Employment Tax Procedures: Social Security Administration

1
Employment Tax ProceduresSocial Security
Administration

• Timothy Beard
• Employer Services Liaison Officer
• Seattle

2
Who Are Employees

• Common Law Test
• Public Officers-SS Act 218 (b) (3)
• Exercise States Sovereign Authority
• Elected and Appointed Positions
• Defined in WA Statute
• Consult AG or OFM
• Subject to Employment Taxes If Paid Wages

3
Social Security/Medicare Coverage of Public
Employees

• Section 218 Agreements Cover Most State Employees
• PERS/TRS/Others
• Not Retirement System Member
• Mandatory SS and Medicare
• Not Under 218 Agreement and Retirement System
  Member
• Mandatory Medicare, If Hired Since 4/1/86
• SSA-1945 Required If Job Not Subject to Social
  Security Tax

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SSA-1945
5
Employee Names and SSNs

• Key to Posting Wages
• Tax Return Interface
• Record Exactly As On SSN card
• OK to Copy Card
• Keep In Payroll File
• Better Idea-Use SSNVS
• Change Name Only After See Corrected SSN Card
• 800 772-1213
• Local SSA Office
• Need ID for Change
• Two Weeks
• Valid SSNs
• SSN Issuance Table
• www.socialsecurity.gov/foia/highgroup.htm

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Employee Names and SSNs

• SSNVS
• www.socialsecurity.gov/employer
• Online (10) or File Upload (250,000)
• Name, SSN, DOB, Gender
• Telephone
• 800 772-6270
• Suspense File If Mismatch
• Internal Action and Correspondence
• Possible IRS Penalties

7
Student Employment

• Statutory FICA Student Exclusion
• Working for School Attending
• Not a Regular Employee
• Enrolled and Regularly Attending (Half Time)
• Definitions in Rev. Proc. 2005-11
• Applies to Public Schools Unless 218 Agreement
• WA 218 Exclusion Effective 7/1/2000
• Mandatory HI and SS Provisions Exclude Students

8
Student Employment

• Foreign Students and Exchange Visitors
• F-1, J-1, M-1, Q-1 visas
• FICA Exempt If Work for Same Purpose as Admitted
  and Nonresident
• F-1-Usually On-campus Work
• J-1-Work Approved by Sponsor
• Check Visa Category or Sponsoring Entity
• If Status Unclear, Contact DHS

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W2 Completion

• Annual Report of Individuals Wages and Taxes
• Accuracy
• State Files Electronically
• Check With OFM If Need to Submit W2s
• Due dates
• Employee Copies-1/31 (2/3/09)
• Copy A-Last Day of Feb. (3/2/09)
• Electronic-3/31
• Penalties If Late, Wrong Media or Incorrect Data
• References-Pub. 15, 15A, 15B, and W2 Instructions

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2008 W2
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W2 Completion

• ID Data-Lettered Boxes
• Employer ID-Match IRS Records
• Employee ID-Name and SSN, Current Address
• Money Fields-Numbered Boxes

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Boxes 1 and 2

• WTOC
• All Wages Subject to FIT
• Excludes Such Items as Deferred Comp (457) and
  Sec. 125 Benefits
• FIT Withheld
• Actual Amount
• Based on W-4

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Boxes 3 and 4

• Social Security Wages
• Wages Subject to SS Tax
• May Be Different Than WTOC
• SS Wages Include 457 Contributions
• If MQGE or Non-FICA, Blank
• 2008 SS Maximum-102.000
• Social Security Tax Withheld
• 6.2 of SS Wages
• Employee Deduction Only, Not Employer Match

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Boxes 5 and 6

• Medicare Wages
• Mirrors SS Wages
• No Dollar Limit
• If MQGE, HI Wages Only
• Medicare Tax Withheld
• 1.45 of HI Wages
• Employee Deduction Only

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Box 9

• Advanced EIC Payments
• Employee Filed W5
• If Employer Paid AEIC, Enter Figure
• TY 2008 Maximum-1750.00
• Required EIC Notice on W2 Copy B, Notice 797, or
  Equivalent

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Box 10

• Dependent Care Benefits
• Sec. 129 Amounts Paid or Incurred for Employee By
  Employer
• Includes Value of Employer Provided Day Care
  Facilities
• Add Sec. 125 (Cafeteria Plan) Payments
• Report Actual Total, Not Limit of 5000
• If Over 5000, Excess in WTOC, etc.
• Pub. 15-B

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Box 11

• Nonqualified Plans
• Used by SSA for Retirement Test
• Report Distributions from Nonqualified or
  Nongovernmental 457 Plans
• 457 Distributions Reported on 1099R
• Unlikely To Be Used by Public Employers

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Box 12

• Catch All for Miscellaneous Amounts
• Letter Code and Amount
• May Or May Not Be Included in WTOC, etc.

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Box 12

• Common Codes
• C-GTLI Over 50,000
• Add to Boxes 1, 3 and 5
• G-Current 457 Deferrals
• Prior Year USERRA Make-up Amounts
• J-Nontaxable Third Party Sick Pay
• Employee Paid Premium
• L-Nontaxable Business Expense Reimbursement
• Excess Reimbursement Received
• Add Excess to WTOC, etc.

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Box 12

• Common Codes
• M and N-Uncollected SS and HI Tax on GTLI Over
  50000
• Former Employees
• Include in WTOC, etc
• P-Qualified (Nontaxable) Moving Expense
  Reimbursements
• Paid Directly to Employee
• Nonqualified Amount in WTOC, etc.
• T-Qualified Adoption Benefits Paid or Incurred By
  Employer
• Includes Sec. 125 Amounts

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Box 12

• Common codes
• W-Employer Contributions to HSA
• Includes Sec. 125 Amounts
• BB-Roth Contributions Under 403(b)

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Box 13

• Special Characteristics
• Retirement Plan
• Participant in Pension Plan, Other Than 457
• Pub. 590
• Third party Sick Pay
• If Reporting Sick Pay Paid by Third Party

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Box 14

• Other
• Informational Items for Employee
• Use to Explain How Got From Last Pay Stub to W2
• Not Read by SSA

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Boxes 15-20

• State and Local Tax Data
• Only If Needed for Another State
• Employees Who Live in OR or ID
• Blank If WA Resident

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2008 W2
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W3

• Summary of W2s
• Data Included in State's Electronic File
• Sum Figures From W2s to Corresponding W3 Boxes
• Special Points
• Kind of Payer-941, Military or Medicare Govt.
  Emp.
• Separate MQGE Only
• Income Tax Withheld by Third Party
• Used to Balance 941s

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2008 W3
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W2C/W3C

• Used to Correct Any W2 Error
• Submit As Soon As Discover Error
• No Deadline
• W2C Online
• www.socialsecurity.gov/employer
• Most Recent Tax Year
• Paper OK If
• Instructions In W2C/W3C Flyer
• Electronic File If 250 or More
• See www.socialsecurity.gov/employer for
  Electronic Specifications

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W2C/W3C

• Name/SSN Corrections
• Enter ID Data Only
• Money Errors
• Use Numbered Fields
• Enter Data for Incorrect Field Only Leave Others
  Blank
• What Was And What Should Be
• W3C Always Required
• Totals From W2Cs
• Not Restatement of Original Report Totals
• Distribution
• Copy A to SSA
• Others to Employee

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W2C
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Reconciliation

• Balance W2s With 941s
• SSA/IRS Annual Process
• Agency Do So Each Pay Period, Month, Quarter,
  Year-end
• Confirm All Figures Reconciled Before Issue W2s
  and File Fourth Quarter 941

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Reconciliation

• Social Security Wages
• Social Security Tips
• Social Security Tax Withheld
• Medicare Wages and Tips
• Medicare Tax Withheld
• Income Tax Withheld
• Advanced EIC Payments

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Reconciliation

• If Out of Balance, SSA or IRS Sends a Notice
• Letters Start in October, Most Sent in
  February/March
• Determine Why Out of Balance And Fix
• W2/W2C/941C/Explanation
• Call If Need Help
• Must Respond or Penalty Assessed

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Back Pay Under A Statute

• Pub. 957
• Payment/Award Under Employment/Wage Protection
  Laws-FLSA, ADA, etc.
• Court or Administrative Proceeding
• Payments Are Wages Regardless of Settlement
  Language
• Exceptions-
• Damages for Personal Injury
• Interest
• Penalties
• Legal Fees
• Back Pay Not Under a Statute, i.e. Payroll Error
• No Special Treatment

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Back Pay Under A Statute

• Taxable as Current Year Wages
• Normal W2 Reporting
• Social Security Allocates To Year Should Have
  Been Paid
• Employer Sends Special Report to SSA
• Detailed Data on Payments
• Sample Report in Pub. 957

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Special Wage Payments

• Pub. 957
• Wages Paid This Year But Earned In Prior Year
• Used With Social Security Retirement Test
• SSA Disregards SWP When Figuring Earnings for
  Retirement Test
• SWPs Include
• Accumulated Sick or Vacation Pay
• Bonuses
• Deferred Compensation
• Severance pay

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Special Wage Payments

• Employer Notifies SSA of SWPs
• Optional Service to Retiring/Retired Employees
  (62-FRA)
• SSA-131 for Individual Reports
• Give to Employee
• Send to Local SSA Office
• Paper Listing or Tape With Annual Data
• Submit by April 1

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SSA-131 Example
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Wage Overpayments

• Recovered In Same Year
• Offset Against Current Year Pretax Wages
• Overpayment Recovered in Subsequent Year
• W2C for Year of Overpayment to Reduce SS and
  Medicare Wages/Taxes
• Prepare 941C for Quarter of Repayment
• May Also Use 843 to Claim Tax Refund
• Do Not Adjust WTOC or FIT
• Employee May Be Able to Claim Adjustment for FIT
  on 1040
• If Repayment Covers Multiple Years, Repeat Process

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Social Security Statement

• Earnings History and Benefit Projections
• WEP/GPO Language
• Annual Automatic Distribution
• Three Months Before Birth Month
• Employee Questions

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Resources

• Tim Beard
• 206 615-2125
• Tim.Beard_at_ssa.gov
• Wayne Godwin
• State Social Security Administrator
• 360 902-9222
• www.socialsecurity.gov/employer
• www.socialsecurity.gov/slge/