RM 01103.007 Summary of Employer Duties - Tax Inquiries
Employers have many duties involving tax withholding, depositing, recordkeeping, and reporting under the Internal Revenue Code and other laws. Failure to perform these duties as required by law usually subjects the employer to penalties ranging from additional tax assessments to fines or imprisonment.
This section summarizes employers' responsibilities concerning the following laws and tax provisions:
Immigration and Naturalization Laws;
Income Tax Withholding Provisions;
Unemployment Compensation Provisions; and
Social Security Taxes
1. Immigration and Naturalization Law
When hiring new employees the employer must:
2. Income Tax With-Holding Provision
The employer must:
Record employee's name and SSN from Social Security Card or refer employee to Social Security office to apply for card;
Have employee complete Form W-4 (See Exhibit, RM 01103.034).
EXCEPTION: Agricultural and household employers are not required to withhold their employee's income tax, but may withhold these taxes voluntarily by agreement with employees.
Have recipients of certain types of income complete Form W-4P, (Withholding Certificate for Pension or Annuity Payments).
Inform eligible employees about earned income credits and when Form W-5 (Earned Income Credit Advance Payment Certificate), is filed, pay eligible employees from income tax and social security tax withheld. (See Exhibit, RM 01103.042).
Withhold income taxes from employee wages and deposit them in an authorized financial institution account for Federal taxes; or where less than $500 tax liability is incurred by an agricultural employer for the year (income plus social security tax), pay the tax directly to IRS.
NOTE: Household employers pay taxes directly to IRS.
Include income tax information on IRS returns (Forms 941, 941E, 942 or 943) and on wage reports filed with SSA (Forms W-3, W-2, and W-2P). Please visit www.irs.gov/formspub/index.html for a complete listing of Internal Revenue Service (IRS) forms and publications.
3. Unemployment Compensation Provision
The employer is responsible for reporting on Form 940, (Employer's Annual Federal Unemployment (FUTA) Tax Return), any tax liability for unemployment compensation. (See Exhibit RM 01103.044).
NOTE: FUTA liability generally exists for agricultural employers whose farm labor costs total $20,000 a year; household employers whose employee wage costs are $1,000 or more in a calendar quarter; or other employers with costs of $1,500 or more in a calendar quarter.
4. Social Security Taxes
The employer must:
Withhold the employee's share of FICA tax and set aside the employer's matching share.
Deposit, along with any withheld income tax, FICA taxes due from employee and employer in an authorized financial institution for Federal taxes on a schedule presented by IRS.
NOTE: Household employers pay FICA taxes directly to IRS. Agricultural employers who have a combined income tax and FICA tax liability of less than $500 for the year pay IRS directly with their annual Form 943 return.
Provide each employee with a W-2 form by January 31 of the year following the tax year; or upon request by a terminating employee, provide a copy of the W-2 form within 30 days of the request.
Include FICA tax information on tax return form 941, 942 and 943 filed with IRS and/or wage report forms W-3, W-2 (or equivalent magnetic media) filed with SSA.