. Irs and form 1040 Applying for a social security card. Irs and form 1040   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation to SSA. Irs and form 1040 You can get Form SS-5 at SSA offices, by calling 1-800-772-1213 or 1-800-325-0778 (TTY), or from the SSA website at www. Irs and form 1040 socialsecurity. Irs and form 1040 gov/online/ss-5. Irs and form 1040 html. Irs and form 1040 The employee must complete and sign Form SS-5; it cannot be filed by the employer. Irs and form 1040 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. Irs and form 1040 Applying for a social security number. Irs and form 1040   If you file Form W-2 on paper and your employee has applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Irs and form 1040 If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. Irs and form 1040 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. Irs and form 1040 Furnish Copies B, C, and 2 of Form W-2c to the employee. Irs and form 1040 Up to 25 Forms W-2c per Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. Irs and form 1040 For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. Irs and form 1040 socialsecurity. Irs and form 1040 gov/employer. Irs and form 1040 Advise your employee to correct the SSN on his or her original Form W-2. Irs and form 1040 Correctly record the employee's name and SSN. Irs and form 1040   Record the name and number of each employee as they are shown on the employee's social security card. Irs and form 1040 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. Irs and form 1040 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. Irs and form 1040   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2. Irs and form 1040 It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. Irs and form 1040 IRS individual taxpayer identification numbers (ITINs) for aliens. Irs and form 1040   Do not accept an ITIN in place of an SSN for employee identification or for work. Irs and form 1040 An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. Irs and form 1040 S. Irs and form 1040 employment. Irs and form 1040 The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). Irs and form 1040 However, it begins with the number “9” and has either a “7” or “8” as the fourth digit (for example, 9NN-7N-NNNN or 9NN-8N-NNNN). Irs and form 1040    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Irs and form 1040 If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier in this section. Irs and form 1040 Do not use an ITIN in place of an SSN on Form W-2. Irs and form 1040 Verification of social security numbers. Irs and form 1040   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 employee names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive results the next business day. Irs and form 1040 Visit www. Irs and form 1040 socialsecurity. Irs and form 1040 gov/employer/ssnv. Irs and form 1040 htm for more information. Irs and form 1040 Registering for SSNVS. Irs and form 1040   You must register online and receive authorization from your employer to use SSNVS. Irs and form 1040 To register, visit SSA's website at www. Irs and form 1040 socialsecurity. Irs and form 1040 gov/employer and click on the Business Services Online link. Irs and form 1040 Follow the registration instructions to obtain a user identification (ID) and password. Irs and form 1040 You will need to provide the following information about yourself and your company. Irs and form 1040 Name. Irs and form 1040 SSN. Irs and form 1040 Date of birth. Irs and form 1040 Type of employer. Irs and form 1040 EIN. Irs and form 1040 Company name, address, and telephone number. Irs and form 1040 Email address. Irs and form 1040 When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Irs and form 1040 You must enter the activation code online to use SSNVS. Irs and form 1040 2. Irs and form 1040 Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Irs and form 1040 See Publication 15-A for details on statutory employees and nonemployees. Irs and form 1040 Employee status under common law. Irs and form 1040   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. Irs and form 1040 This is so even when you give the employee freedom of action. Irs and form 1040 What matters is that you have the right to control the details of how the services are performed. Irs and form 1040 See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Irs and form 1040 If an employer-employee relationship exists, it does not matter what it is called. Irs and form 1040 The employee may be called an agent or independent contractor. Irs and form 1040 It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Irs and form 1040 You are responsible for withholding and paying employment taxes for your employees. Irs and form 1040 You are also required to file employment tax returns. Irs and form 1040 These requirements do not apply to amounts that you pay to independent contractors. Irs and form 1040 The rules discussed in this publication apply only to workers who are your employees. Irs and form 1040 In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Irs and form 1040 For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. Irs and form 1040 Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. Irs and form 1040 The table in section 12, How Do Employment Taxes Apply to Farmwork , distinguishes between farm and nonfarm activities, and also addresses rules that apply in special situations. Irs and form 1040 Crew Leaders If you are a crew leader, you are an employer of farmworkers. Irs and form 1040 A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. Irs and form 1040 If there is no written agreement between you and the farm operator stating that you are his or her employee and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. Irs and form 1040 For FUTA tax rules, see section 10. Irs and form 1040 Business Owned and Operated by Spouses If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Irs and form 1040 See Publication 541, Partnerships, for more details. Irs and form 1040 The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Irs and form 1040 Exception—Qualified joint venture. Irs and form 1040   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. Irs and form 1040 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). Irs and form 1040   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. Irs and form 1040 Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Irs and form 1040   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Irs and form 1040 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. Irs and form 1040 Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Irs and form 1040 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. Irs and form 1040    Note. Irs and form 1040 If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. Irs and form 1040   For more information on qualified joint ventures, visit IRS. Irs and form 1040 gov and enter “qualified joint venture” in the search box. Irs and form 1040 Exception—Community income. Irs and form 1040   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. Irs and form 1040 S. Irs and form 1040 possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Irs and form 1040 You may still make an election to be taxed as a qualified joint venture instead of a partnership. Irs and form 1040 See Exception—Qualified joint venture , earlier in this section. Irs and form 1040 3. Irs and form 1040 Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. Irs and form 1040 You may also be required to withhold, deposit, and report Additional Medicare Tax. Irs and form 1040 See section 4 for more information. Irs and form 1040 If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Irs and form 1040 You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. Irs and form 1040 FUTA tax is discussed in section 10. Irs and form 1040 Cash wages include checks, money orders, etc. Irs and form 1040 Do not count as cash wages the value of food, lodging, and other noncash items. Irs and form 1040 For more information on what payments are considered taxable wages, see Publication 15 (Circular E). Irs and form 1040 Commodity wages. Irs and form 1040   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. Irs and form 1040 However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. Irs and form 1040 These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. Irs and form 1040 Other compensation. Irs and form 1040   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. Irs and form 1040 Family members. Irs and form 1040   Generally, the wages that you pay to family members who are your employees are subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax. Irs and form 1040 However, certain exemptions may apply for your child, spouse, or parent. Irs and form 1040 See the table, How Do Employment Taxes Apply to Farmwork , in section 12. Irs and form 1040 Household employees. Irs and form 1040   The wages of an employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,900 in 2014. Irs and form 1040   Social security and Medicare taxes do not apply to cash wages for housework in your private home if it was done by your spouse or your child under age 21. Irs and form 1040 Nor do the taxes apply to housework done by your parent unless: You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter, and You are a widow or widower, or divorced and not remarried, or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. Irs and form 1040   For more information, see Publication 926, Household Employer's Tax Guide. Irs and form 1040    Wages for household work may not be a deductible farm expense. Irs and form 1040 See Publication 225, Farmer's Tax Guide. Irs and form 1040 Share farmers. Irs and form 1040   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. Irs and form 1040 Compensation paid to H-2A visa holders. Irs and form 1040   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2 but do not report it as social security wages (box 3) or Medicare wages (box 5) on Form W-2 because compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes. Irs and form 1040 On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Irs and form 1040   An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Irs and form 1040 In that case, the worker must give the employer a completed Form W-4. Irs and form 1040 Federal income tax withheld should be reported in box 2 of Form W-2. Irs and form 1040 These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Irs and form 1040 For rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Irs and form 1040 4. Irs and form 1040 Social Security and Medicare Taxes Generally, you must withhold social security and Medicare taxes on all cash wage payments that you make to your employees. Irs and form 1040 You may also be required to withhold Additional Medicare Tax. Irs and form 1040 For more information, see Additional Medicare Tax withholding , later. Irs and form 1040 The $150 Test or the $2,500 Test All cash wages that you pay to an employee during the year for farmwork are subject to social security and Medicare taxes and federal income tax withholding if either of the two tests below is met. Irs and form 1040 You pay cash wages to an employee of $150 or more in a year for farmwork (count all cash wages paid on a time, piecework, or other basis). Irs and form 1040 The $150 test applies separately to each farmworker that you employ. Irs and form 1040 If you employ a family of workers, each member is treated separately. Irs and form 1040 Do not count wages paid by other employers. Irs and form 1040 The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. Irs and form 1040 Exceptions. Irs and form 1040   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes, or federal income tax withholding, even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. Irs and form 1040   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. Irs and form 1040 Social Security and Medicare Tax Withholding The social security tax rate is 6. Irs and form 1040 2%, for both the employee and employer, on the first $117,000 paid to each employee. Irs and form 1040 You must withhold at this rate from each employee and pay a matching amount. Irs and form 1040 The Medicare tax rate is 1. Irs and form 1040 45% each for the employee and employer on all wages. Irs and form 1040 You must withhold at this rate from each employee and pay a matching amount. Irs and form 1040 There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Irs and form 1040 Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. Irs and form 1040 For details, see Publication 15-A. Irs and form 1040 Additional Medicare Tax withholding. Irs and form 1040   In addition to withholding Medicare tax at 1. Irs and form 1040 45%, you must withhold a 0. Irs and form 1040 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Irs and form 1040 You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Irs and form 1040 Additional Medicare Tax is only imposed on the employee. Irs and form 1040 There is no employer share of Additional Medicare Tax. Irs and form 1040 All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Irs and form 1040   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). Irs and form 1040 For more information on Additional Medicare Tax, visit IRS. Irs and form 1040 gov and enter “Additional Medicare Tax” in the search box. Irs and form 1040 Employee share paid by employer. Irs and form 1040   If you would rather pay a household or agricultural employee's share of the social security and Medicare taxes without withholding them from his or her wages, you may do so. Irs and form 1040 If you do not withhold the taxes, however, you must still pay them. Irs and form 1040 Any employee social security and Medicare taxes that you pay is additional income to the employee. Irs and form 1040 Include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages and do not include it in boxes 3 and 5. Irs and form 1040 Also, do not count the additional income as wages for FUTA tax purposes. Irs and form 1040 Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. Irs and form 1040 See section 7 of Publication 15-A. Irs and form 1040 Withholding social security and Medicare taxes on nonresident alien employees. Irs and form 1040   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. Irs and form 1040 S. Irs and form 1040 citizen or resident alien. Irs and form 1040 However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Irs and form 1040 Also see Compensation paid to H-2A visa holders in section 3. Irs and form 1040 Religious exemption. Irs and form 1040    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. Irs and form 1040 This exemption is available only if both the employee and the employer are members of the sect. Irs and form 1040   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Irs and form 1040 5. Irs and form 1040 Federal Income Tax Withholding Farmers and crew leaders must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes. Irs and form 1040 The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. Irs and form 1040 You may use one of several methods to determine the amount of federal income tax withholding. Irs and form 1040 They are discussed in section 13. Irs and form 1040 Form W-4. Irs and form 1040   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Irs and form 1040 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. Irs and form 1040 Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Irs and form 1040 irs. Irs and form 1040 gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. Irs and form 1040   Ask each new employee to give you a signed Form W-4 when starting work. Irs and form 1040 Make the form effective with the first wage payment. Irs and form 1040 If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. Irs and form 1040 Forms in Spanish. Irs and form 1040   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. Irs and form 1040 For more information, see Publicación 17(SP). Irs and form 1040 Effective date of Form W-4. Irs and form 1040   A Form W-4 remains in effect until the employee gives you a new one. Irs and form 1040 When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. Irs and form 1040 Do not adjust withholding retroactively. Irs and form 1040 If an employee gives you a replacement Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Irs and form 1040 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. Irs and form 1040 A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Irs and form 1040 Completing Form W-4. Irs and form 1040   The amount of federal income tax withholding is based on marital status and withholding allowances. Irs and form 1040 Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Irs and form 1040 However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Irs and form 1040   Employees may claim fewer withholding allowances than they are entitled to claim. Irs and form 1040 They may do this to ensure that they have enough withholding or to offset other sources of taxable income that are not subject to withholding. Irs and form 1040   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Irs and form 1040 Along with Form W-4, you may wish to order Publication 505 for use by your employees. Irs and form 1040    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Irs and form 1040 If an employee wants additional withholding, he or she should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Irs and form 1040 Exemption from federal income tax withholding. Irs and form 1040   Generally, an employee may claim exemption from federal income tax withholding because he or she had no federal income tax liability last year and expects none this year. Irs and form 1040 See the Form W-4 instructions for more information. Irs and form 1040 However, the wages are still subject to social security and Medicare taxes. Irs and form 1040   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Irs and form 1040 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. Irs and form 1040 If the employee does not give you a new Form W-4 by February 15, withhold tax based on the last valid Form W-4 you have for the employee that did not claim an exemption from withholding or, if one does not exist, withhold as if he or she is single with zero withholding allowances. Irs and form 1040 If the employee provides a new Form W-4 claiming an exemption from withholding on February 16 or later, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Irs and form 1040 Withholding income taxes on the wages of nonresident alien employees. Irs and form 1040   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Irs and form 1040 However, see Publication 515 for exceptions to this general rule. Irs and form 1040 Also see Compensation paid to H-2A visa workers in section 3. Irs and form 1040 Withholding adjustment for nonresident alien employees. Irs and form 1040   A special procedure applies for figuring the amount of income tax to withhold from wages of nonresident alien employees performing services within the United States for wages paid in 2014. Irs and form 1040 This procedure requires a special chart to be used with the withholding tables to determine the amount to withhold from the wages of the nonresident alien employee. Irs and form 1040 See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). Irs and form 1040 Nonresident alien employee's Form W-4. Irs and form 1040   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding; Request withholding as if they are single, regardless of their actual marital status; Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or Korea, he or she may claim more than one allowance); and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Irs and form 1040   If you maintain an electronic Form W-4 system, you should provide a field for nonresident alien employees to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Irs and form 1040    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. Irs and form 1040 Form 8233. Irs and form 1040   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. Irs and form 1040 See Publication 515 for details. Irs and form 1040 IRS review of requested Forms W-4. Irs and form 1040   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Irs and form 1040 You may also be directed to send certain Forms W-4 to the IRS. Irs and form 1040 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. Irs and form 1040 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. Irs and form 1040 The IRS may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. Irs and form 1040 When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Irs and form 1040   After submitting a copy of the requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Irs and form 1040 However, if the IRS later notifies you in writing that the employee is not entitled to claim a complete exemption from withholding or more than the maximum number of withholding allowances specified by the IRS in the written notice, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the notice (commonly referred to as a “lock-in letter”). Irs and form 1040 Initial lock-in letter. Irs and form 1040   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. Irs and form 1040 In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee. Irs and form 1040 You will also receive a copy for the employee that identifies the maximum number of withholding allowances permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding allowances. Irs and form 1040 If the employee is employed by you as of the date of the notice, you must furnish the employee copy to the employee within 10 business days of receipt. Irs and form 1040 You may follow any reasonable business practice to furnish the employee copy to the employee. Irs and form 1040 Implementation of lock-in letter. Irs and form 1040   When you receive the notice specifying the maximum number of withholding allowances and marital status permitted, you may not withhold immediately on the basis of the notice. Irs and form 1040 You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. Irs and form 1040 The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee to contact the IRS. Irs and form 1040 Seasonal employees and employees not currently performing services. Irs and form 1040   If you receive a notice for an employee who is not currently performing services for you, you are still required to furnish the employee copy to the employee and withhold based on the notice if any of the following apply. Irs and form 1040 You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. Irs and form 1040 You reasonably expect the employee to resume services within 12 months of the date of the notice. Irs and form 1040 The employee is on a bona fide leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence. Irs and form 1040 Termination and re-hire of employees. Irs and form 1040   If you are required to furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. Irs and form 1040 You must also withhold based on the notice or modification notice (explained next) if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship. Irs and form 1040 Modification notice. Irs and form 1040   After issuing the notice specifying the maximum number of withholding allowances and marital status permitted, the IRS may issue a subsequent notice (modification notice) that modifies the original notice. Irs and form 1040 The modification notice may change the marital status and/or the number of withholding allowances permitted. Irs and form 1040 You must withhold federal income tax based on the effective date specified in the modification notice. Irs and form 1040 New Form W-4 after IRS notice. Irs and form 1040   After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, you must disregard the new Form W-4. Irs and form 1040 You are required to withhold on the basis of the notice or modification notice unless the IRS subsequently notifies you to withhold based on the new Form W-4. Irs and form 1040 If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS. Irs and form 1040   If, after you receive an IRS notice or modification notice, your employee provides you with a new Form W-4 that does not claim exemption from federal income tax withholding and claims a marital status, a number of withholding allowances, and any additional withholding that results in more withholding than would result under the notice or modification notice, you must withhold tax on the basis of that new Form W-4. Irs and form 1040 Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. Irs and form 1040 Substitute Forms W-4. Irs and form 1040   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. Irs and form 1040 Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. Irs and form 1040 gov to obtain copies of Form W-4. Irs and form 1040   You may use a substitute version of Form W-4 to meet your business needs. Irs and form 1040 However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. Irs and form 1040 At the time that you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W-4. Irs and form 1040   You cannot accept a substitute Form W-4 developed by an employee, and the employee submitting such form will be treated as failing to furnish a Form W-4. Irs and form 1040 However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. Irs and form 1040 Invalid Forms W-4. Irs and form 1040   Any unauthorized change or addition to Form W-4 makes it invalid. Irs and form 1040 This includes taking out any language by which the employee certifies that the form is correct. Irs and form 1040 A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. Irs and form 1040 An employee who submits a false Form W-4 may be subject to a $500 penalty. Irs and form 1040 You may treat a Form W-4 as invalid if the employee wrote “exempt” on line 7 and also entered a number on line 5 or an amount on line 6. Irs and form 1040   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. Irs and form 1040 Tell the employee that it is invalid and ask for another one. Irs and form 1040 If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. Irs and form 1040 However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. Irs and form 1040   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. Irs and form 1040 R. Irs and form 1040 B. Irs and form 1040 455, available at www. Irs and form 1040 irs. Irs and form 1040 gov/irb/2007-35_IRB/ar10. Irs and form 1040 html. Irs and form 1040 Amounts exempt from levy on wages, salary, and other income. Irs and form 1040   If you receive a Notice of Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), or 668-W(ICS), you must withhold amounts as described in the instructions for these forms. Irs and form 1040 Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), and 668-W(ICS), shows the exempt amount. Irs and form 1040 If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount. Irs and form 1040 How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. Irs and form 1040 Wage bracket tables. Irs and form 1040 See section 13 for directions on how to use the tables. Irs and form 1040 Percentage method. Irs and form 1040 See section 13 for directions on how to use the percentage method. Irs and form 1040 Alternative formula tables for percentage method withholding. Irs and form 1040 See Publication 15-A. Irs and form 1040 Wage bracket percentage method withholding tables. Irs and form 1040 See Publication 15-A. Irs and form 1040 Other alternative methods. Irs and form 1040 See Publication 15-A. Irs and form 1040 Employers with automated payroll systems will find the two alternative formula tables and the two alternative wage bracket percentage method tables in Publication 15-A useful. Irs and form 1040 If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. Irs and form 1040 Supplemental wages. Irs and form 1040   Supplemental wages are wage payments to an employee that are not regular wages. Irs and form 1040 They include, but are not limited to, bonuses, commissions, overtime pay, accumulated sick leave, severance pay, awards, prizes, back pay and retroactive pay increases for current employees, and payments for nondeductible moving expenses. Irs and form 1040 Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Irs and form 1040   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total was a single payment for a regular payroll period. Irs and form 1040   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold federal income tax from your employee's regular wages. Irs and form 1040 If you withheld federal income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Irs and form 1040 Withhold a flat 25% (no other percentage allowed). Irs and form 1040 If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Irs and form 1040 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. Irs and form 1040 Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Irs and form 1040 Subtract the tax withheld from the regular wages. Irs and form 1040 Withhold the remaining tax from the supplemental wages. Irs and form 1040 If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and previous supplemental wage payments, and withhold the remaining tax from the current payment of supplemental wages. Irs and form 1040 If you did not withhold federal income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b above. Irs and form 1040 This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Irs and form 1040    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. Irs and form 1040 See section 7 in Publication 15 (Circular E) for details. Irs and form 1040   Regardless of the method that you use to withhold federal income tax on supplemental wages, they are generally subject to social security, Medicare, and FUTA taxes. Irs and form 1040 6. Irs and form 1040 Required Notice to Employees About Earned Income Credit (EIC) You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC. Irs and form 1040 Although you do not have to notify employees who claim exemption from withholding on Form W-4 about the EIC, you are encouraged to notify any employees whose wages for 2013 were less than $46,227 ($51,567 if married filing jointly) that they may be eligible to claim the credit for 2013. Irs and form 1040 This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. Irs and form 1040 You will meet the notification requirement if you issue to the employee Form W-2 with the EIC notice on the back of Copy B, or a substitute Form W-2 with the same statement. Irs and form 1040 You may also meet the requirement by providing Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. Irs and form 1040 If a substitute Form W-2 is given to the employee on time but does not have the required statement, you must notify the employee within 1 week of the date that the substitute Form W-2 is given. Irs and form 1040 If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement by the date that Form W-2 is required to be given. Irs and form 1040 If Form W-2 is not required, you must notify the employee by February 7, 2014. Irs and form 1040 7. Irs and form 1040 Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. Irs and form 1040 You must use electronic funds transfer to make all federal tax deposits. Irs and form 1040 See How To Deposit , later in this section. Irs and form 1040 The credit against employment taxes for COBRA premium assistance payments is treated as a deposit of taxes on the first day of your return period. Irs and form 1040 For more information, see COBRA premium assistance credit under Introduction. Irs and form 1040 Payment with return. Irs and form 1040   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. Irs and form 1040 You report less than a $2,500 tax liability for the year (Form 943, line 11; Form 945, line 3) and you pay in full with a return that is filed on time. Irs and form 1040 However, if you are unsure that you will report less than $2,500, deposit under the rules explained in this section so that you will not be subject to failure-to-deposit penalties. Irs and form 1040 You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. Irs and form 1040 This payment may be $2,500 or more. Irs and form 1040 Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. Irs and form 1040 Semiweekly schedule depositors must timely deposit the amount. Irs and form 1040 See Accuracy of Deposits Rule and How To Deposit, later in this section. Irs and form 1040 When To Deposit If you employ both farm and nonfarm workers, do not combine the taxes reportable on Forms 941 or 944 with Form 943 to decide whether to make a deposit. Irs and form 1040 See Employers of Both Farm and Nonfarm Workers, later in this section. Irs and form 1040 The rules for determining when to deposit Form 943 taxes are discussed below. Irs and form 1040 See section 10 for the separate rules that apply to FUTA tax. Irs and form 1040 Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. Irs and form 1040 The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often your business pays its employees or how often you are required to make deposits. Irs and form 1040 The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). Irs and form 1040 The deposit schedule that you must use for a calendar year is determined from the tax liability reported on your Form 943, line 9, for the lookback period, discussed next. Irs and form 1040 If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. Irs and form 1040 If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. Irs and form 1040 Lookback period. Irs and form 1040   The lookback period is the second calendar year preceding the current calendar year. Irs and form 1040 For example, the lookback period for 2014 is 2012. Irs and form 1040 Example of deposit schedule based on lookback period. Irs and form 1040 Rose Co. Irs and form 1040 reported taxes on Form 943 as follows. Irs and form 1040 2012 — $48,000 2013 — $60,000 Rose Co. Irs and form 1040 is a monthly schedule depositor for 2014 because its taxes for the lookback period ($48,000 for calendar year 2012) were not more than $50,000. Irs and form 1040 However, for 2015, Rose Co. Irs and form 1040 is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. Irs and form 1040 Adjustments to lookback period taxes. Irs and form 1040   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). Irs and form 1040 Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Irs and form 1040 Example of adjustments. Irs and form 1040 An employer originally reported total tax of $45,000 for the lookback period in 2012. Irs and form 1040 The employer discovered during March 2014 that the tax reported for the lookback period was understated by $10,000 and corrected this error by filing Form 943-X. Irs and form 1040 The total tax reported in the lookback period is still $45,000. Irs and form 1040 The $10,000 adjustment is also not treated as part of the 2014 taxes. Irs and form 1040 Deposit period. Irs and form 1040   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. Irs and form 1040 For monthly schedule depositors, the deposit period is a calendar month. Irs and form 1040 The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. Irs and form 1040 Monthly Deposit Schedule If the tax liability reported on Form 943, line 9, for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. Irs and form 1040 You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. Irs and form 1040 Monthly schedule example. Irs and form 1040   Red Co. Irs and form 1040 is a seasonal employer and a monthly schedule depositor. Irs and form 1040 It pays wages each Friday. Irs and form 1040 It paid wages during August 2014, but did not pay any wages during September. Irs and form 1040 Red Co. Irs and form 1040 must deposit the combined tax liabilities for the August paydays by September 15. Irs and form 1040 Red Co. Irs and form 1040 does not have a deposit requirement for September (that is, due by October 15, 2014) because no wages were paid in September; therefore, it did not have a tax liability for September. Irs and form 1040 New employers. Irs and form 1040   For agricultural employers, your tax liability for any year in the lookback period before the date you started or acquired your business is considered to be zero. Irs and form 1040 Therefore, you are a monthly schedule depositor for the first and second calendar years of your agricultural business (but see the $100,000 Next-Day Deposit Rule , later in this section). Irs and form 1040 Semiweekly Deposit Schedule You are a semiweekly schedule depositor for a calendar year if the tax liability on Form 943, line 9, during your lookback period was more than $50,000. Irs and form 1040 Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Irs and form 1040 Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Irs and form 1040 Semiweekly depositors are not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule (discussed later in this section) applies. Irs and form 1040 For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 by the following Wednesday. Irs and form 1040 If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. Irs and form 1040 Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. Irs and form 1040 Semiweekly Deposit Schedule IF the payday falls on a. Irs and form 1040 . Irs and form 1040 . Irs and form 1040 THEN deposit taxes by the following. Irs and form 1040 . Irs and form 1040 . Irs and form 1040 Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. Irs and form 1040   Green, Inc. Irs and form 1040 , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. Irs and form 1040 Green, Inc. Irs and form 1040 , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. Irs and form 1040 Green, Inc. Irs and form 1040 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). Irs and form 1040 Semiweekly deposit period spanning two quarters. Irs and form 1040   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. Irs and form 1040 For example, if you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. Irs and form 1040 Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). Irs and form 1040 Deposits on Business Days Only If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. Irs and form 1040 A business day is any day other than a Saturday, Sunday, or legal holiday. Irs and form 1040 For example, if a deposit is required to be made on Friday and Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). Irs and form 1040 Semiweekly schedule depositors   will always have 3 business days to make a deposit. Irs and form 1040 That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the deposit. Irs and form 1040 For example, if a semiweekly schedule depositor accumulated taxes on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). Irs and form 1040 Legal holiday. Irs and form 1040   The term “legal holiday” means any legal holiday in the District of Columbia. Irs and form 1040 Legal holidays for 2014 are listed below. Irs and form 1040 January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. Irs and form 1040 February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans' Day November 27— Thanksgiving Day December 25— Christmas Day $100,000 Next-Day Deposit Rule If you accumulate $100,000 or more of Form 943 taxes (that is, taxes reported on Form 943, line 11) on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. Irs and form 1040 For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. Irs and form 1040 For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 liability on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. Irs and form 1040 Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. Irs and form 1040 However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. Irs and form 1040 For example, Fir Co. Irs and form 1040 is a semiweekly schedule depositor. Irs and form 1040 On Monday, Fir Co. Irs and form 1040 accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. Irs and form 1040 On Tuesday, Fir Co. Irs and form 1040 accumulates additional taxes of $30,000. Irs and form 1040 Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. Irs and form 1040 does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). Irs and form 1040 If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year. Irs and form 1040 Example of the $100,000 next-day deposit rule. Irs and form 1040   Elm, Inc. Irs and form 1040 , started its business on May 1, 2014. Irs and form 1040 Because Elm, Inc. Irs and form 1040 , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. Irs and form 1040 , is a monthly schedule depositor. Irs and form 1040 On May 8, Elm, Inc. Irs and form 1040 , paid wages for the first time and accumulated taxes of $50,000. Irs and form 1040 On May 9 (Friday), Elm, Inc. Irs and form 1040 , paid wages and accumulated taxes of $60,000, for a total of $110,000. Irs and form 1040 Because Elm, Inc. Irs and form 1040 , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. Irs and form 1040 Elm, Inc. Irs and form 1040 , became a semiweekly schedule depositor on May 10. Irs and form 1040 It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. Irs and form 1040 Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. Irs and form 1040 However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. Irs and form 1040 Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. Irs and form 1040 The deposit shortfall is paid or deposited by the shortfall makeup date as described below. Irs and form 1040 Makeup Date for Deposit Shortfall:    Monthly Schedule Depositor—Deposit the shortfall or pay it with your return by the due date of your Form 943. Irs and form 1040 You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. Irs and form 1040 Semiweekly Schedule Depositor—Deposit by the earlier of (a) the first Wednesday or Friday (whichever comes first) that falls on or after the 15th of the month following the month in which the shortfall occurred, or (b) the due date for Form 943. Irs and form 1040 For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). Irs and form 1040 How To Deposit You must deposit employment taxes by electronic funds transfer. Irs and form 1040 See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. Irs and form 1040 Electronic deposit requirement. Irs and form 1040   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). Irs and form 1040 Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Irs and form 1040 If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Irs and form 1040   EFTPS is a free service provided by the Department of Treasury. Irs and form 1040 To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD). Irs and form 1040 You can also visit the EFTPS website at www. Irs and form 1040 eftps. Irs and form 1040 gov. Irs and form 1040 Additional information about EFTPS is also available in Publication 966. Irs and form 1040 New employers that have a federal tax obligation will be pre-enrolled in EFTPS. Irs and form 1040 Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. Irs and form 1040 See When you receive your EIN in section 1 for more information. Irs and form 1040 Deposit record. Irs and form 1040   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. Irs and form 1040 The number can be used as a receipt or to trace the payment. Irs and form 1040 Depositing on time. Irs and form 1040   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. Irs and form 1040 m. Irs and form 1040 Eastern time the day before the date a deposit is due. Irs and form 1040 If you use a third party to make a deposit on your behalf, they may have different cutoff times. Irs and form 1040 Same-day payment option. Irs and form 1040   If you fail to initiate a deposit transaction on EFTPS by 8 p. Irs and form 1040 m. Irs and form 1040 Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). Irs and form 1040 To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. Irs and form 1040 Please check with your financial institution regarding availability, deadlines, and costs. Irs and form 1040 Your financial institution may charge you a fee for payments made this way. Irs and form 1040 To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. Irs and form 1040 eftps. Irs and form 1040 gov to download the Same-Day Payment Worksheet. Irs and form 1040 Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. Irs and form 1040 The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. Irs and form 1040 IRS may also waive deposit penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. Irs and form 1040 For amounts not properly deposited or not deposited on time, the penalty rates are shown next. Irs and form 1040 Penalty Charged for. Irs and form 1040 . Irs and form 1040 . Irs and form 1040 2% Deposits made 1 to 5 days late. Irs and form 1040 5% Deposits made 6 to 15 days late. Irs and form 1040 10% Deposits made 16 or more days late. Irs and form 1040 Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. Irs and form 1040 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. Irs and form 1040 See Payment with return , earlier in this section, for exceptions. Irs and form 1040 15% Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. Irs and form 1040 Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. Irs and form 1040 Order in which deposits are applied. Irs and form 1040   Deposits generally are applied to the most recent tax liability within the year. Irs and form 1040 If you receive a failure-to-deposit penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. Irs and form 1040 Follow the instructions on the penalty notice that you received. Irs and form 1040 For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. Irs and form 1040 You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. Irs and form 1040 irs. Irs and form 1040 gov/pub/irs-irbs/irb01-50. Irs and form 1040 pdf. Irs and form 1040 Example. Irs and form 1040 Cedar, Inc. Irs and form 1040 , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. Irs and form 1040 It does not make the deposit on July 15. Irs and form 1040 On August 15, Cedar, Inc. Irs and form 1040 , deposits $2,000. Irs and form 1040 Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. Irs and form 1040 Accordingly, $500 of the July 15 liability remains undeposited. Irs and form 1040 The penalty on this underdeposit will apply as explained above. Irs and form 1040 Trust fund recovery penalty. Irs and form 1040   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Irs and form 1040 The penalty is the full amount of the unpaid trust fund tax. Irs and form 1040 This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. Irs and form 1040   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. Irs and form 1040   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. Irs and form 1040 A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. Irs and form 1040    Willfully means voluntarily, consciously, and intentionally. Irs and form 1040 A responsible person acts willfully if the person knows that the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. Irs and form 1040 “Average” failure-to-deposit penalty. Irs and form 1040   IRS may assess an “averaged” failure-to-deposit penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 943, line 17, when your tax liability shown on Form 943, line 11, was $2,500 or more. Irs and form 1040 IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 943, line 11, was $2,500 or more and you did any of the following. Irs and form 1040 Completed Form 943, line 17, instead of Form 943-A. Irs and form 1040 Failed to attach a properly completed Form 943-A. Irs and form 1040 Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. Irs and form 1040   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. Irs and form 1040 Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. Irs and form 1040   You can avoid the penalty by reviewing your return before filing it. Irs and form 1040 Follow these steps before filing your Form 943. Irs and form 1040 If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. Irs and form 1040 If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Form 943-A in the lines that represent the dates you paid your employees. Irs and form 1040 Verify that your total liability shown on Form 943, line 17, or Form 943-A, line M, equals your tax liability shown on Form 943, line 11. Irs and form 1040 Do not show negative amounts on Form 943, line 17, or Form 943-A. Irs and form 1040 For prior period errors discovered after December 31, 2008, do not adjust your tax liabilities reported on Form 943, line 17, or on Form 943-A. Irs and form 1040 Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941 and 944 taxes). Irs and form 1040 Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. Irs and form 1040 If a deposit is due, deposi
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SOI Tax Stats - What's New

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Recent Updates

Exempt Organizations Financial Data—2013 data on tax-exempt organizations were published on Tax Stats. These data include selected financial items from more than 600,000 Forms 990, 990-EZ and 990-PF filed by tax-exempt organizations and processed by the IRS during calendar year 2013. The latest release was expanded to include nearly 500 financial and other data items. The data are in ASCII space-delimited format, and supporting documentation is available.

2013 IRS Data BookThe Internal Revenue Service (IRS) has released the 2013 IRS Data Book, a snapshot of agency activities for Fiscal Year 2013—Oct. 1, 2012, to Sept. 30, 2013. In addition to information on taxes collected and returns processed, the report also includes information about enforcement, taxpayer assistance, and the IRS budget and workforce, among others.

2014 Winter SOI Bulletin—Statistics of Income (SOI) has released the 2014 Winter SOI Bulletin. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

This issue of the SOI Bulletin includes articles on the following topics:

  • Individual Income Tax Returns, Preliminary Data, 2012
  • Sales of Capital Assets Panel Data Reported on Individual Tax Returns, 2004–2007
  • Split-Interest Trusts, Filing Year 2012
  • Nonprofit Charitable Organizations, 2010

(March 2014)

Corporation Foreign Tax Credit, 2010Two new tables presenting data from Form 1118, Foreign Tax Credit—Corporations, are now available on SOI’s Tax Stats Webpage. The tables present data from the population of returns filed for Tax Year 2010. Table 1.1 displays data on returns with income in an excess credit position while table 1.2 shows data on returns in an excess limit position. Data presented includes foreign-source income, deductions, and taxes by major and selected minor industry. (February, 2014)

Exempt Organizations Microdata Files, Tax Years 1985–1997—Historical microdata files based on Forms 990 and Forms 990-EZ sampled for the annual studies of nonprofit charitable and other tax-exempt organizations are now available. Annual data are available for organizations exempt from income tax under Internal Revenue Code Section 501(c)(3). Additional data for tax-exempt organizations under IRC Sections 501(c)(4) through 501(c)(9) are available for limited tax years. (February, 2014)

2011 Individual Income Tax ZIP Code and County DataUnited States’ ZIP Code and county data for Tax Year 2011 are now available on Tax Stats. The data present selected income and tax return items by State, ZIP Code, county, and size of adjusted gross income. These data are based on individual income tax returns filed with the IRS. (February, 2014)

Fiduciary Income Tax, 2012—Three tables presenting Filing Year 2012 data for income from estates and trusts (Form 1041) are now available. The statistics cover sources of income and deductions at the National and State levels. Data are classified by trust type and filing status. (February, 2014)

U.S. Gift Tax Returns table Gift Tax, 2012 - One table presenting Filing Year 2012 data for United States Gift (and Generation-Skipping Transfer) Tax Returns (Form 709), including information on total gifts, deductions, credits, and net tax amounts, is now available. Data are presented by tax status and size of total taxable gifts. (January 2014)

2013 Fall SOI Bulletin—Statistics of Income (SOI) has released the 2013 Fall SOI Bulletin. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers.

This issue of the SOI Bulletin includes articles on the following topics:

  • Individual Income Tax Returns, 2011
  • Partnership Returns, 2011
  • Accumulation and Distribution of Individual Retirement Arrangements, 2010

(January 2014)

The Statistics of Income Tax Stats Table Wizard was recently updated! The Table Wizard allows users to query tax data on corporations, individuals, tax-exempt organizations, estates, gifts trusts, and more. The resulting data can then be downloaded. This update includes the following data:

  • Corporate data by industry (Forms 1120 and 1120s)—2004 through 2010
  • 501c(3)  Exempt Organizations (Form 990)—2004 through 2007
  • Domestic Private Foundations and Charitable Trusts (Form 990-PF)—2004 through 2008
  • Unrelated Business Income Tax Returns (Form 990-T)—2006 through 2008
  • Estate Tax Returns (Form 706)—2007 through 2010
  • Gift Tax Returns (Form 709)—2005 through 2010

(December 2013)

2011 Individual Income Tax Estimated Data Line CountsThe 2011 Statistics of Income (SOI) estimated data line counts publication presents estimates of frequencies of taxpayer entries on the lines of the forms and schedules filed with individual tax returns as shown on the 2011 Individual SOI Complete Report file. The statistics are based on a sample of returns that have been weighted to estimate the entire 2011 Tax Year population. The publication includes corresponding dollar amounts of selected lines filed in concurrence with the number of returns filed. (December 2013)

Tax Year 2001–2011 Individual Income Tax Return Statistics by Selected Descending and Ascending Cumulative PercentilesStatistics based on all individual income tax returns by selected descending and ascending cumulative percentiles are now available for Tax Years 2001–2011. Tables present historical statistics on income and tax by cumulative percentiles based on the number of returns. They also show distributions of adjusted gross income (AGI) and total income tax, as defined for each tax year, by descending and ascending cumulative percentiles of returns in both current and constant dollars. These tables can be used to make comparisons across cumulative percentile classes beginning with Tax Year 2001. This release is based on all individual income tax returns except returns of dependents. (December 2013)

2011 Partnership Returns Line Item Estimates (Publication 5035)—This publication presents estimates of frequencies of taxpayer entries recorded on the applicable lines of the forms and schedules filed with partnership tax returns for Tax Year 2011. It also contains corresponding population estimates of dollar amounts recorded on those lines (as applicable). (November 2013)

Partnerships, 2011—Twenty-two tables presenting Tax Year 2011 data for partnership returns (Forms 1065 and 1065-B), including types of partnerships and specific industrial sectors, are now available. The statistics cover balance sheets, trade or business income and deductions, portfolio income, rental income (including rental real estate income), and total net income. Data are classified by industry and size of total assets. In addition, historical tables provide balance sheet and income statement data as well as counts of partnership returns, by size of assets and receipts. 
(November 2013)

Foreign Recipients of US Income Study, 2011 Tax Year—Two tables presenting data for Tax Year 2011 from Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, are now available. The tables include statistics for the number of returns, total income, tax withheld, income subject to withholding, income exempt from withholding, and income by category. Data are available by selected countries and selected recipient types. (October 2013)

Issue Year 2011 Tax-Exempt Bond Tables— Updated tax-exempt bond data for both governmental and private activity bonds issued in calendar year 2011 are now available on Tax Stats. Data include the term of issue, purpose, bond size, and uses of bond proceeds. Tax credit bond data, by bond type, and State-level data, by bond purpose, are also available. (October 2013)

 

 



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The Irs And Form 1040

Irs and form 1040 1. Irs and form 1040   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. Irs and form 1040 This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. Irs and form 1040 Tax records are not the only type of records you need to keep for your farming business. Irs and form 1040 You should also keep records that measure your farm's financial performance. Irs and form 1040 This publication only discusses tax records. Irs and form 1040 The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. Irs and form 1040 For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. Irs and form 1040 ffsc. Irs and form 1040 org. Irs and form 1040 For more information, contact Countryside Marketing, Inc. Irs and form 1040 in the following manner. Irs and form 1040 Call 262-253-6902. Irs and form 1040 Send a fax to 262-253-6903. Irs and form 1040 Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. Irs and form 1040 , #287 Menomonee Falls, WI 53051. Irs and form 1040 Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. Irs and form 1040 Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. Irs and form 1040 Recordkeeping will help you do the following. Irs and form 1040 Monitor the progress of your farming business. Irs and form 1040   You need records to monitor the progress of your farming business. Irs and form 1040 Records can show whether your business is improving, which items are selling, or what changes you need to make. Irs and form 1040 Records can help you make better decisions that may increase the likelihood of business success. Irs and form 1040 Prepare your financial statements. Irs and form 1040   You need records to prepare accurate financial statements. Irs and form 1040 These include income (profit and loss) statements and balance sheets. Irs and form 1040 These statements can help you in dealing with your bank or creditors and help you to manage your farm business. Irs and form 1040 Identify source of receipts. Irs and form 1040   You will receive money or property from many sources. Irs and form 1040 Your records can identify the source of your receipts. Irs and form 1040 You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. Irs and form 1040 Keep track of deductible expenses. Irs and form 1040   You may forget expenses when you prepare your tax return unless you record them when they occur. Irs and form 1040 Prepare your tax returns. Irs and form 1040   You need records to prepare your tax return. Irs and form 1040 For example, your records must support the income, expenses, and credits you report. Irs and form 1040 Generally, these are the same records you use to monitor your farming business and prepare your financial statements. Irs and form 1040 Support items reported on tax returns. Irs and form 1040   You must keep your business records available at all times for inspection by the IRS. Irs and form 1040 If the IRS examines any of your tax returns, you may be asked to explain the items reported. Irs and form 1040 A complete set of records will speed up the examination. Irs and form 1040 Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Irs and form 1040 You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. Irs and form 1040 You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Irs and form 1040 See  chapter 2. Irs and form 1040 If you are in more than one business, you should keep a complete and separate set of records for each business. Irs and form 1040 A corporation should keep minutes of board of directors' meetings. Irs and form 1040 Your recordkeeping system should include a summary of your business transactions. Irs and form 1040 This summary is ordinarily made in accounting journals and ledgers. Irs and form 1040 For example, they must show your gross income, as well as your deductions and credits. Irs and form 1040 In addition, you must keep supporting documents. Irs and form 1040 Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. Irs and form 1040 These documents contain the information you need to record in your journals and ledgers. Irs and form 1040 It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. Irs and form 1040 Keep them in an orderly fashion and in a safe place. Irs and form 1040 For instance, organize them by year and type of income or expense. Irs and form 1040 Electronic records. Irs and form 1040   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Irs and form 1040 When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Irs and form 1040 An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Irs and form 1040 The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Irs and form 1040 All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Irs and form 1040 Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Irs and form 1040 The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Irs and form 1040 You still have the responsibility of retaining any other books and records that are required to be retained. Irs and form 1040 The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Irs and form 1040 This test is not considered an examination and the results must be shared with you. Irs and form 1040 If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Irs and form 1040 If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. Irs and form 1040 For details on electronic storage system requirements, see Rev. Irs and form 1040 Proc. Irs and form 1040 97-22. Irs and form 1040 You can find Rev. Irs and form 1040 Proc. Irs and form 1040 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. Irs and form 1040 irs. Irs and form 1040 gov/pub/irs-irbs/irb97-13. Irs and form 1040 pdf. Irs and form 1040 Travel, transportation, entertainment, and gift expenses. Irs and form 1040   Specific recordkeeping rules apply to these expenses. Irs and form 1040 For more information, see Publication 463. Irs and form 1040 Employment taxes. Irs and form 1040   There are specific employment tax records you must keep. Irs and form 1040 For a list, see Publication 51 (Circular A). Irs and form 1040 Excise taxes. Irs and form 1040   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. Irs and form 1040 Assets. Irs and form 1040   Assets are the property, such as machinery and equipment, you own and use in your business. Irs and form 1040 You must keep records to verify certain information about your business assets. Irs and form 1040 You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. Irs and form 1040 Your records should show all the following. Irs and form 1040 When and how you acquired the asset. Irs and form 1040 Purchase price. Irs and form 1040 Cost of any improvements. Irs and form 1040 Section 179 deduction taken. Irs and form 1040 Deductions taken for depreciation. Irs and form 1040 Deductions taken for casualty losses, such as losses resulting from fires or storms. Irs and form 1040 How you used the asset. Irs and form 1040 When and how you disposed of the asset. Irs and form 1040 Selling price. Irs and form 1040 Expenses of sale. Irs and form 1040   The following are examples of records that may show this information. Irs and form 1040 Purchase and sales invoices. Irs and form 1040 Real estate closing statements. Irs and form 1040 Canceled checks. Irs and form 1040 Bank statements. Irs and form 1040 Financial account statements as proof of payment. Irs and form 1040   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Irs and form 1040 These include account statements prepared for the financial institution by a third party. Irs and form 1040 These account statements must be legible. Irs and form 1040 The following table lists acceptable account statements. Irs and form 1040 IF payment is by. Irs and form 1040 . Irs and form 1040 . Irs and form 1040 THEN the statement must show the. Irs and form 1040 . Irs and form 1040 . Irs and form 1040 Check Check number. Irs and form 1040 Amount. Irs and form 1040 Payee's name. Irs and form 1040 Date the check amount was posted to the account by the financial institution. Irs and form 1040 Electronic funds  transfer Amount transferred. Irs and form 1040 Payee's name. Irs and form 1040 Date the transfer was posted to the account by the financial institution. Irs and form 1040 Credit card Amount charged. Irs and form 1040 Payee's name. Irs and form 1040 Transaction date. Irs and form 1040    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Irs and form 1040 You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Irs and form 1040 Tax returns. Irs and form 1040   Keep copies of your filed tax returns. Irs and form 1040 They help in preparing future tax returns and making computations if you file an amended return. Irs and form 1040 Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. Irs and form 1040 How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Irs and form 1040 Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. Irs and form 1040 A period of limitations is the period of time after which no legal action can be brought. Irs and form 1040 Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. Irs and form 1040 However, certain records must be kept for a longer period of time, as discussed below. Irs and form 1040 Employment taxes. Irs and form 1040   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Irs and form 1040 Assets. Irs and form 1040   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Irs and form 1040 You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. Irs and form 1040   You may need to keep records relating to the basis of property longer than the period of limitation. Irs and form 1040 Keep those records as long as they are important in figuring the basis of the original or replacement property. Irs and form 1040 Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Irs and form 1040 For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Irs and form 1040 For more information on basis, see chapter 6. Irs and form 1040 Records for nontax purposes. Irs and form 1040   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Irs and form 1040 For example, your insurance company or creditors may require you to keep them longer than the IRS does. Irs and form 1040 Prev  Up  Next   Home   More Online Publications