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Military Tax Questions

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Military Tax Questions

Military tax questions Publication 15 - Main Content Table of Contents 1. Military tax questions Employer Identification Number (EIN) 2. Military tax questions Who Are Employees?Relief provisions. Military tax questions Business Owned and Operated by Spouses 3. Military tax questions Family Employees 4. Military tax questions Employee's Social Security Number (SSN)Registering for SSNVS. Military tax questions 5. Military tax questions Wages and Other CompensationAccountable plan. Military tax questions Nonaccountable plan. Military tax questions Per diem or other fixed allowance. Military tax questions 50% test. Military tax questions Health Savings Accounts and medical savings accounts. Military tax questions Nontaxable fringe benefits. Military tax questions When fringe benefits are treated as paid. Military tax questions Valuation of fringe benefits. Military tax questions Withholding on fringe benefits. Military tax questions Depositing taxes on fringe benefits. Military tax questions 6. Military tax questions TipsOrdering rule. Military tax questions 7. Military tax questions Supplemental Wages 8. Military tax questions Payroll Period 9. Military tax questions Withholding From Employees' WagesIncome Tax Withholding Social Security and Medicare Taxes Part-Time Workers 10. Military tax questions Required Notice to Employees About the Earned Income Credit (EIC) 11. Military tax questions Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties 12. Military tax questions Filing Form 941 or Form 944 13. Military tax questions Reporting Adjustments to Form 941 or Form 944Current Period Adjustments Prior Period Adjustments Wage Repayments 14. Military tax questions Federal Unemployment (FUTA) TaxSuccessor employer. Military tax questions Household employees. Military tax questions When to deposit. Military tax questions Household employees. Military tax questions Electronic filing by reporting agents. Military tax questions 16. Military tax questions How To Use the Income Tax Withholding TablesWage Bracket Method Percentage Method Alternative Methods of Income Tax Withholding How To Get Tax Help 1. Military tax questions Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. Military tax questions The EIN is a nine-digit number the IRS issues. Military tax questions The digits are arranged as follows: 00-0000000. Military tax questions It is used to identify the tax accounts of employers and certain others who have no employees. Military tax questions Use your EIN on all of the items you send to the IRS and SSA. Military tax questions For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. Military tax questions If you do not have an EIN, you may apply for one online. Military tax questions Go to the IRS. Military tax questions gov and click on the Apply for an EIN Online link under Tools. Military tax questions 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. Military tax questions Do not use an SSN in place of an EIN. Military tax questions You should have only one EIN. Military tax questions If you have more than one and are not sure which one to use, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Military tax questions Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Military tax questions The IRS will tell you which number to use. Military tax questions If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. Military tax questions If you have applied for an EIN but do not have your EIN by the time a return is due, file a paper return and write “Applied For” and the date you applied for it in the space shown for the number. Military tax questions 2. Military tax questions Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. Military tax questions See Publication 15-A for details on statutory employees and nonemployees. Military tax questions Employee status under common law. Military tax questions   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. Military tax questions This is so even when you give the employee freedom of action. Military tax questions What matters is that you have the right to control the details of how the services are performed. Military tax questions See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Military tax questions   Generally, people in business for themselves are not employees. Military tax questions For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. Military tax questions However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. Military tax questions   If an employer-employee relationship exists, it does not matter what it is called. Military tax questions The employee may be called an agent or independent contractor. Military tax questions It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Military tax questions Statutory employees. Military tax questions   If someone who works for you is not an employee under the common law rules discussed earlier, do not withhold federal income tax from his or her pay, unless backup withholding applies. Military tax questions Although the following persons may not be common law employees, they are considered employees by statute for social security, Medicare, and FUTA tax purposes under certain conditions. Military tax questions An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. Military tax questions A full-time life insurance salesperson who sells primarily for one company. Military tax questions A homeworker who works by guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. Military tax questions A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. Military tax questions The orders must be for merchandise for resale or supplies for use in the customer's business. Military tax questions The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Military tax questions    Statutory nonemployees. Military tax questions   Direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. Military tax questions They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. Military tax questions H-2A agricultural workers. Military tax questions   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Military tax questions Treating employees as nonemployees. Military tax questions   You will generally be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold these taxes because you treated an employee as a nonemployee. Military tax questions You may be able to calculate your liability using special section 3509 rates for the employee share of social security and Medicare taxes and the federal income tax withholding. Military tax questions The applicable rates depend on whether you filed required Forms 1099. Military tax questions You cannot recover the employee share of social security, or Medicare tax, or income tax withholding from the employee if the tax is paid under section 3509. Military tax questions You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. Military tax questions You continue to owe the full employer share of social security and Medicare taxes. Military tax questions The employee remains liable for the employee share of social security and Medicare taxes. Military tax questions See Internal Revenue Code section 3509 for details. Military tax questions Also see the Instructions for Form 941-X. Military tax questions   Section 3509 rates are not available if you intentionally disregard the requirement to withhold taxes from the employee or if you withheld income taxes but not social security or Medicare taxes. Military tax questions Section 3509 is not available for reclassifying statutory employees. Military tax questions See Statutory employees , earlier in this section. Military tax questions   If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Military tax questions 2% plus 20% of the employee rate (see the Instructions for Form 941-X). Military tax questions For Medicare taxes; employer rate of 1. Military tax questions 45% plus 20% of the employee rate of 1. Military tax questions 45%, for a total rate of 1. Military tax questions 74% of wages. Military tax questions For Additional Medicare Tax; 0. Military tax questions 18% (20% of the employee rate of 0. Military tax questions 9%) of wages subject to Additional Medicare Tax. Military tax questions For income tax withholding, the rate is 1. Military tax questions 5% of wages. Military tax questions   If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6. Military tax questions 2% plus 40% of the employee rate (see the Instructions for Form 941-X). Military tax questions For Medicare taxes; employer rate of 1. Military tax questions 45% plus 40% of the employee rate of 1. Military tax questions 45%, for a total rate of 2. Military tax questions 03% of wages. Military tax questions For Additional Medicare Tax; 0. Military tax questions 36% (40% of the employee rate of 0. Military tax questions 9%) of wages subject to Additional Medicare Tax. Military tax questions For income tax withholding, the rate is 3. Military tax questions 0% of wages. Military tax questions Relief provisions. Military tax questions   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. Military tax questions To get this relief, you must file all required federal tax returns, including information returns, on a basis consistent with your treatment of the worker. Military tax questions You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. Military tax questions See Publication 1976, Do You Qualify for Relief Under Section 530. Military tax questions IRS help. Military tax questions   If you want the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Military tax questions Voluntary Classification Settlement Program (VCSP). Military tax questions   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Military tax questions To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Military tax questions For more information visit IRS. Military tax questions gov and enter “VCSP” in the search box. Military tax questions Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Military tax questions See Publication 541, Partnerships, for more details. Military tax questions The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Military tax questions Exception—Qualified joint venture. Military tax questions   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. Military tax questions 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). Military tax questions   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. Military tax questions Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Military tax questions   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. Military tax questions 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. Military tax questions Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. Military tax questions 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. Military tax questions    Note. Military tax questions If your spouse is your employee, not your partner, see One spouse employed by another in section 3. Military tax questions   For more information on qualified joint ventures, visit IRS. Military tax questions gov and enter “qualified joint venture” in the search box. Military tax questions Exception—Community income. Military tax questions   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. Military tax questions S. Military tax questions possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. Military tax questions You may still make an election to be taxed as a qualified joint venture instead of a partnership. Military tax questions See Exception—Qualified joint venture , earlier. Military tax questions 3. Military tax questions Family Employees Child employed by parents. Military tax questions   Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Military tax questions If these payments are for work other than in a trade or business, such as domestic work in the parent's private home, they are not subject to social security and Medicare taxes until the child reaches age 21. Military tax questions However, see Covered services of a child or spouse , later in this section. Military tax questions Payments for the services of a child under age 21 who works for his or her parent, whether or not in a trade or business, are not subject to FUTA tax. Military tax questions Payments for the services of a child of any age who works for his or her parent are generally subject to income tax withholding unless the payments are for domestic work in the parent's home, or unless the payments are for work other than in a trade or business and are less than $50 in the quarter or the child is not regularly employed to do such work. Military tax questions One spouse employed by another. Military tax questions   The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and social security and Medicare taxes, but not to FUTA tax. Military tax questions However, the payments for services of one spouse employed by another in other than a trade or business, such as domestic service in a private home, are not subject to social security, Medicare, and FUTA taxes. Military tax questions Covered services of a child or spouse. Military tax questions   The wages for the services of a child or spouse are subject to income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for: A corporation, even if it is controlled by the child's parent or the individual's spouse; A partnership, even if the child's parent is a partner, unless each partner is a parent of the child; A partnership, even if the individual's spouse is a partner; or An estate, even if it is the estate of a deceased parent. Military tax questions Parent employed by son or daughter. Military tax questions   When the employer is a son or daughter employing his or her parent the following rules apply. Military tax questions Payments for the services of a parent in the son’s or daughter’s (the employer’s) trade or business are subject to income tax withholding and social security and Medicare taxes. Military tax questions Payments for the services of a parent not in the son’s or daughter’s (the employer’s) trade or business are generally not subject to social security and Medicare taxes. Military tax questions    Social security and Medicare taxes do apply to payments made to a parent for domestic services if all of the following apply: The parent is employed by his or her son or daughter; The son or daughter (the employer) has a child or stepchild living in the home; The son or daughter (the employer) is a widow or widower, divorced, or living with a spouse who, because of a mental or physical condition, cannot care for the child or stepchild for at least 4 continuous weeks in a calendar quarter; and The child or stepchild is either under age 18 or requires the personal care of an adult for at least 4 continuous weeks in a calendar quarter due to a mental or physical condition. Military tax questions   Payments made to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided. Military tax questions 4. Military tax questions Employee's Social Security Number (SSN) You are required to get each employee's name and SSN and to enter them on Form W-2. Military tax questions This requirement also applies to resident and nonresident alien employees. Military tax questions You should ask your employee to show you his or her social security card. Military tax questions The employee may show the card if it is available. Military tax questions Do not accept a social security card that says “Not valid for employment. Military tax questions ” A social security number issued with this legend does not permit employment. Military tax questions You may, but are not required to, photocopy the social security card if the employee provides it. Military tax questions If you do not provide the correct employee name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. Military tax questions See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Military tax questions Applying for a social security card. Military tax questions   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. Military tax questions You can get Form SS-5 at SSA offices, by calling 1-800-772-1213, or from the SSA website at www. Military tax questions socialsecurity. Military tax questions gov/online/ss-5. Military tax questions html. Military tax questions The employee must complete and sign Form SS-5; it cannot be filed by the employer. Military tax questions 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. Military tax questions Applying for a social security number. Military tax questions   If you file Form W-2 on paper and your employee applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. Military tax questions If you are filing electronically, enter all zeros (000-00-000) in the social security number field. Military tax questions 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. Military tax questions Furnish copies B, C, and 2 of Form W-2c to the employee. Military tax questions Up to 25 Forms W-2c for each Form W-3c, Transmittal of Corrected Wage and Tax Statements, may now be filed per session over the Internet, with no limit on the number of sessions. Military tax questions For more information, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Military tax questions socialsecurity. Military tax questions gov/employer. Military tax questions Advise your employee to correct the SSN on his or her original Form W-2. Military tax questions Correctly record the employee's name and SSN. Military tax questions   Record the name and number of each employee as they are shown on the employee's social security card. Military tax questions 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. Military tax questions 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. Military tax questions If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported for the most recently filed Form W-2. Military tax questions It is not necessary to correct other years if the previous name and number were used for years before the most recent Form W-2. Military tax questions IRS individual taxpayer identification numbers (ITINs) for aliens. Military tax questions   Do not accept an ITIN in place of an SSN for employee identification or for work. Military tax questions An ITIN is only available to resident and nonresident aliens who are not eligible for U. Military tax questions S. Military tax questions employment and need identification for other tax purposes. Military tax questions You can identify an ITIN because it is a nine-digit number, beginning with the number “9” with either a “7” or “8” as the fourth digit and is formatted like an SSN (for example, 9NN-7N-NNNN). Military tax questions    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. Military tax questions 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. Military tax questions Do not use an ITIN in place of an SSN on Form W-2. Military tax questions Verification of social security numbers. Military tax questions   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. Military tax questions Visit www. Military tax questions socialsecurity. Military tax questions gov/employer/ssnv. Military tax questions htm for more information. Military tax questions Registering for SSNVS. Military tax questions   You must register online and receive authorization from your employer to use SSNVS. Military tax questions To register, visit SSA's website at www. Military tax questions ssa. Military tax questions gov/employer and click on the Business Services Online link. Military tax questions Follow the registration instructions to obtain a user identification (ID) and password. Military tax questions You will need to provide the following information about yourself and your company. Military tax questions Name. Military tax questions SSN. Military tax questions Date of birth. Military tax questions Type of employer. Military tax questions EIN. Military tax questions Company name, address, and telephone number. Military tax questions Email address. Military tax questions   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Military tax questions You must enter the activation code online to use SSNVS. Military tax questions 5. Military tax questions Wages and Other Compensation Wages subject to federal employment taxes generally include all pay you give to an employee for services performed. Military tax questions The pay may be in cash or in other forms. Military tax questions It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits. Military tax questions It does not matter how you measure or make the payments. Military tax questions Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Military tax questions Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. Military tax questions More information. Military tax questions   See section 6 for a discussion of tips and section 7 for a discussion of supplemental wages. Military tax questions Also, see section 15 for exceptions to the general rules for wages. Military tax questions Publication 15-A provides additional information on wages, including nonqualified deferred compensation, and other compensation. Military tax questions Publication 15-B provides information on other forms of compensation, including: Accident and health benefits, Achievement awards, Adoption assistance, Athletic facilities, De minimis (minimal) benefits, Dependent care assistance, Educational assistance, Employee discounts, Employee stock options, Employer-provided cell phones, Group-term life insurance coverage, Health Savings Accounts, Lodging on your business premises, Meals, Moving expense reimbursements, No-additional-cost services, Retirement planning services, Transportation (commuting) benefits, Tuition reduction, and Working condition benefits. Military tax questions Employee business expense reimbursements. Military tax questions   A reimbursement or allowance arrangement is a system by which you pay the advances, reimbursements, and charges for your employees' business expenses. Military tax questions How you report a reimbursement or allowance amount depends on whether you have an accountable or a nonaccountable plan. Military tax questions If a single payment includes both wages and an expense reimbursement, you must specify the amount of the reimbursement. Military tax questions   These rules apply to all ordinary and necessary employee business expenses that would otherwise qualify for a deduction by the employee. Military tax questions Accountable plan. Military tax questions   To be an accountable plan, your reimbursement or allowance arrangement must require your employees to meet all three of the following rules. Military tax questions They must have paid or incurred deductible expenses while performing services as your employees. Military tax questions The reimbursement or advance must be paid for the expense and must not be an amount that would have otherwise been paid by the employee. Military tax questions They must substantiate these expenses to you within a reasonable period of time. Military tax questions They must return any amounts in excess of substantiated expenses within a reasonable period of time. Military tax questions   Amounts paid under an accountable plan are not wages and are not subject to income, social security, Medicare, and FUTA taxes. Military tax questions   If the expenses covered by this arrangement are not substantiated (or amounts in excess of substantiated expenses are not returned within a reasonable period of time), the amount paid under the arrangement in excess of the substantiated expenses is treated as paid under a nonaccountable plan. Military tax questions This amount is subject to income, social security, Medicare, and FUTA taxes for the first payroll period following the end of the reasonable period of time. Military tax questions   A reasonable period of time depends on the facts and circumstances. Military tax questions Generally, it is considered reasonable if your employees receive their advance within 30 days of the time they incur the expenses, adequately account for the expenses within 60 days after the expenses were paid or incurred, and return any amounts in excess of expenses within 120 days after the expenses were paid or incurred. Military tax questions Also, it is considered reasonable if you give your employees a periodic statement (at least quarterly) that asks them to either return or adequately account for outstanding amounts and they do so within 120 days. Military tax questions Nonaccountable plan. Military tax questions   Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to income, social security, Medicare, and FUTA taxes. Military tax questions Your payments are treated as paid under a nonaccountable plan if: Your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, You advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount he or she does not use for business expenses, You advance or pay an amount to your employee regardless of whether you reasonably expect the employee to have business expenses related to your business, or You pay an amount as a reimbursement you would have otherwise paid as wages. Military tax questions   See section 7 for more information on supplemental wages. Military tax questions Per diem or other fixed allowance. Military tax questions   You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. Military tax questions In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. Military tax questions The 2013 standard mileage rate for auto expenses was 56. Military tax questions 5 cents per mile. Military tax questions The rate for 2014 is 56 cents per mile. Military tax questions   The government per diem rates for meals and lodging in the continental United States are listed in Publication 1542, Per Diem Rates. Military tax questions Other than the amount of these expenses, your employees' business expenses must be substantiated (for example, the business purpose of the travel or the number of business miles driven). Military tax questions   If the per diem or allowance paid exceeds the amounts substantiated, you must report the excess amount as wages. Military tax questions This excess amount is subject to income tax withholding and payment of social security, Medicare, and FUTA taxes. Military tax questions Show the amount equal to the substantiated amount (for example, the nontaxable portion) in box 12 of Form W-2 using code “L. Military tax questions ” Wages not paid in money. Military tax questions   If in the course of your trade or business you pay your employees in a medium that is neither cash nor a readily negotiable instrument, such as a check, you are said to pay them “in kind. Military tax questions ” Payments in kind may be in the form of goods, lodging, food, clothing, or services. Military tax questions Generally, the fair market value of such payments at the time they are provided is subject to federal income tax withholding and social security, Medicare, and FUTA taxes. Military tax questions   However, noncash payments for household work, agricultural labor, and service not in the employer's trade or business are exempt from social security, Medicare, and FUTA taxes. Military tax questions Withhold income tax on these payments only if you and the employee agree to do so. Military tax questions Nonetheless, noncash payments for agricultural labor, such as commodity wages, are treated as cash payments subject to employment taxes if the substance of the transaction is a cash payment. Military tax questions Moving expenses. Military tax questions   Reimbursed and employer-paid qualified moving expenses (those that would otherwise be deductible by the employee) paid under an accountable plan are not includible in an employee's income unless you have knowledge the employee deducted the expenses in a prior year. Military tax questions Reimbursed and employer-paid nonqualified moving expenses are includible in income and are subject to employment taxes and income tax withholding. Military tax questions For more information on moving expenses, see Publication 521, Moving Expenses. Military tax questions Meals and lodging. Military tax questions   The value of meals is not taxable income and is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the meals are furnished for the employer's convenience and on the employer's premises. Military tax questions The value of lodging is not subject to income tax withholding and social security, Medicare, and FUTA taxes if the lodging is furnished for the employer's convenience, on the employer's premises, and as a condition of employment. Military tax questions    “For the convenience of the employer” means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee. Military tax questions For example, meals you provide at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for your convenience. Military tax questions   However, whether meals or lodging are provided for the convenience of the employer depends on all of the facts and circumstances. Military tax questions A written statement that the meals or lodging are for your convenience is not sufficient. Military tax questions 50% test. Military tax questions   If over 50% of the employees who are provided meals on an employer's business premises receive these meals for the convenience of the employer, all meals provided on the premises are treated as furnished for the convenience of the employer. Military tax questions If this 50% test is met, the value of the meals is excludable from income for all employees and is not subject to federal income tax withholding or employment taxes. Military tax questions For more information, see Publication 15-B. Military tax questions Health insurance plans. Military tax questions   If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Military tax questions Generally, this exclusion also applies to qualified long-term care insurance contracts. Military tax questions However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). Military tax questions For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the wages only for employees and their dependents or for a class or classes of employees and their dependents. Military tax questions See Announcement 92-16 for more information. Military tax questions You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Military tax questions Health Savings Accounts and medical savings accounts. Military tax questions   Your contributions to an employee's Health Savings Account (HSA) or Archer medical savings account (MSA) are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they will be excludable from the income of the employee. Military tax questions To the extent it is not reasonable to believe they will be excludable, your contributions are subject to these taxes. Military tax questions Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. Military tax questions However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan are not wages and are not subject to employment taxes or withholding. Military tax questions For more information, see the Instructions for Form 8889, Health Savings Accounts (HSAs). Military tax questions Medical care reimbursements. Military tax questions   Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding. Military tax questions See Publication 15-B for an exception for highly compensated employees. Military tax questions Differential wage payments. Military tax questions   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and represent all or a portion of the wages the individual would have received from the employer if the individual were performing services for the employer. Military tax questions   Differential wage payments are wages for income tax withholding, but are not subject to social security, Medicare, or FUTA taxes. Military tax questions Employers should report differential wage payments in box 1 of Form W-2. Military tax questions For more information about the tax treatment of differential wage payments, visit IRS. Military tax questions gov and enter “employees in a combat zone” in the search box. Military tax questions Fringe benefits. Military tax questions   You generally must include fringe benefits in an employee's gross income (but see Nontaxable fringe benefits next). Military tax questions The benefits are subject to income tax withholding and employment taxes. Military tax questions Fringe benefits include cars you provide, flights on aircraft you provide, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. Military tax questions In general, the amount you must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount the law excludes. Military tax questions There are other special rules you and your employees may use to value certain fringe benefits. Military tax questions See Publication 15-B for more information. Military tax questions Nontaxable fringe benefits. Military tax questions   Some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Military tax questions See Publication 15-B for details. Military tax questions The following are some examples of nontaxable fringe benefits. Military tax questions Services provided to your employees at no additional cost to you. Military tax questions Qualified employee discounts. Military tax questions Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it. Military tax questions Examples include a company car for business use and subscriptions to business magazines. Military tax questions Certain minimal value fringes (including an occasional cab ride when an employee must work overtime and meals you provide at eating places you run for your employees if the meals are not furnished at below cost). Military tax questions Qualified transportation fringes subject to specified conditions and dollar limitations (including transportation in a commuter highway vehicle, any transit pass, and qualified parking). Military tax questions Qualified moving expense reimbursement. Military tax questions See Moving expenses , earlier in this section, for details. Military tax questions The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children. Military tax questions Qualified tuition reduction an educational organization provides to its employees for education. Military tax questions For more information, see Publication 970, Tax Benefits for Education. Military tax questions Employer-provided cell phones provided primarily for a noncompensatory business reason. Military tax questions   However, do not exclude the following fringe benefits from the income of highly compensated employees unless the benefit is available to other employees on a nondiscriminatory basis. Military tax questions No-additional-cost services. Military tax questions Qualified employee discounts. Military tax questions Meals provided at an employer operated eating facility. Military tax questions Reduced tuition for education. Military tax questions  For more information, including the definition of a highly compensated employee, see Publication 15-B. Military tax questions When fringe benefits are treated as paid. Military tax questions   You may choose to treat certain noncash fringe benefits as paid by the pay period, by the quarter, or on any other basis you choose as long as you treat the benefits as paid at least once a year. Military tax questions You do not have to make a formal choice of payment dates or notify the IRS of the dates you choose. Military tax questions You do not have to make this choice for all employees. Military tax questions You may change methods as often as you like, as long as you treat all benefits provided in a calendar year as paid by December 31 of the calendar year. Military tax questions See Publication 15-B for more information, including a discussion of the special accounting rule for fringe benefits provided during November and December. Military tax questions Valuation of fringe benefits. Military tax questions   Generally, you must determine the value of fringe benefits no later than January 31 of the next year. Military tax questions Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Military tax questions Withholding on fringe benefits. Military tax questions   You may add the value of fringe benefits to regular wages for a payroll period and figure withholding taxes on the total, or you may withhold federal income tax on the value of the fringe benefits at the optional flat 25% supplemental wage rate. Military tax questions However, see Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages during the calendar year in section 7. Military tax questions   You may choose not to withhold income tax on the value of an employee's personal use of a vehicle you provide. Military tax questions You must, however, withhold social security and Medicare taxes on the use of the vehicle. Military tax questions See Publication 15-B for more information on this election. Military tax questions Depositing taxes on fringe benefits. Military tax questions   Once you choose when fringe benefits are paid, you must deposit taxes in the same deposit period you treat the fringe benefits as paid. Military tax questions To avoid a penalty, deposit the taxes following the general deposit rules for that deposit period. Military tax questions   If you determine by January 31 you overestimated the value of a fringe benefit at the time you withheld and deposited for it, you may claim a refund for the overpayment or have it applied to your next employment tax return. Military tax questions See Valuation of fringe benefits , earlier. Military tax questions If you underestimated the value and deposited too little, you may be subject to a failure-to-deposit penalty. Military tax questions See section 11 for information on deposit penalties. Military tax questions   If you deposited the required amount of taxes but withheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on his or her behalf, and included in the employee's Form W-2. Military tax questions However, you must recover the income taxes before April 1 of the following year. Military tax questions Sick pay. Military tax questions   In general, sick pay is any amount you pay under a plan to an employee who is unable to work because of sickness or injury. Military tax questions These amounts are sometimes paid by a third party, such as an insurance company or an employees' trust. Military tax questions In either case, these payments are subject to social security, Medicare, and FUTA taxes. Military tax questions Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. Military tax questions The payments are always subject to federal income tax. Military tax questions See Publication 15-A for more information. Military tax questions 6. Military tax questions Tips Tips your employee receives from customers are generally subject to withholding. Military tax questions Your employee must report cash tips to you by the 10th of the month after the month the tips are received. Military tax questions The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Military tax questions Both directly and indirectly tipped employees must report tips to you. Military tax questions No report is required for months when tips are less than $20. Military tax questions Your employee reports the tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. Military tax questions The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period the report covers, and The total of tips received during the month or period. Military tax questions Both Forms 4070 and 4070-A, Employee's Daily Record of Tips, are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer. Military tax questions You are permitted to establish a system for electronic tip reporting by employees. Military tax questions See Regulations section 31. Military tax questions 6053-1(d). Military tax questions Collecting taxes on tips. Military tax questions   You must collect income tax, employee social security tax, and employee Medicare tax on the employee's tips. Military tax questions The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. Military tax questions If an employee reports to you in writing $20 or more of tips in a month, the tips are also subject to FUTA tax. Military tax questions   You can collect these taxes from the employee's wages or from other funds he or she makes available. Military tax questions See Tips treated as supplemental wages in section 7 for more information. Military tax questions Stop collecting the employee social security tax when his or her wages and tips for tax year 2014 reach $117,000; collect the income and employee Medicare taxes for the whole year on all wages and tips. Military tax questions You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the limit. Military tax questions You are responsible for the employer Medicare tax for the whole year on all wages and tips. Military tax questions File Form 941 or Form 944 to report withholding and employment taxes on tips. Military tax questions Ordering rule. Military tax questions   If, by the 10th of the month after the month for which you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you no longer have to collect it. Military tax questions If there are not enough funds available, withhold taxes in the following order. Military tax questions Withhold on regular wages and other compensation. Military tax questions Withhold social security and Medicare taxes on tips. Military tax questions Withhold income tax on tips. Military tax questions Reporting tips. Military tax questions   Report tips and any collected and uncollected social security and Medicare taxes on Form W-2 and on Form 941, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). Military tax questions Report an adjustment on Form 941, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Military tax questions Enter the amount of uncollected social security tax and Medicare tax on Form W-2, box 12, with codes “A” and “B. Military tax questions ” Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. Military tax questions See section 13 and the General Instructions for Forms W-2 and W-3. Military tax questions   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. Military tax questions See Revenue Ruling 2012-18, 2012-26 I. Military tax questions R. Military tax questions B. Military tax questions 1032, available at www. Military tax questions irs. Military tax questions gov/irb/2012-26_IRB/ar07. Military tax questions html. Military tax questions Allocated tips. Military tax questions   If you operate a large food or beverage establishment, you must report allocated tips under certain circumstances. Military tax questions However, do not withhold income, social security, or Medicare taxes on allocated tips. Military tax questions   A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary, and where there were normally more than 10 employees on a typical business day during the preceding year. Military tax questions   The tips may be allocated by one of three methods—hours worked, gross receipts, or good faith agreement. Military tax questions For information about these allocation methods, including the requirement to file Forms 8027 electronically if 250 or more forms are filed, see the Instructions for Form 8027. Military tax questions For information on filing Form 8027 electronically with the IRS, see Publication 1239. Military tax questions Tip Rate Determination and Education Program. Military tax questions   Employers may participate in the Tip Rate Determination and Education Program. Military tax questions The program primarily consists of two voluntary agreements developed to improve tip income reporting by helping taxpayers to understand and meet their tip reporting responsibilities. Military tax questions The two agreements are the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Military tax questions A tip agreement, the Gaming Industry Tip Compliance Agreement (GITCA), is available for the gaming (casino) industry. Military tax questions To get more information about TRDA and TRAC agreements, see Publication 3144, Tips on Tips. Military tax questions Additionally, visit IRS. Military tax questions gov and enter “MSU tips” in the search box to get more information about GITCA, TRDA, or TRAC agreements. Military tax questions 7. Military tax questions Supplemental Wages Supplemental wages are wage payments to an employee that are not regular wages. Military tax questions They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Military tax questions Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. Military tax questions How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages. Military tax questions See Regulations section 31. Military tax questions 3402(g)-1 for additional guidance for wages paid after January 1, 2007. Military tax questions Also see Revenue Ruling 2008-29, 2008-24 I. Military tax questions R. Military tax questions B. Military tax questions 1149, available at www. Military tax questions irs. Military tax questions gov/irb/2008-24_IRB/ar08. Military tax questions html. Military tax questions Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year. Military tax questions   Special rules apply to the extent supplemental wages paid to any one employee during the calendar year exceed $1 million. Military tax questions If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39. Military tax questions 6% (or the highest rate of income tax for the year). Military tax questions Withhold using the 39. Military tax questions 6% rate without regard to the employee's Form W-4. Military tax questions In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control. Military tax questions For more information, see Treasury Decision 9276, 2006-37 I. Military tax questions R. Military tax questions B. Military tax questions 423, available at www. Military tax questions irs. Military tax questions gov/irb/2006-37_IRB/ar09. Military tax questions html. Military tax questions Withholding on supplemental wage payments to an employee who does not receive $1 million of supplemental wages during the calendar year. Military tax questions   If the supplemental wages paid to the employee during the calendar year are less than or equal to $1 million, the following rules apply in determining the amount of income tax to be withheld. Military tax questions Supplemental wages combined with regular wages. Military tax questions   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total were a single payment for a regular payroll period. Military tax questions Supplemental wages identified separately from regular wages. Military tax questions   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold income tax from your employee's regular wages. Military tax questions If you withheld income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. Military tax questions Withhold a flat 25% (no other percentage allowed). Military tax questions If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. Military tax questions 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. Military tax questions Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. Military tax questions Subtract the tax withheld from the regular wages. Military tax questions Withhold the remaining tax from the supplemental wages. Military tax questions If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and the previous supplemental wage payments, and withhold the remaining tax. Military tax questions If you did not withhold income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b. Military tax questions This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. Military tax questions Regardless of the method you use to withhold income tax on supplemental wages, they are subject to social security, Medicare, and FUTA taxes. Military tax questions Example 1. Military tax questions You pay John Peters a base salary on the 1st of each month. Military tax questions He is single and claims one withholding allowance. Military tax questions In January he is paid $1,000. Military tax questions Using the wage bracket tables, you withhold $50 from this amount. Military tax questions In February, he receives salary of $1,000 plus a commission of $2,000, which you combine with regular wages and do not separately identify. Military tax questions You figure the withholding based on the total of $3,000. Military tax questions The correct withholding from the tables is $338. Military tax questions Example 2. Military tax questions You pay Sharon Warren a base salary on the 1st of each month. Military tax questions She is single and claims one allowance. Military tax questions Her May 1 pay is $2,000. Military tax questions Using the wage bracket tables, you withhold $188. Military tax questions On May 14 she receives a bonus of $1,000. Military tax questions Electing to use supplemental wage withholding method 1-b, you: Add the bonus amount to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 = $3,000). Military tax questions Determine the amount of withholding on the combined $3,000 amount to be $338 using the wage bracket tables. Military tax questions Subtract the amount withheld from wages on the most recent base salary pay date (May 1) from the combined withholding amount ($338 – $188 = $150). Military tax questions Withhold $150 from the bonus payment. Military tax questions Example 3. Military tax questions The facts are the same as in Example 2, except you elect to use the flat rate method of withholding on the bonus. Military tax questions You withhold 25% of $1,000, or $250, from Sharon's bonus payment. Military tax questions Example 4. Military tax questions The facts are the same as in Example 2, except you elect to pay Sharon a second bonus of $2,000 on May 28. Military tax questions Using supplemental wage withholding method 1-b, you: Add the first and second bonus amounts to the amount of wages from the most recent base salary pay date (May 1) ($2,000 + $1,000 + $2,000 = $5,000). Military tax questions Determine the amount of withholding on the combined $5,000 amount to be $781 using the wage bracket tables. Military tax questions Subtract the amounts withheld from wages on the most recent base salary pay date (May 1) and the amounts withheld from the first bonus payment from the combined withholding amount ($781 – $188 – $150 = $443). Military tax questions Withhold $443 from the second bonus payment. Military tax questions Tips treated as supplemental wages. Military tax questions   Withhold income tax on tips from wages earned by the employee or from other funds the employee makes available. Military tax questions If an employee receives regular wages and reports tips, figure income tax withholding as if the tips were supplemental wages. Military tax questions If you have not withheld income tax from the regular wages, add the tips to the regular wages. Military tax questions Then withhold income tax on the total. Military tax questions If you withheld income tax from the regular wages, you can withhold on the tips by method 1-a or 1-b discussed earlier in this section under Supplemental wages identified separately from regular wages. Military tax questions Vacation pay. Military tax questions   Vacation pay is subject to withholding as if it were a regular wage payment. Military tax questions When vacation pay is in addition to regular wages for the vacation period, treat it as a supplemental wage payment. Military tax questions If the vacation pay is for a time longer than your usual payroll period, spread it over the pay periods for which you pay it. Military tax questions 8. Military tax questions Payroll Period Your payroll period is a period of service for which you usually pay wages. Military tax questions When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. Military tax questions No regular payroll period. Military tax questions   When you do not have a regular payroll period, withhold the tax as if you paid wages for a daily or miscellaneous payroll period. Military tax questions Figure the number of days (including Sundays and holidays) in the period covered by the wage payment. Military tax questions If the wages are unrelated to a specific length of time (for example, commissions paid on completion of a sale), count back the number of days from the payment period to the latest of: The last wage payment made during the same calendar year, The date employment began, if during the same calendar year, or January 1 of the same year. Military tax questions Employee paid for period less than 1 week. Military tax questions   When you pay an employee for a period of less than one week, and the employee signs a statement under penalties of perjury indicating he or she is not working for any other employer during the same week for wages subject to withholding, figure withholding based on a weekly payroll period. Military tax questions If the employee later begins to work for another employer for wages subject to withholding, the employee must notify you within 10 days. Military tax questions You then figure withholding based on the daily or miscellaneous period. Military tax questions 9. Military tax questions Withholding From Employees' Wages Income Tax Withholding Using Form W-4 to figure withholding. Military tax questions   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. Military tax questions 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. Military tax questions Advise your employees to use the IRS Withholding Calculator on the IRS website at www. Military tax questions irs. Military tax questions gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4. Military tax questions   Ask all new employees to give you a signed Form W-4 when they start work. Military tax questions Make the form effective with the first wage payment. Military tax questions If a new employee does not give you a completed Form W-4, withhold income tax as if he or she is single, with no withholding allowances. Military tax questions Form in Spanish. Military tax questions   You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, to your Spanish-speaking employees. Military tax questions For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Military tax questions The rules discussed in this section that apply to Form W-4 also apply to Formulario W-4(SP). Military tax questions Electronic system to receive Form W-4. Military tax questions   You may establish a system to electronically receive Forms W-4 from your employees. Military tax questions See Regulations section 31. Military tax questions 3402(f)(5)-1(c) for more information. Military tax questions Effective date of Form W-4. Military tax questions   A Form W-4 remains in effect until the employee gives you a new one. Military tax questions When you receive a new Form W-4 from an employee, do not adjust withholding for pay periods before the effective date of the new form. Military tax questions If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. Military tax questions 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. Military tax questions A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. Military tax questions Successor employer. Military tax questions   If you are a successor employer (see Successor employer , later in this section), secure new Forms W-4 from the transferred employees unless the “Alternative Procedure” in section 5 of Revenue Procedure 2004-53 applies. Military tax questions See Revenue Procedure 2004-53, 2004-34 I. Military tax questions R. Military tax questions B. Military tax questions 320, available at www. Military tax questions irs. Military tax questions gov/irb/2004-34_IRB/ar13. Military tax questions html. Military tax questions Completing Form W-4. Military tax questions   The amount of any federal income tax withholding must be based on marital status and withholding allowances. Military tax questions Your employees may not base their withholding amounts on a fixed dollar amount or percentage. Military tax questions However, an employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. Military tax questions Employees may claim fewer withholding allowances than they are entitled to claim. Military tax questions They may wish to claim fewer allowances to ensure they have enough withholding or to offset the tax on other sources of taxable income not subject to withholding. Military tax questions See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. Military tax questions Along with Form W-4, you may wish to order Publication 505 for use by your employees. Military tax questions Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. Military tax questions If they require additional withholding, they should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. Military tax questions Exemption from federal income tax withholding. Military tax questions   Generally, an employee may claim exemption from federal income tax withholding because he or she had no income tax liability last year and expects none this year. Military tax questions See the Form W-4 instructions for more information. Military tax questions However, the wages are still subject to social security and Medicare taxes. Military tax questions See also Invalid Forms W-4 , later in this section. Military tax questions   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. Military tax questions 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. Military tax questions If the employee does not give you a new Form W-4 by February 15, begin withholding based on the last Form W-4 for the employee that did not claim an exemption from withholding or, if one was not filed, then withhold tax as if he or she is single with zero withholding allowances. Military tax questions If the employee provides a new Form W-4 claiming exemption from withholding on February 16 or later, you may apply it to future wages but do not refund any taxes already withheld. Military tax questions Withholding income taxes on the wages of nonresident alien employees. Military tax questions   In general, you must withhold federal income taxes on the wages of nonresident alien employees. Military tax questions However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. Military tax questions Also see section 3 of Publication 51 (Circular A), Agricultural Employer's Tax Guide, for guidance on H-2A visa workers. Military tax questions Withholding adjustment for nonresident alien employees. Military tax questions   For 2014, apply the procedure discussed next to figure the amount of income tax to withhold from the wages of nonresident alien employees performing services within the United States. Military tax questions Nonresident alien students from India and business apprentices from India are not subject to this procedure. Military tax questions Instructions. Military tax questions   To figure how much income tax to withhold from the wages paid to a nonresident alien employee performing services in the United States, use the following steps. Military tax questions Step 1. Military tax questions   Add to the wages paid to the nonresident alien employee for the payroll period the amount shown in the chart below for the applicable payroll period. Military tax questions    Amount to Add to Nonresident Alien Employee's Wages for Calculating Income Tax Withholding Only   Payroll Period Add Additional     Weekly $ 43. Military tax questions 30     Biweekly 86. Military tax questions 50     Semimonthly 93. Military tax questions 80     Monthly 187. Military tax questions 50     Quarterly 562. Military tax questions 50     Semiannually 1,125. Military tax questions 00     Annually 2,250. Military tax questions 00     Daily or Miscellaneous (each day of the payroll period) 8. Military tax questions 70   Step 2. Military tax questions   Use the amount figured in Step 1 and the number of withholding allowances claimed (generally limited to one allowance) to figure income tax withholding. Military tax questions Determine the value of withholding allowances by multiplying the number of withholding allowances claimed by the appropriate amount from Table 5. Military tax questions Percentage Method—2014 Amount for One Withholding Allowance shown on page 41. Military tax questions If you are using the Percentage Method Tables for Income Tax Withholding, provided on pages 43–44, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure the income tax withholding. Military tax questions If you are using the Wage Bracket Method for Income Tax Withholding, provided on pages 45–64, use the amount figured in Step 1 and the number of withholding allowances to figure income tax withholding. Military tax questions The amounts from the chart above are added to wages solely for calculating income tax withholding on the wages of the nonresident alien employee. Military tax questions The amounts from the chart should not be included in any box on the employee's Form W-2 and do not increase the income tax liability of the employee. Military tax questions Also, the amounts from the chart do not increase the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Military tax questions This procedure only applies to nonresident alien employees who have wages subject to income tax withholding. Military tax questions Example. Military tax questions An employer using the percentage method of withholding pays wages of $500 for a biweekly payroll period to a married nonresident alien employee. Military tax questions The nonresident alien has properly completed Form W-4, entering marital status as “single” with one withholding allowance and indicating status as a nonresident alien on Form W-4, line 6 (see Nonresident alien employee's Form W-4 , later in this section). Military tax questions The employer determines the wages to be used in the withholding tables by adding to the $500 amount of wages paid the amount of $86. Military tax questions 50 from the chart under Step 1 ($586. Military tax questions 50 total). Military tax questions The employer then applies the applicable tables to determine the income tax withholding for nonresident aliens (see Step 2 ). Military tax questions Reminder: If you use the Percentage Method Tables for Income Tax Withholding, reduce the amount figured in Step 1 by the value of withholding allowances and use that reduced amount to figure income tax withholding. Military tax questions The $86. Military tax questions 50 added to wages for calculating income tax withholding is not reported on Form W-2, and does not increase the income tax liability of the employee. Military tax questions Also, the $86. Military tax questions 50 added to wages does not affect the social security tax or Medicare tax liability of the employer or the employee, or the FUTA tax liability of the employer. Military tax questions Supplemental wage payment. Military tax questions   This procedure for determining the amount of income tax withholding does not apply to a supplemental wage payment (see section 7) if the 39. Military tax questions 6% mandatory flat rate withholding applies or if the 25% optional flat rate withholding is being used to calculate income tax withholding on the supplemental wage payment. Military tax questions Nonresident alien employee's Form W-4. Military tax questions   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding, Request withholding as if they are single, regardless of their actual marital status, Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or South Korea, or a student or business apprentice from India, he or she may claim more than one allowance), and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. Military tax questions   If you maintain an electronic Form W-4 system, you should provide a field for nonresident aliens to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. Military tax questions 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. Military tax questions Form 8233. Military tax questions   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. Military tax questions See Publication 515 for details. Military tax questions IRS review of requested Forms W-4. Military tax questions   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. Military tax questions You may also be directed to send certain Forms W-4 to the IRS. Military tax questions 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. Military tax questions 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. Military tax questions The IRS may also require you to submit copies of Form W-4 to the IRS as directed by Treasury Decision 9337, 2007-35 I. Military tax questions R. Military tax questions B. Military tax questions 455, which is available at www. Military tax questions irs. Military tax questions gov/irb/2007-35_IRB/ar10. Military tax questions html. Military tax questions When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. Military tax questions After submitting a copy of a requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). Military tax questions However, if the IRS later notifies you in writing the employee is not entitled to claim exemption from withholding or a claimed number of withholding allowances, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the IRS notice (commonly referred to as a "lock-in letter
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