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Free State File

Free state file Publication 51 - Main Content Table of Contents 1. Free state file Taxpayer Identification NumbersWhen you receive your EIN. Free state file Registering for SSNVS. Free state file 2. Free state file Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. Free state file Wages and Other Compensation 4. Free state file Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. Free state file Federal Income Tax WithholdingImplementation of lock-in letter. Free state file Seasonal employees and employees not currently performing services. Free state file Termination and re-hire of employees. Free state file How To Figure Federal Income Tax Withholding 6. Free state file Required Notice to Employees About Earned Income Credit (EIC) 7. Free state file Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. Free state file Form 943 9. Free state file Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. Free state file Federal Unemployment (FUTA) Tax 11. Free state file Reconciling Wage Reporting Forms 13. Free state file Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. Free state file 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. Free state file Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. Free state file Employer identification number (EIN). Free state file   An employer identification number (EIN) is a nine-digit number that the IRS issues. Free state file The digits are arranged as follows: 00-0000000. Free state file It is used to identify the tax accounts of employers and certain others who have no employees. Free state file Use your EIN on all of the items that you send to the IRS and SSA. Free state file   If you do not have an EIN, you may apply for one online. Free state file Visit IRS. Free state file gov and click on the Apply for an EIN Online link under Tools. Free state file You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Free state file Do not use a SSN in place of an EIN. Free state file   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. Free state file If you took over another employer's business, do not use that employer's EIN. Free state file   You should have only one EIN. Free state file 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). Free state file 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. Free state file The IRS will tell you which EIN to use. Free state file   For more information, see Publication 1635 or Publication 583. Free state file When you receive your EIN. Free state file   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). Free state file 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. Free state file 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. Free state file 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. Free state file Social security number (SSN). Free state file   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. Free state file 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. Free state file Do not accept a social security card that says “Not valid for employment. Free state file ” A social security number issued with this legend does not permit employment. Free state file You may, but are not required to, photocopy the social security card if the employee provides it. Free state file 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. Free state file See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. Free state file Applying for a social security card. Free state file   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. Free state file 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. Free state file socialsecurity. Free state file gov/online/ss-5. Free state file html. Free state file The employee must complete and sign Form SS-5; it cannot be filed by the employer. Free state file You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Free state file Applying for a social security number. Free state file   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. Free state file If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. Free state file When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. Free state file Furnish Copies B, C, and 2 of Form W-2c to the employee. Free state file 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. Free state file For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. Free state file socialsecurity. Free state file gov/employer. Free state file Advise your employee to correct the SSN on his or her original Form W-2. Free state file Correctly record the employee's name and SSN. Free state file   Record the name and number of each employee as they are shown on the employee's social security card. Free state file If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Free state file Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. Free state file   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. Free state file 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. Free state file IRS individual taxpayer identification numbers (ITINs) for aliens. Free state file   Do not accept an ITIN in place of an SSN for employee identification or for work. Free state file An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. Free state file S. Free state file employment. Free state file The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). Free state file 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). Free state file    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Free state file 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. Free state file Do not use an ITIN in place of an SSN on Form W-2. Free state file Verification of social security numbers. Free state file   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. Free state file Visit www. Free state file socialsecurity. Free state file gov/employer/ssnv. Free state file htm for more information. Free state file Registering for SSNVS. Free state file   You must register online and receive authorization from your employer to use SSNVS. Free state file To register, visit SSA's website at www. Free state file socialsecurity. Free state file gov/employer and click on the Business Services Online link. Free state file Follow the registration instructions to obtain a user identification (ID) and password. Free state file You will need to provide the following information about yourself and your company. Free state file Name. Free state file SSN. Free state file Date of birth. Free state file Type of employer. Free state file EIN. Free state file Company name, address, and telephone number. Free state file Email address. Free state file When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Free state file You must enter the activation code online to use SSNVS. Free state file 2. Free state file Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Free state file See Publication 15-A for details on statutory employees and nonemployees. Free state file Employee status under common law. Free state file   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Free state file This is so even when you give the employee freedom of action. Free state file What matters is that you have the right to control the details of how the services are performed. Free state file See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Free state file If an employer-employee relationship exists, it does not matter what it is called. Free state file The employee may be called an agent or independent contractor. Free state file It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Free state file You are responsible for withholding and paying employment taxes for your employees. Free state file You are also required to file employment tax returns. Free state file These requirements do not apply to amounts that you pay to independent contractors. Free state file The rules discussed in this publication apply only to workers who are your employees. Free state file 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. Free state file 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. Free state file 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. Free state file 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. Free state file Crew Leaders If you are a crew leader, you are an employer of farmworkers. Free state file 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. Free state file 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. Free state file For FUTA tax rules, see section 10. Free state file 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. Free state file See Publication 541, Partnerships, for more details. Free state file The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Free state file Exception—Qualified joint venture. Free state file   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. Free state file A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). Free state file   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. Free state file Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Free state file   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Free state file If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. Free state file Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Free state file However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. Free state file    Note. Free state file If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. Free state file   For more information on qualified joint ventures, visit IRS. Free state file gov and enter “qualified joint venture” in the search box. Free state file Exception—Community income. Free state file   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Free state file S. Free state file possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Free state file You may still make an election to be taxed as a qualified joint venture instead of a partnership. Free state file See Exception—Qualified joint venture , earlier in this section. Free state file 3. Free state file Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. Free state file You may also be required to withhold, deposit, and report Additional Medicare Tax. Free state file See section 4 for more information. Free state file If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Free state file You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. Free state file FUTA tax is discussed in section 10. Free state file Cash wages include checks, money orders, etc. Free state file Do not count as cash wages the value of food, lodging, and other noncash items. Free state file For more information on what payments are considered taxable wages, see Publication 15 (Circular E). Free state file Commodity wages. Free state file   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. Free state file However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. Free state file These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. Free state file Other compensation. Free state file   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. Free state file Family members. Free state file   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. Free state file However, certain exemptions may apply for your child, spouse, or parent. Free state file See the table, How Do Employment Taxes Apply to Farmwork , in section 12. Free state file Household employees. Free state file   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. Free state file   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. Free state file 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. Free state file   For more information, see Publication 926, Household Employer's Tax Guide. Free state file    Wages for household work may not be a deductible farm expense. Free state file See Publication 225, Farmer's Tax Guide. Free state file Share farmers. Free state file   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. Free state file Compensation paid to H-2A visa holders. Free state file   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. Free state file On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Free state file   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. Free state file In that case, the worker must give the employer a completed Form W-4. Free state file Federal income tax withheld should be reported in box 2 of Form W-2. Free state file These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Free state file 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. Free state file 4. Free state file 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. Free state file You may also be required to withhold Additional Medicare Tax. Free state file For more information, see Additional Medicare Tax withholding , later. Free state file 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. Free state file 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). Free state file The $150 test applies separately to each farmworker that you employ. Free state file If you employ a family of workers, each member is treated separately. Free state file Do not count wages paid by other employers. Free state file The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. Free state file Exceptions. Free state file   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. Free state file   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. Free state file Social Security and Medicare Tax Withholding The social security tax rate is 6. Free state file 2%, for both the employee and employer, on the first $117,000 paid to each employee. Free state file You must withhold at this rate from each employee and pay a matching amount. Free state file The Medicare tax rate is 1. Free state file 45% each for the employee and employer on all wages. Free state file You must withhold at this rate from each employee and pay a matching amount. Free state file There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Free state file Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. Free state file For details, see Publication 15-A. Free state file Additional Medicare Tax withholding. Free state file   In addition to withholding Medicare tax at 1. Free state file 45%, you must withhold a 0. Free state file 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Free state file 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. Free state file Additional Medicare Tax is only imposed on the employee. Free state file There is no employer share of Additional Medicare Tax. Free state file 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. Free state file   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). Free state file For more information on Additional Medicare Tax, visit IRS. Free state file gov and enter “Additional Medicare Tax” in the search box. Free state file Employee share paid by employer. Free state file   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. Free state file If you do not withhold the taxes, however, you must still pay them. Free state file Any employee social security and Medicare taxes that you pay is additional income to the employee. Free state file 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. Free state file Also, do not count the additional income as wages for FUTA tax purposes. Free state file Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. Free state file See section 7 of Publication 15-A. Free state file Withholding social security and Medicare taxes on nonresident alien employees. Free state file   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. Free state file S. Free state file citizen or resident alien. Free state file However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Free state file Also see Compensation paid to H-2A visa holders in section 3. Free state file Religious exemption. Free state file    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. Free state file This exemption is available only if both the employee and the employer are members of the sect. Free state file   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Free state file 5. Free state file 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. Free state file The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. Free state file You may use one of several methods to determine the amount of federal income tax withholding. Free state file They are discussed in section 13. Free state file Form W-4. Free state file   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Free state file Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. Free state file Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Free state file irs. Free state file gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. Free state file   Ask each new employee to give you a signed Form W-4 when starting work. Free state file Make the form effective with the first wage payment. Free state file 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. Free state file Forms in Spanish. Free state file   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. Free state file For more information, see Publicación 17(SP). Free state file Effective date of Form W-4. Free state file   A Form W-4 remains in effect until the employee gives you a new one. Free state file When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. Free state file Do not adjust withholding retroactively. Free state file 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. Free state file For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. Free state file A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Free state file Completing Form W-4. Free state file   The amount of federal income tax withholding is based on marital status and withholding allowances. Free state file Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Free state file 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. Free state file   Employees may claim fewer withholding allowances than they are entitled to claim. Free state file 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. Free state file   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Free state file Along with Form W-4, you may wish to order Publication 505 for use by your employees. Free state file    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Free state file 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. Free state file Exemption from federal income tax withholding. Free state file   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. Free state file See the Form W-4 instructions for more information. Free state file However, the wages are still subject to social security and Medicare taxes. Free state file   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Free state file To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. Free state file 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. Free state file 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. Free state file Withholding income taxes on the wages of nonresident alien employees. Free state file   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Free state file However, see Publication 515 for exceptions to this general rule. Free state file Also see Compensation paid to H-2A visa workers in section 3. Free state file Withholding adjustment for nonresident alien employees. Free state file   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. Free state file 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. Free state file See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). Free state file Nonresident alien employee's Form W-4. Free state file   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. Free state file   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. Free state file    A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. Free state file Form 8233. Free state file   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. Free state file See Publication 515 for details. Free state file IRS review of requested Forms W-4. Free state file   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Free state file You may also be directed to send certain Forms W-4 to the IRS. Free state file You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. Free state file Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. Free state file 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. Free state file When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Free state file   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). Free state file 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”). Free state file Initial lock-in letter. Free state file   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. Free state file 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. Free state file 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. Free state file 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. Free state file You may follow any reasonable business practice to furnish the employee copy to the employee. Free state file Implementation of lock-in letter. Free state file   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. Free state file You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. Free state file 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. Free state file Seasonal employees and employees not currently performing services. Free state file   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. Free state file 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. Free state file You reasonably expect the employee to resume services within 12 months of the date of the notice. Free state file 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. Free state file Termination and re-hire of employees. Free state file   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. Free state file 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. Free state file Modification notice. Free state file   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. Free state file The modification notice may change the marital status and/or the number of withholding allowances permitted. Free state file You must withhold federal income tax based on the effective date specified in the modification notice. Free state file New Form W-4 after IRS notice. Free state file   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. Free state file 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. Free state file 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. Free state file   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. Free state file Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. Free state file Substitute Forms W-4. Free state file   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. Free state file Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. Free state file gov to obtain copies of Form W-4. Free state file   You may use a substitute version of Form W-4 to meet your business needs. Free state file 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. Free state file 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. Free state file   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. Free state file However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. Free state file Invalid Forms W-4. Free state file   Any unauthorized change or addition to Form W-4 makes it invalid. Free state file This includes taking out any language by which the employee certifies that the form is correct. Free state file 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. Free state file An employee who submits a false Form W-4 may be subject to a $500 penalty. Free state file 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. Free state file   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. Free state file Tell the employee that it is invalid and ask for another one. Free state file If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. Free state file However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. Free state file   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. Free state file R. Free state file B. Free state file 455, available at www. Free state file irs. Free state file gov/irb/2007-35_IRB/ar10. Free state file html. Free state file Amounts exempt from levy on wages, salary, and other income. Free state file   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. Free state file 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. Free state file 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. Free state file How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. Free state file Wage bracket tables. Free state file See section 13 for directions on how to use the tables. Free state file Percentage method. Free state file See section 13 for directions on how to use the percentage method. Free state file Alternative formula tables for percentage method withholding. Free state file See Publication 15-A. Free state file Wage bracket percentage method withholding tables. Free state file See Publication 15-A. Free state file Other alternative methods. Free state file See Publication 15-A. Free state file 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. Free state file If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. Free state file Supplemental wages. Free state file   Supplemental wages are wage payments to an employee that are not regular wages. Free state file 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. Free state file Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Free state file   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. Free state file   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. Free state file 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. Free state file Withhold a flat 25% (no other percentage allowed). Free state file If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Free state file If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. Free state file Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Free state file Subtract the tax withheld from the regular wages. Free state file Withhold the remaining tax from the supplemental wages. Free state file 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. Free state file 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. Free state file This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Free state file    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. Free state file See section 7 in Publication 15 (Circular E) for details. Free state file   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. Free state file 6. Free state file 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. Free state file 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. Free state file This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. Free state file 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. Free state file 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. Free state file 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. Free state file 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. Free state file If Form W-2 is not required, you must notify the employee by February 7, 2014. Free state file 7. Free state file Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. Free state file You must use electronic funds transfer to make all federal tax deposits. Free state file See How To Deposit , later in this section. Free state file 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. Free state file For more information, see COBRA premium assistance credit under Introduction. Free state file Payment with return. Free state file   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. Free state file 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. Free state file 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. Free state file You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. Free state file This payment may be $2,500 or more. Free state file Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. Free state file Semiweekly schedule depositors must timely deposit the amount. Free state file See Accuracy of Deposits Rule and How To Deposit, later in this section. Free state file 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. Free state file See Employers of Both Farm and Nonfarm Workers, later in this section. Free state file The rules for determining when to deposit Form 943 taxes are discussed below. Free state file See section 10 for the separate rules that apply to FUTA tax. Free state file Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. Free state file 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. Free state file The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). Free state file 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. Free state file If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. Free state file If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. Free state file Lookback period. Free state file   The lookback period is the second calendar year preceding the current calendar year. Free state file For example, the lookback period for 2014 is 2012. Free state file Example of deposit schedule based on lookback period. Free state file Rose Co. Free state file reported taxes on Form 943 as follows. Free state file 2012 — $48,000 2013 — $60,000 Rose Co. Free state file 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. Free state file However, for 2015, Rose Co. Free state file is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. Free state file Adjustments to lookback period taxes. Free state file   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). Free state file Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Free state file Example of adjustments. Free state file An employer originally reported total tax of $45,000 for the lookback period in 2012. Free state file 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. Free state file The total tax reported in the lookback period is still $45,000. Free state file The $10,000 adjustment is also not treated as part of the 2014 taxes. Free state file Deposit period. Free state file   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. Free state file For monthly schedule depositors, the deposit period is a calendar month. Free state file The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. Free state file 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. Free state file You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. Free state file Monthly schedule example. Free state file   Red Co. Free state file is a seasonal employer and a monthly schedule depositor. Free state file It pays wages each Friday. Free state file It paid wages during August 2014, but did not pay any wages during September. Free state file Red Co. Free state file must deposit the combined tax liabilities for the August paydays by September 15. Free state file Red Co. Free state file 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. Free state file New employers. Free state file   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. Free state file 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). Free state file 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. Free state file Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Free state file Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Free state file 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. Free state file 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. Free state file If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. Free state file Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. Free state file Semiweekly Deposit Schedule IF the payday falls on a. Free state file . Free state file . Free state file THEN deposit taxes by the following. Free state file . Free state file . Free state file Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. Free state file   Green, Inc. Free state file , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. Free state file Green, Inc. Free state file , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. Free state file Green, Inc. Free state file 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). Free state file Semiweekly deposit period spanning two quarters. Free state file   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. Free state file 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. Free state file Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). Free state file 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. Free state file A business day is any day other than a Saturday, Sunday, or legal holiday. Free state file 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). Free state file Semiweekly schedule depositors   will always have 3 business days to make a deposit. Free state file 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. Free state file 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). Free state file Legal holiday. Free state file   The term “legal holiday” means any legal holiday in the District of Columbia. Free state file Legal holidays for 2014 are listed below. Free state file January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. Free state file 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. Free state file For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. Free state file 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. Free state file Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. Free state file 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. Free state file For example, Fir Co. Free state file is a semiweekly schedule depositor. Free state file On Monday, Fir Co. Free state file accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. Free state file On Tuesday, Fir Co. Free state file accumulates additional taxes of $30,000. Free state file Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. Free state file does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). Free state file 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. Free state file Example of the $100,000 next-day deposit rule. Free state file   Elm, Inc. Free state file , started its business on May 1, 2014. Free state file Because Elm, Inc. Free state file , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. Free state file , is a monthly schedule depositor. Free state file On May 8, Elm, Inc. Free state file , paid wages for the first time and accumulated taxes of $50,000. Free state file On May 9 (Friday), Elm, Inc. Free state file , paid wages and accumulated taxes of $60,000, for a total of $110,000. Free state file Because Elm, Inc. Free state file , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. Free state file Elm, Inc. Free state file , became a semiweekly schedule depositor on May 10. Free state file It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. Free state file Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. Free state file However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. Free state file Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. Free state file The deposit shortfall is paid or deposited by the shortfall makeup date as described below. Free state file 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. Free state file You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. Free state file 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. Free state file For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). Free state file How To Deposit You must deposit employment taxes by electronic funds transfer. Free state file See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. Free state file Electronic deposit requirement. Free state file   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). Free state file Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Free state file 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. Free state file   EFTPS is a free service provided by the Department of Treasury. Free state file 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). Free state file You can also visit the EFTPS website at www. Free state file eftps. Free state file gov. Free state file Additional information about EFTPS is also available in Publication 966. Free state file New employers that have a federal tax obligation will be pre-enrolled in EFTPS. Free state file Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. Free state file See When you receive your EIN in section 1 for more information. Free state file Deposit record. Free state file   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. Free state file The number can be used as a receipt or to trace the payment. Free state file Depositing on time. Free state file   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. Free state file m. Free state file Eastern time the day before the date a deposit is due. Free state file If you use a third party to make a deposit on your behalf, they may have different cutoff times. Free state file Same-day payment option. Free state file   If you fail to initiate a deposit transaction on EFTPS by 8 p. Free state file m. Free state file 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). Free state file To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. Free state file Please check with your financial institution regarding availability, deadlines, and costs. Free state file Your financial institution may charge you a fee for payments made this way. Free state file To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. Free state file eftps. Free state file gov to download the Same-Day Payment Worksheet. Free state file 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. Free state file 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. Free state file 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. Free state file For amounts not properly deposited or not deposited on time, the penalty rates are shown next. Free state file Penalty Charged for. Free state file . Free state file . Free state file 2% Deposits made 1 to 5 days late. Free state file 5% Deposits made 6 to 15 days late. Free state file 10% Deposits made 16 or more days late. Free state file Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. Free state file 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. Free state file See Payment with return , earlier in this section, for exceptions. Free state file 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. Free state file Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. Free state file Order in which deposits are applied. Free state file   Deposits generally are applied to the most recent tax liability within the year. Free state file 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. Free state file Follow the instructions on the penalty notice that you received. Free state file For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. Free state file You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. Free state file irs. Free state file gov/pub/irs-irbs/irb01-50. Free state file pdf. Free state file Example. Free state file Cedar, Inc. Free state file , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. Free state file It does not make the deposit on July 15. Free state file On August 15, Cedar, Inc. Free state file , deposits $2,000. Free state file 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. Free state file Accordingly, $500 of the July 15 liability remains undeposited. Free state file The penalty on this underdeposit will apply as explained above. Free state file Trust fund recovery penalty. Free state file   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. Free state file The penalty is the full amount of the unpaid trust fund tax. Free state file This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. Free state file   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. Free state file   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. Free state file A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. Free state file    Willfully means voluntarily, consciously, and intentionally. Free state file 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. Free state file “Average” failure-to-deposit penalty. Free state file   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. Free state file 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. Free state file Completed Form 943, line 17, instead of Form 943-A. Free state file Failed to attach a properly completed Form 943-A. Free state file Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. Free state file   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. Free state file Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. Free state file   You can avoid the penalty by reviewing your return before filing it. Free state file Follow these steps before filing your Form 943. Free state file If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. Free state file 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. Free state file 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. Free state file Do not show negative amounts on Form 943, line 17, or Form 943-A. Free state file 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. Free state file 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). Free state file Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. Free state file If a deposit is due, deposi
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The Free State File

Free state file 9. Free state file   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. Free state file This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. Free state file The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. Free state file See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. Free state file However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. Free state file You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Free state file Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. Free state file If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Free state file Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. Free state file Qualified education expenses. Free state file   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Free state file They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Free state file   In addition, if the student is at least a half-time student, room and board are qualified education expenses. Free state file   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Free state file The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Free state file The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Free state file You will need to contact the eligible educational institution for qualified room and board costs. Free state file Eligible educational institution. Free state file   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Free state file S. Free state file Department of Education. Free state file It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free state file The educational institution should be able to tell you if it is an eligible educational institution. Free state file   Certain educational institutions located outside the United States also participate in the U. Free state file S. Free state file Department of Education's Federal Student Aid (FSA) programs. Free state file Half-time student. Free state file   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Free state file Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. Free state file You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free state file Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). Free state file If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. Free state file Example 1. Free state file In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. Free state file She paid $5,800 of qualified education expenses from the following sources. Free state file   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. Free state file   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. Free state file However, she must include the $500 taxable earnings in her gross income subject to income tax. Free state file Example 2. Free state file Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. Free state file This must be included in her income subject to income tax. Free state file The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. Free state file Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). Free state file She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. Free state file Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free state file The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. Free state file If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). Free state file Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. Free state file See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. Free state file There are many other situations in which Form 5329 is required. Free state file If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. Free state file Prev  Up  Next   Home   More Online Publications