This is a comprehensive payroll problem that must be completed in the Excel worksheet provided.

I have attached the excel template and the IRS Publication 15 Document that is needed to complete the problem. I need this within 2 hours.

Thanks.

Module 11 Final Exam Step 1 You will complete the final exam in much the same way you completed the steps of the continuing payroll problem throughout the course. To begin, the hotel has a workforce of both hourly and salaried employees. Each employee is paid for hours actually worked during each week, with the time worked being recorded in quarter-hour increments. The standard workweek consists of 40 hours, with most employees being paid time and one-half for any hours worked beyond the 40 regular hours. One salaried executive, Margaret Yo, is not eligible for overtime pay. Wages are paid every Friday, with one week's pay being held back by the company. Thus, the first payday for North Country Hotel and Resort is January 12 for the workweek ending January 7 (Sunday). The information below will be used in preparing the payroll for the pay period ending January 7. Employee Adams, Nikki Barr, Stephanie Duginski, Samuel Glander, Morgan Hines, Terrance Jama, Adamo Lee, Min Rorberts, Tammi Vick, Tomika Yo, Margaret Hourly Wage or Salary $16.75 $13.25 $12.50 $14.90 $11.85 $1,055 weekly $3,250 monthly $4,204 monthly $4,640 monthly $122,000 annually Hours Worked 42 40 45 41 39 52 40 41 40 Using the payroll register for North Country Hotel and Resort, proceed as follows: 1. Record the regular hours and the overtime hours worked for each employee. 2. Complete the Regular Earnings columns and the Overtime Earnings columns for each hourly employee. For salaried workers, complete the Regular Earnings column and show the hourly overtime rate and earnings only if overtime was worked. 3. Record the Total Earnings for each employee by adding the Regular Earnings and the Overtime Earnings. Calculate the weekly rate for Margaret Yo who does not earn overtime. Step 2 You will now input non-tax withholdings for each employee, proceeding as follows: 1. Record the payroll deductions for the 401k/Simple plan, the Health plan, and the Group life plan that the employer has established for participating employees. All of the employees are participating, and their weekly contributions are listed below. For future reference, the tax deferral on the Health plan and the 401k/Simple deductions applies to the federal, state, and city income taxes. No. 300 111 208 198 189 68 45 17 12 9 Employee Adams, Nikki Barr, Stephanie Duginski, Samuel Glander, Morgan Hines, Terrance Jama, Adamo Lee, Min Rorberts, Tammi Vick, Tomika Yo, Margaret $ $ $ $ $ $ $ $ $ $ 401k 25.00 38.00 52.00 28.00 40.00 75.00 60.00 55.00 66.00 125.00 Group $ 11.00 $ 11.00 $ 11.00 $ 11.00 $ 11.00 $ 16.00 $ 16.00 $ 16.00 $ 16.00 $ 21.00 Health $ 55.00 $ 55.00 $ 105.00 $ 105.00 $ 105.00 $ 55.00 $ 105.00 $ 55.00 $ 105.00 $ 105.00 Step 3 You will now determine the employee and employer FICA taxes for the pay period ending January 7. 1. In the Taxable Earnings columns, record the amount of each employee's weekly earnings that is subject to FICA taxes. 2. Using the taxable earnings, compute the OASDI (6.3%) and HI (.85%) taxes for each employee and record in the appropriate column. 3. Below the worksheet, in the space provided, use the total wages to calculate the employer's FICA obligation. Note the employer's FICA taxes will be used in step 8 for the journal entry. Step 4 You will now determine the amount of income tax to withhold for each employee, proceeding as follows: 1. In the appropriate columns of your payroll register, record the marital status and number of withholding allowances claimed for each employee, using the information provided. 2. Record the amount of federal income taxes using the wage-bracket method. Recall that the 401K and the health plan are both pre-tax deductions. The tax deferral on these deductions applies to the federal income tax as well as the state and city taxes below. Use the wage-bracket method to determine the federal income taxes to withhold from the wages and salaries of each employee. Use the wage brackets found in the Publication 15 PDF file provided with the exam file. No. 300 111 208 198 189 68 45 17 12 9 Step 5 You will now determine the amount of state and city income tax to withhold for each employee, proceeding as follows: 1. Record the state income taxes on the taxable weekly earnings for each employee. For this exercise, assume the rate is 2% for the state of Minnesota. In reality, tax tables are used in Minnesota that are much like the federal tax tables used last week. 2. Record the city income taxes on the taxable weekly earnings of each employee. Assume the rate is 1% for the city of Minneapolis residents. In reality, Minneapolis does not impose an income tax. Step 6 You will now compute the employer's liability for federal unemployment taxes (FUTA) for the pay of January 12. These computations will be used in step 8 for recording the payroll tax entries. To compute the employer's liability for federal unemployment taxes, proceed as follows: 1. Enter each employee's gross earnings in the Taxable Earnings FUTA column. 2. Total the Taxable EarningsFUTA column. 3. At the bottom of your payroll register, assuming a rate of .66%, compute the Net FUTA tax. Since this is the first pay period of the year, none of the employees are near the $7,000 ceiling; therefore, each employee's gross earnings are subject to the FUTA tax. Step 7 You will now compute the employee and employer liability for state unemployment taxes (SUTA) for the pay of January 12. These computations will be used in step 8 for recording the payroll tax entries. To compute the employer liability for federal unemployment taxes, proceed as follows: 1. Enter each employee's gross earnings in the Taxable EarningsSUTA column. 2. Total the Taxable EarningsSUTA column. 3. At the bottom of your payroll register, assuming a rate of 5.75%, compute the SUTA tax. Minnesota does not limit the amount of wages subject to SUTA, so all wages are subject to SUTA tax. Assume that employees are subject to a SUTA rate of .7%. In reality, however, Minnesota does not impose a SUTA tax on employees. Employee Adams, Nikki Barr, Stephanie Duginski, Samuel Glander, Morgan Hines, Terrance Jama, Adamo Lee, Min Rorberts, Tammi Vick, Tomika Yo, Margaret Marital Status S S M M M S M S M M Allowances 2 1 3 5 4 0 8 2 6 4 Step 8 In this last step of the final exam, you will calculate the net pay for each employee. 1. Determine the net pay for each employee. 2. Foot all money columns of the payroll register, and prove the accuracy of the column totals. 3. Prepare the journal entries as of January 07 to record the payroll and the payroll taxes for the week. Also prepare the journal entry to record the payment of the payroll on January 12 when the paychecks are distributed to all workers. Final Exam Worksheet North Country Hotel and Resort Payroll Register For the Period Ending: Jan. 07, 20XX Regular Earnings No. Employee Marital Status Allow. Hours Hourly Rate Earnings Overtime Earnings Hours Hourly Rate Earnings Deductions Total Earnings Group Life Health Plan 401K / Simple Net Pay FICA OASDI HI FIT SIT CIT SUTA Check No. 300 Adams, Nikki 21313 111 Barr, Stephanie 21314 208 Duginski, Samuel 21315 198 Glander, Morgan 21316 189 Hines, Terrance 21317 68 Jama, Adamo 21318 45 Lee, Min 21319 17 Rorberts, Tammi 21320 12 Vick, Tomika 21321 9 Yo, Margaret 21322 Totals Journal Date 01/07/20XX Account Salaries and Wages Expense Employee FIT Payable Employee SIT Payable Empoyee SUTA Payable Employee CIT Payabale FICA - OASDI Payable FICA - HI Payable 401K Contributions Payable Group Insurance Premiums Payable Health Insurance Premiums Payable Salaries and Wages Payable 01/07/20XX Payroll Taxes Expense FICA - OASDI Payable FICA - HI Payabale FUTA Taxes Payable SUTA Taxes Payable 01/14/20XX Salaries and Wages Payable Cash Debit Taxable Earnings Credit Rate OASDI Tax OASDI HI Tax HI FUTA Tax FUTA SUTA Tax SUTA Amount Taxable Earnings OASDI HI FUTA SUTA Department of the Treasury Internal Revenue Service Publication 15 Contents What's New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Cat. No. 10000W Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (Circular E), Employer's Tax Guide Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 For use in 2014 1. Employer Identification Number (EIN) . . . . . . . 10 2. Who Are Employees? . . . . . . . . . . . . . . . . . . . . 10 3. Family Employees . . . . . . . . . . . . . . . . . . . . . . 12 4. Employee's Social Security Number (SSN) . . . 12 5. Wages and Other Compensation . . . . . . . . . . . 13 6. Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 7. Supplemental Wages . . . . . . . . . . . . . . . . . . . . 18 8. Payroll Period . . . . . . . . . . . . . . . . . . . . . . . . . . 19 9. Withholding From Employees' Wages . . . . . . . 20 10. Required Notice to Employees About the Earned Income Credit (EIC) . . . . . . . . . . . . . . 24 11. Depositing Taxes . . . . . . . . . . . . . . . . . . . . . . 24 12. Filing Form 941 or Form 944 . . . . . . . . . . . . . . 29 13. Reporting Adjustments to Form 941 or Form 944 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 14. Federal Unemployment (FUTA) Tax . . . . . . . . 34 15. Special Rules for Various Types of Services and Payments . . . . . . . . . . . . . . . . . 36 16. How To Use the Income Tax Withholding Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . 65 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www.irs.gov/pub15. What's New Get forms and other Information faster and easier by Internet at IRS.gov Dec 18, 2013 Social security and Medicare tax for 2014. The social security tax rate is 6.2% each for the employee and employer, unchanged from 2013. The social security wage base limit is $117,000. The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2013. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. 2014 withholdng tables. This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Withholding allowance. The 2014 amount for one withholding allowance on an annual basis is $3,950. Voluntary withholding on dividends and other distri butions by an Alaska Native Corporation (ANC). A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. For more information see Notice 2013-77, 2013-50 I.R.B. 632, available at www.irs.gov/irb/2013-50_IRB/ar10.html. Change of responsible party. Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party Business, to report the latest change to its responsible party. Form 8822-B must be filed within 60 days of the change. If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. For a definition of \"responsible party,\" see the Form 8822-B instructions. Samesex marriage. For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. For more information, see Revenue Ruling 2013-17, 2013-38 I.R.B. 201, available at www.irs.gov/irb/2013-38_IRB/ar07.html. Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Notice 2013-61, 2013-44 I.R.B. 432, is available at www.irs.gov/ irb/2013-44_IRB/ar10.html. Reminders Additional Medicare Tax withholding. In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 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. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages Page 2 that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 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. For more information on Additional Medicare Tax, visit IRS.gov and enter \"Additional Medicare Tax\" in the search box. Work opportunity tax credit for qualified taxexempt organizations hiring qualified veterans. The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. For more information, visit IRS.gov and enter \"work opportunity tax credit\" in the search box. Outsourcing payroll duties. Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. The employer remains responsible if the third party fails to perform any required action. If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS.gov and enter \"outsourcing payroll duties\" in the search box for helpful information on this topic. COBRA premium assistance credit. The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. See COBRA premium assistance credit under Introduction. Federal tax deposits must be made by electronic funds transfer. You must use electronic funds transfer to make all federal tax deposits. Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 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. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. For more information on making federal tax deposits, see How To Deposit in section 11. To get more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. You must receive written notice from the IRS to file Form 944. If you have been filing Forms 941, Employer's Publication 15 (2014) QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax ReturnAmerican Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands, or Formularios 941-PR, Planilla para la Declaracin Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. For more information on requesting to file Form 944, visit IRS.gov and enter \"file employment taxes annually\" in the search box. Employers can request to file Forms 941 instead of Form 944. If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. For more information on requesting to file Form 944, visit IRS.gov and enter \"file employment taxes annually\" in the search box. Aggregate Form 941 filers. Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. Aggregate Form 940 filers. Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Electronic Filing and Payment Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Spend less time and worry about taxes and more time running your business. Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. For e-file, visit www.irs.gov/efile for additional information. For EFTPS, visit www.eftps.gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Publication 15 (2014) For electronic filing of Forms W-2, Wage and Tax Statement, visit www.socialsecurity.gov/employer. If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. If CAUTION a valid EIN is not provided, the return or payment will not be processed. This may result in penalties and delays in processing your return or payment. ! Electronic funds withdrawal (EFW). If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. However, do not use EFW to make federal tax deposits. For more information on paying your taxes using EFW, visit the IRS website at www.irs.gov/e-pay. A fee may be charged to file electronically. Credit or debit card payments. For information on paying your taxes with a credit or debit card, visit the IRS website at www.irs.gov/e-pay. However, do not use credit or debit cards to make federal tax deposits. Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exencin de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. For more information, see Publicacin 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Fsicas). For nonemployees, Formulario W-9(SP), Solicitud y Certificacin del Nmero de Identificacin del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Hiring New Employees Eligibility for employment. You must verify that each new employee is legally eligible to work in the United States. This includes completing the U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. You can get the form from USCIS offices or by calling 1-800-870-3676. Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www.uscis.gov for more information. New hire reporting. You are required to report any new employee to a designated state new hire registry. A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Many states accept a copy of Form W-4 with employer information added. Visit the Office of Child Support Enforcement website at www.acf.hhs.gov/programs/cse/ newhire for more information. W4 request. Ask each new employee to complete the 2014 Form W-4. See section 9. Page 3 Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Each item in this list has a page reference to a more detailed discussion in this publication. New Employees: Page Verify work eligibility of new employees . . . . . . . 3 Record employees' names and SSNs from social security cards . . . . . . . . . . . . . . . . . . . . 4 Ask employees for Form W-4 . . . . . . . . . . . . . . 3 Each Payday: Withhold federal income tax based on each employee's Form W-4 . . . . . . . . . . . . . . . . . . . 20 Withhold employee's share of social security and Medicare taxes . . . . . . . . . . . . . . . . . . . . 23 Deposit: Withheld income tax Withheld and employer social security taxes Withheld and employer Medicare taxes . . . . . 24 Note: Due date of deposit generally depends on your deposit schedule (monthly or semiweekly) Quarterly (By April 30, July 31, October 31, and January 31): Deposit FUTA tax if undeposited amount is over $500 . . . . . . . . . . . . . . . . . . . . . . . . . . 35 File Form 941 (pay tax with return if not required to deposit) . . . . . . . . . . . . . . . . . . . . . 29 Name and social security number. Record each new employee's name and number from his or her social security card. Any employee without a social security card should apply for one. See section 4. Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. See section 13 for more information. Income tax withholding. Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Page 4 Annually (By January 31 of the current year, Page for the prior year): File Form 944 if required (pay tax with return if not required to deposit) . . . . . . . . . . . . . . . . . . . . . 29 Annually (see Calendar for due dates): Remind employees to submit a new Form W-4 if they need to change their withholding . . . . . . . . . . 20 Ask for a new Form W-4 from employees claiming exemption from income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Reconcile Forms 941 (or Form 944) with Forms W-2 and W-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Furnish each employee a Form W-2 . . . . . . . . . . . . 7 File Copy A of Forms W-2 and the transmittal Form W-3 with the SSA . . . . . . . . . . . . . . . . . . . . . 8 Furnish each other payee a Form 1099 (for example, 7 Form 1099-MISC, Miscellaneous Income) . . . . . . . . File Forms 1099 and the transmittal Form 1096 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . File Form 940 . . . . . . . . . . . . . . . . . . . . . . . . . . . . File Form 945 for any nonpayroll income tax withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7 8 Withhold from periodic pension and annuity pay ments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Publication 15-A includes information about withholding on pensions and annuities. Zero wage return. If you have not filed a \"final\" Form 941 or Form 944, or are not a \"seasonal\" employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. The IRS encourages you to file your \"Zero Wage\" Forms 941 or 944 electronically using IRS e-file at www.irs.gov/efile. Information Returns You may be required to file information returns to report certain types of payments made during the year. For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. For details about filing Forms 1099 and for information about required electronic filing, see the Publication 15 (2014) General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. If you file 250 or more Forms 1099, you must file them electronically. If you file 250 or more Forms W-2, you must file them electronically. SSA will not accept Forms W-2 and W-3 filed on magnetic media. Information reporting customer service site. The IRS operates the Enterprise Computing CenterMartinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). The center can also be reached by email at mccirp@irs.gov. Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. Military retirement. participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.; income tax withheld must be reported on Form 945. Backup withholding. You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). This withholding is referred to as \"backup withholding.\" Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified CAUTION employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. ! You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/ TIN(s). Gambling winnings. Indian gaming profits. Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Payments subject to backup withholding. For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. Distributions from nonqualified pension plans and deferred compensation plans. Because distributions to Publication 15 (2014) Recordkeeping Keep all records of employment taxes for at least 4 years. These should be available for IRS review. Your records should include the following information. Your EIN. Amounts and dates of all wage, annuity, and pension payments. Amounts of tips reported to you by your employees. Records of allocated tips. The fair market value of in-kind wages paid. Names, addresses, social security numbers, and occupations of employees and recipients. Page 5 Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Dates of employment for each employee. Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Copies of returns filed and confirmation numbers. Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. Do not mail Form 8822-B with your employment tax return. Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. The list includes only the following: DHL Express (DHL): DHL Same Day Service. Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express. For the IRS mailing address to use if you are using a private delivery service, go to IRS.gov and enter \"private delivery service\" in the search box. Your private delivery service can tell you how to get written proof of the mailing date. ! CAUTION Page 6 Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address. Telephone Help Tax questions. You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Help for people with disabilities. You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. You may also use this number for assistance with unresolved tax problems. Recorded tax information (TeleTax). The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. You can listen to up to three topics on each call you make. Touch-Tone service is available 24 hours a day, 7 days a week. TeleTax topics are also available on the IRS website at www.irs.gov/taxtopics. Most tax topics listed below are also available in Spanish. For a complete list of TeleTax topics in Spanish, visit the IRS website at www.irs.gov/Spanishdice-de-Temas-TributariosAo-2013. A list of employment tax topics is provided next. Select, by number, the topic you want to hear and call 1-800-829-4477. For the directory of all topics, select Topic 123. Teletax Topics Topic No. Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2Where, When, and How to File 753 Form W-4Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944Deposit Requirements 758 Form 941Employer's QUARTERLY Federal Tax Return and Form 944Employer's ANNUAL Federal Tax Return 759 Form 940Employer's Annual Federal Unemployment (FUTA) Tax ReturnFiling and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers Publication 15 (2014) Topic No. Subject 761 TipsWithholding and Reporting 762 Independent Contractor vs. Employee 763 The \"Affordable Care Act\" of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Visit the IRS website at www.irs.gov/businesses and click on the Employment Taxes link under Businesses Topics. Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www.irs.gov/businesses. To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Visit the SSA's Employer W-2 Filing Instructions & Information website at www.socialsecurity.gov/employer to register for Business Services Online. You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Form W-3 will be created for you based on your Forms W-2. Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. The penalty is $25 or 2% of the payment, whichever is more. However, the penalty on dishonored payments of $24.99 or less is an amount equal to the payment. For example, a dishonored payment of $18 is charged a penalty of $18. Publication 15 (2014) Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Calendar The following is a list of important dates. Also see Publication 509, Tax Calendars. If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. However, a statewide legal holiday does not delay the due date of federal tax deposits. See Deposits on Business Days Only in section 11. For any filing due date, you will meet the \"file\" or \"furnish\" requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U.S. Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. See Private Delivery Services under Reminders for more information. TIP By January 31 Furnish Forms 1099 and W2. Furnish each employee a completed Form W-2. Furnish each other payee a completed Form 1099 (for example, Form 1099-MISC). File Form 941 or Form 944. File Form 941 for the fourth quarter of the previous calendar year and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter is less than $2,500. File Form 944 for the previous calendar year instead of Form 941 if the IRS has notified you in writing to file Form 944 and pay any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 944 if your total tax liability for the year is less than $2,500. For additional rules on when you can pay your taxes with your return, see Payment with return in section 11. If you timely deposited all taxes when due, you have 10 additional calendar days from January 31 to file the appropriate return. File Form 940. File Form 940 to report any FUTA tax. However if you deposited all of the FUTA tax when due, you have 10 additional calendar days to file. Page 7 File Form 945. File Form 945 to report any nonpayroll federal income tax withheld in 2013. If you deposited all taxes when due, you have 10 additional calendar days to file. See Nonpayroll Income Tax Withholding under Reminders for more information. By February 15 Request a new Form W4 from exempt employees. Ask for a new Form W-4 from each employee who claimed exemption from income tax withholding last year. On February 16 Forms W4 claiming exemption from withholding ex Any Form W-4 claiming exemption from withpire. holding for the previous year has now expired. Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. If the employee does not give you a new Form W-4, withhold tax based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. See section 9 for more information. If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. By February 28 File paper Forms 1099 and 1096. File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U.S. Information Returns, with the IRS. For electronically filed returns, see By March 31, later. File paper Forms W2 and W3. File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). For electronically filed returns, see By March 31, later. File paper Form 8027. File paper Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, with the IRS. See section 6. For electronically filed returns, see By March 31 below. W-2G, and Publication 1239, Specifications for Electronic Filing of Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips. By April 30, July 31, October 31, and January 31 Deposit FUTA taxes. more than $500. Deposit FUTA tax due if it is File Form 941. File Form 941 and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter is less than $2,500. If you timely deposited all taxes when due, you have 10 additional calendar days from the due dates above to file the return. Before December 1 New Forms W4. Remind employees to submit a new Form W-4 if their marital status or withholding allowances have changed or will change for the next year. Introduction This publication explains your tax responsibilities as an employer. It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. References to \"income tax\" in this guide apply only to \"federal\" income tax. Contact your state or local tax department to determine if their rules are different. Additional employment tax information is available in Publication 15-A. Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Income tax. By March 31 Social security tax. File electronic Forms 1099, 8027, and W2. File electronic Forms 1099 and 8027 with the IRS. File electronic Forms W-2 with the SSA. For information on reporting Form W-2 information to the SSA electronically, visit the Social Security Administration's Employer W-2 Filing Instructions & Information webpage at www.socialsecurity.gov/employer. For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and Medicare tax. Page 8 FUTA tax. There are exceptions to these requirements. See section 15 for guidance. Railroad retirement taxes are explained in the Instructions for Form CT-1. Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. Publication 15 (2014) You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. You can also send us comments from www.irs.gov/ formspubs. Click on More Information and then click on Comment on Tax Forms and Publications. Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Federal Government employers. The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. State and local government employers. Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Most elected and appointed public officials of state or local governments are employees under common law rules. See chapter 3 of Publication 963, Federal-State Reference Guide. In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. See section 15 for more information on the exceptions. If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www.irs.gov/pub/irs-irbs/irb00-06.pdf. You can get information on reporting and social security coverage from your local IRS office. If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www.ncsssa.org. Disregarded entities and qualified subchapter S sub sidiaries (QSubs). Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. See Regulations sections 1.1361-4(a)(7) and 301.7701-2(c)(2) (iv). COBRA premium assistance credit. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time Publication 15 (2014) employees. Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against \"payroll taxes\" (referred to in this publication as \"employment taxes\") for providing COBRA premium assistance to assistance eligible individuals. For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. The assistance for the coverage can last up to 15 months. Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. For more information see Notice 2009-27, 2009-16 I.R.B. 838, available at www.irs.gov/irb/2009-16_irb/ar09.html. Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. The reimbursement is made through a credit against the employer's employment tax liabilities. For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. The credit is treated as a deposit made on the first day of the return period (quarter or year). In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier Page 9 and proof of timely payment of the full premium to the insurance carrier required under COBRA. In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. For more information, visit IRS.gov and enter \"COBRA\" in the search box. 1. Employer Identification Number (EIN) If you are required to report employment taxes or give tax statements to employees or annuitants, you need an EIN. The EIN is a nine-digit number the IRS issues. The digits are arranged as follows: 00-0000000. It is used to identify the tax accounts of employers and certain others who have no employees. Use your EIN on all of the items you send to the IRS and SSA. For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN. If you do not have an EIN, you may apply for one online. Go to the IRS.gov and click on the Apply for an EIN Online link under Tools. 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. Do not use an SSN in place of an EIN. You should have only one EIN. 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). Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. The IRS will tell you which number to use. If you took over another employer's business (see Successor employer in section 9), do not use that employer's EIN. 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. 2. Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. See Publication 15-A for details on statutory employees and nonemployees. Employee status under common law. 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. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed. See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Generally, people in business for themselves are not employees. For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. If an employer-employee relationship exists, it does not matter what it is called. The employee may be called an agent or independent contractor. It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Statutory employees. 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. 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. An agent (or commission) driver who delivers food, beverages (other than milk), laundry, or dry cleaning for someone else. A full-time life insurance salesperson who sells primarily for one company. 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. 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. The orders must be for merchandise for resale or supplies for use in the customer's business. The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Statutory nonemployees. Direct sellers, qualified real estate agents, and certain companion sitters are, by law, Page 10 Publication 15 (2014) considered nonemployees. They are generally treated as self-employed for all federal tax purposes, including income and employment taxes. H2A agricultural workers. On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Treating employees as nonemployees. 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. 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. The applicable rates depend on whether you filed required Forms 1099. 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. You are liable for the income tax withholding regardless of whether the employee paid income tax on the wages. You continue to owe the full employer share of social security and Medicare taxes. The employee remains liable for the employee share of social security and Medicare taxes. See Internal Revenue Code section 3509 for details. Also see the Instructions for Form 941-X. 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. Section 3509 is not available for reclassifying statutory employees. See Statutory employees, earlier in this section. If the employer issued required information returns, the section 3509 rates are: For social security taxes; employer rate of 6.2% plus 20% of the employee rate (see the Instructions for Form 941-X). For Medicare taxes; employer rate of 1.45% plus 20% of the employee rate of 1.45%, for a total rate of 1.74% of wages. For Additional Medicare Tax; 0.18% (20% of the employee rate of 0.9%) of wages subject to Additional Medicare Tax. For income tax withholding, the rate is 1.5% of wages. If the employer did not issue required information returns, the section 3509 rates are: For social security taxes; employer rate of 6.2% plus 40% of the employee rate (see the Instructions for Form 941-X). For Medicare taxes; employer rate of 1.45% plus 40% of the employee rate of 1.45%, for a total rate of 2.03% of wages. For Additional Medicare Tax; 0.36% (40% of the employee rate of 0.9%) of wages subject to Additional Medicare Tax. Relief provisions. 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. 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. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Do You Qualify for Relief Under Section 530. IRS help. 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. Voluntary Classification Settlement Program (VCSP). 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. To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). For more information visit IRS.gov and enter \"VCSP\" in the search box. 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. See Publication 541, Partnerships, for more details. The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. ExceptionQualified joint venture. 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. 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). For income tax withholding, the rate is 3.0% of wages. Publication 15 (2014) Page 11 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. Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. 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. Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. 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. Note. If your spouse is your employee, not your partner, see One spouse employed by another in section 3. For more information on qualified joint ventures, visit IRS.gov and enter \"qualified joint venture\" in the search box. ExceptionCommunity income. 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.S. possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. You may still make an election to be taxed as a qualified joint venture instead of a partnership. See ExceptionQualified joint venture, earlier. FUTA tax. 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. Covered services of a child or spouse. 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. Parent employed by son or daughter. When the employer is a son or daughter employing his or her parent the following rules apply. 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. 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. ! CAUTION 3. Family Employees Child employed by parents. 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. 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. However, see Covered services of a child or spouse, later in this section. 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. 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. One spouse employed by another. 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 Page 12 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

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