Changes To Note
Social security and Medicare tax for 2002.
The social security wage base for 2002 is $84,900. There is no wage base limit for Medicare tax. The tax rate remains 6.2% for social security and
1.45% for Medicare tax.
Redesignation of Estimated Income Tax Payments as Employment Tax Deposits.
If you determine that your income tax liability for your current tax year will be lower than the amount of estimated income tax payments you have
already made, you may redesignate estimated income tax payments as employment tax deposits. You may use these redesignated payments to satisfy deposit
liabilities for income tax withholding and social security, Medicare, railroad retirement and Federal unemployment taxes. To make this redesignation,
call 1-866-562-5227. Be certain that your redesignation of these payments does not result in an underpayment of the estimated income tax for the tax
year. You may be subject to a penalty for an underpayment of estimated income tax.
The following is a list of important dates. Also see Pub. 509, Tax Calendars for 2002.
If any date shown below falls on a Saturday, Sunday, or Federal 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. For any due date, you will meet the file or
furnish requirement if the form is properly addressed and mailed First-Class or sent by an IRS designated private delivery service on or before
the due date. See Private Delivery Services on page 5 for more information on IRS designated private delivery services.
By January 31
Furnish Forms 1099 and W-2.
Furnish each employee a completed Form W-2, Wage and Tax Statement. Furnish each recipient a completed Form 1099 (e.g., Form
1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form 1099-MISC,
File Form 940 or 940-EZ.
File Form 940 or Form 940-EZ, Employer's Annual Federal Unemployment (FUTA) Tax Return. However, if you deposited all the
FUTA tax when due, you have ten additional days to file.
File Form 945.
File Form 945, Annual Return of Withheld Federal Income Tax, to report any nonpayroll income tax withheld in 2001. See Nonpayroll
Income Tax Withholding on page 4 for more information.
By February 15
Request new Form W-4 from exempt employees.
Ask for a new Form W-4, Employee's Withholding Allowance Certificate, from each employee who claimed exemption from withholding last
On February 16
Exempt Forms W-4 expire.
Any Form W-4 previously given to you claiming exemption from withholding has 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
as if he or she is single, with zero withholding allowances. (See section 9.)
By February 28
File Forms 1099 and 1096.
File Copy A of all 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 below.
File Forms W-2 and W-3.
File Copy A of all 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 below.
File Form 8027.
File Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, with the Internal Revenue Service. (See section
6.) For electronically filed returns, see By March 31 below.
By March 31
File electronic Forms 1099, W-2, and 8027.
File Copy A of electronic (not magnetic media) Forms 1099 with the IRS and W-2 with the Social Security Administration. File electronic (not
magnetic media) Form 8027 with the IRS.
By April 30, July 31, October 31, and January 31
Deposit FUTA taxes.
Deposit Federal unemployment (FUTA) tax due if it is more than $100.
File Form 941.
File Form 941, Employer's Quarterly Federal Tax Return, 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 and the taxes are paid in full with a
timely filed return. If you deposited all taxes when due, you have 10 additional days from the due dates above to file the return.
Before December 1
New Forms W-4.
Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year.
On December 31
Form W-5 expires.
Form W-5, Earned Income Credit Advance Payment Certificate, expires. Eligible employees who want to receive advance payments of the
earned income credit next year must give you a new Form W-5.
Form 940 and Form 941 may now be filed electronically. For more information, visit the IRS Web Site at
www.irs.gov/elec_svs/efile-bus.html or call 1-800-829-1040.
Electronic Deposit Requirement
You must make electronic deposits of all depository taxes (such as employment tax, excise tax, and corporate income tax) using the Electronic
Federal Tax Payment System (EFTPS) in 2002 if:
- The total deposits of such taxes in 2000 were more than $200,000 or
- You were required to use EFTPS in 2001.
If you are required to use EFTPS and fail to do so, you may be subject to a 10% penalty. If you are not required to use EFTPS, you may participate
voluntarily. To get more information or to enroll in EFTPS, call 1-800-555-4477 or 1-800-945-8400.
See section 11 for more information.
Hiring New Employees
Eligibility for employment.
You must verify that each new employee is legally eligible to work in the United States. This will include completing the Immigration and
Naturalization Service (INS) Form I-9, Employment Eligibility Verification. You can get the form from INS offices or by calling
1-800-870-3676. Contact the INS at 1-800-375-5283, or visit the INS Web Site at www.ins.usdoj.gov for further information.
New hire reporting.
You are required to report any new employee to a designated state new hire registry. Many states accept a copy of Form W-4 with employer
information added. Call the Office of Child Support Enforcement at 202-401-9267 or access its Web Site at
www.acf.dhhs.gov/programs/cse/newhire for more information.
Income tax withholding.
Ask each new employee to complete the 2002 Form W-4. (See section 9.)
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
Income tax withholding.
Withhold tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the
correct withholding rate. (If you have nonresident alien employees, see section 9.) Withhold from periodic pension and annuity payments 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. See section 9 and Pub. 15-A, Employer's Supplemental Tax Guide. Pub. 15-A
includes information on withholding on pensions and annuities.
You may have 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 (e.g., independent contractors) for services
performed for your trade or business. For details about filing Forms 1099 and for information about required electronic or magnetic media filing, see
the 2002 General Instructions for Forms 1099, 1098, 5498, and W-2G for general information and the separate specific instructions for each
information return you file (for example, 2002 Instructions for Forms 1099-MISC). Do not use Forms 1099 to report wages and other
compensation you paid to employees; report these on Form W-2. See the separate Instructions for Forms W-2 and W-3 for details about filing
Form W-2 and for information about required magnetic media filing. If you file 250 or more Forms W-2 or 1099, you must file them on magnetic media or
Information reporting call site.
The IRS operates a centralized call 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.
Nonpayroll Income Tax Withholding
Nonpayroll income tax withholding
must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Form 945 is an
annual tax return and the return for 2001 is due January 31, 2002. Separate deposits are required for payroll (Form 941) and nonpayroll (Form 945)
withholding. Nonpayroll items include:
- Pensions, annuities, and IRAs.
- Military retirement.
- Gambling winnings.
- Indian gaming profits.
- Voluntary withholding on certain government payments.
- Backup withholding.
All income tax withholding reported on Forms 1099 or W-2G must be reported on Form 945. All income tax withholding reported on Form W-2 must be
reported on Form 941, 943, or Schedule H (Form 1040).
Because distributions to participants from some nonqualified pension plans and deferred compensation plans are treated as wages and are
reported on Form W-2, income tax withheld must be reported on Form 941, not Form 945. However, because distributions from such plans to a beneficiary
or estate of a deceased employee are not wages and are reported on Forms 1099-R, income tax withheld must be reported on Form 945.
For details on depositing and reporting nonpayroll income tax withholding, see the separate Instructions for Form 945.
You generally must withhold 30% 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 employee pension (SEP) and SIMPLE retirement
plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, long-term care benefits, or real estate
You can use Form W-9, Request for Taxpayer Identification Number and Certification, to request payees to furnish a TIN and to certify
that the number furnished is correct. You can also use Form W-9 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 includes a list of types of payees who are
exempt from backup withholding. For more information, see Pub. 1679, A Guide to Backup Withholding.
Keep all records of employment taxes for at least 4 years. These should be available for IRS review. Records should include:
- Your employer identification number.
- Amounts and dates of all wage, annuity, and pension payments.
- Amounts of tips reported.
- Records of allocated tips.
- The fair market value of in-kind wages paid.
- Names, addresses, social security numbers, and occupations of employees and recipients.
- Any employee copies of Form W-2 that were returned to you as undeliverable.
- Dates of employment.
- 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 payers made to them.
- Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4S, and W-4V).
- Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS.
- Copies of returns filed, including 941TeleFile Tax Records and confirmation numbers.
- Records of fringe benefits provided, including substantiation.
Change of Address
To notify the IRS of a new business mailing address or business location, file Form 8822, Change of Address.
Private Delivery Services
You can use certain private delivery services designated by the IRS to mail tax returns and payments. If you mail by the due date using any of
these services, you are considered to have filed on time. The most recent list of designated private delivery services was published in October 2001.
The list includes only the following:
- Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, Second Day Service.
- DHL Worldwide Express (DHL): DHL Same Day Service, DHL USA Overnight.
- Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day.
- 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.
The private delivery service can tell you how to get written proof of the mailing date.
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.
You can call the IRS with your tax questions. Check your telephone book for the local number or call
Help for people with disabilities.
Telephone help is available using TTY/TDD equipment. You may call 1-800-829-4059 with your 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 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 using a
personal computer (connect to www.irs.gov).
A list of employment tax topics is provided below. Select, by number, the topic you want to hear and call 1-800-829-4477. For the directory of all
topics, listen to topic 123.
||Social security and Medicare withholding rates
||Form W-2 - Where, when, and how to file
||Form W-4 - Employee's Withholding Allowance Certificate
||Form W-5 - Advance earned income credit
||Employer identification number (EIN) - How to apply
||Employment taxes for household employees
||Form 941 - Deposit requirements
||Form 941 - Employer's Quarterly Federal Tax Return
||Form 940 and 940-EZ - Deposit requirements
||Form 940 and 940-EZ - Employer's Annual Federal Unemployment Tax Return
||Tips - Withholding and reporting
||Independent contractor vs. employee
Unresolved Tax Issues
If you have attempted to deal with an IRS problem unsuccessfully, you should contact the Taxpayer Advocate. The Taxpayer Advocate independently
represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal
While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous
contacts and ensure that your case is given a complete and impartial review.
Your assigned personal advocate will listen to your point of view and will work with you to address your concerns. You can expect the advocate to
- A fresh look at a new or on-going problem.
- Timely acknowledgement.
- The name and phone number of the individual assigned to your case.
- Updates on progress.
- Timeframes for action.
- Speedy resolution.
- Courteous service.
When contacting the Taxpayer Advocate, you should provide the following information:
- Your name, address, and employer identification number.
- The name and telephone number of an authorized contact person and the hours he or she can be reached.
- The type of tax return and year(s)
- A detailed description of the problem.
- Previous attempts to solve the problem and the office that had been contacted.
- A description of the hardship you are facing (if applicable).
You may contact a Taxpayer Advocate by calling a toll-free number, 1-877-777-4778. Persons who have access to TTY/TDD equipment may call
1-800-829-4059 and ask for Taxpayer Advocate assistance. If you prefer, you may call, write, or fax the Taxpayer Advocate office in your area. See
Pub. 1546, The Taxpayer Advocate Service of the IRS, for a list of addresses and fax numbers.
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