US Internal Revenue Service: p51--1995

8/14/2019 US Internal Revenue Service: p51--1995

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Circular A, AgriculturalEmployers Tax Guide

Page

Table of Contents

Introduction 2

1. Calendar 2

2. Reminders 2

5. Wages Subject to Social Securityand Medicare Taxes, andIncome Tax Withholding 2

6. How To Determine if Social Securityand Medicare Taxes Are Due and ifthe Wages Are Subject to Income TaxWithholdingThe $150 a Worker Testor the $2,500 a Year Test 3

7. Withholding From Employees Wages 3

8. Figuring Withholding 4

9. Employer Identification Number (EIN) 4

10. Employees Social Security Number (SSN) 5

11. Payment of Taxes and DepositRequirements 5

12. Advance Payment of the EarnedIncome Credit (EIC) 7

13. Requirements for Filing Form 943 9

14. Correcting Errors 9

15. Filing Forms W-2 9

16. Magnetic Media Reporting 10

17. Paying and Depositing FederalUnemployment (FUTA) Tax 10

Internal Revenue ServiceBulk RateWADC9999

Rancho Cordova, CA 95743-9999 Postage and Fees Paid

Internal Revenue ServiceOfficial BusinessPermit No. G-48Penalty for Private Use $300

Carrier Route Presort

Publication 51

18. Records You Should Keep 10

20. Income Tax Withholding and AdvancedEarned Income Credit (EIC)Payment Methods 1112

Income Tax WithholdingPercentage Method Tables 1617Wage Bracket Tables 1837

Social Security Tax Tables

Advance EICPercentage Method Tables 4142Wage Bracket Tables 4345

How To Complete Form 943 15

Form 7018-A, Employers Order

Blank for 1995 Forms 4748

19. Reconciling Forms W-2, W-3, and 943 11

Deliver toPayroll Department

Medicare 40

Social Security 3839

Department of the TreasuryInternal Revenue Service

Cat. No. 10320R

Advance Earned Income Credit

Eligible employees may be able to receive a part of their earned income credit inadvance with their pay. This guide contains the tables you need to figure theadvance earned income credit. See section 12 for more information.

Employment Tax Rates and Wage Base for 1995

Social Security Tax6.2% each for employers and employees

Agricultural workers whose cash wages are subject to social security andMedicare taxes are required to have income tax withheld on their cash wages.See sections 6 through 8 for more details. Income tax withholding tables for 1995begin on page 16 of this guide.

Forms and Publications

(Rev. January 1995)

Keep this guide for reference.

Penalties 7

Index 46

Postmaster: Deliver Immediately

Section

How Employment Taxes Apply toFarmwork 14

3. Information Returns 2

4. Who Are Employers of Farmworkers? 2

Medicare Tax1.45% each for employers and employees

1995 Wage Base for Social Security Tax$61,200

If you need to order forms or publications, including additional copies of thisguide, you may use Form 7018-A, Employers Order Blank for 1994 Forms, at theend of this guide or you may call 1-800-TAX-FORM (1-800-829-3676).

Forms 945 and 945-A for 1994

All nonpayroll items have been removed from Form 941, Employers QuarterlyTax Return. The nonpayroll items include backup withholding and withholding forpensions, annuities, IRAs, and gambling winnings. These nonpayroll items mustbe reported on Form 945, Annual Return of Withheld Federal Income Tax, whichis an annual tax return. The return for 1994 is due January 31, 1995. Form 945filers who are required to deposit on a semiweekly deposit schedule must attachForm 945-A, Annual Record of Federal Tax Liability, to Form 945. See CircularE, Employers Tax Guide, for details.

21. Household Employees 12

Federal Unemployment (FUTA) Tax6.2% (employers only)

Household EmployeesThe requirements for household employees have changed for 1994. See section21 for more information.

Federal Tax Deposits by Electronic Funds Transfer (EFT)

If your total deposits of withheld income, social security, and Medicare taxesduring calendar year 1993 exceeded $78 million you are required to deposit alldepository taxes due in 1995 by electronic funds transfer (EFT). See section 11for more details.


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IntroductionThis guide is for employers of agriculturalworkers (farmworkers). It containsinformation you may need to comply withthe laws for agricultural labor (farmwork)relating to social security and Medicaretaxes, Federal unemployment (FUTA) tax,and withheld income tax.

1. CalendarThe following are important dates and

responsibilities. Also see Pub. 509, TaxCalendars For 1995.

Note: For any due date, you will meet thefile or furnish requirement if the form isproperly addressed, mailed First-Class, andpostmarked on or before the due date. Ifany date shown falls on a Saturday,Sunday, or legal holiday, use the nextbusiness day.

By January 31.File Form 943,Employers Annual Tax Return forAgricultural Employees, with the InternalRevenue Service and pay or deposit thetaxes reported on it. (See section 11.)Furnish each employee a completed FormW-2, Wage and Tax Statement. (See

section 15.) Furnish each recipient acompleted Form 1099 (e.g., Form1099-MISC, Miscellaneous Income). Youmay furnish Form W-2 or 1099 by mail asexplained in the Note above. Also fileForm 940 or Form 940-EZ, EmployersAnnual Federal Unemployment Tax Return.(See section 17.) But if you deposited allthe FUTA tax when due, you may file Form940 or 940-EZ on or before February 10.

Annual return of withheld Federalincome tax.File the new Form 945 toreport any nonpayroll income tax withheldduring 1994. See Circular E for moreinformation.

By February 15.Ask for a new FormW-4, Employees Withholding AllowanceCertificate, from each employee whoclaimed total exemption from withholdinglast year.

On February 16.Begin withholding forany employee who previously claimedexemption from withholding but has notgiven you a new Form W-4 for the currentyear. If the employee does not give you anew Form W-4, withhold tax as if he or sheis single, with zero withholding allowances.The Form W-4 previously given youclaiming exemption is now expired. (Seesection 7.)

By February 28.Send Copy A of allForms W-2 with Form W-3, Transmittal ofWage and Tax Statements, or yourmagnetic media wage report to the SocialSecurity Administration Data OperationsCenter, Wilkes-Barre, PA 18769. (Seesections 15 and 16.)

Note: If you have employees in AmericanSamoa, Guam, the Commonwealth of theNorthern Mariana Islands, the U.S. VirginIslands, or Puerto Rico who are subject tolocal income tax and U.S. social securityand Medicare taxes, you must file theappropriate wage and tax statements andtransmittals for those employees (Forms

W-2AS, W-2GU, W-2CM, or W-2VI withForm W-3SS, and Form 499R-2/W-2PRwith Form W-3PR). These forms areavailable at local tax departments in eachjurisdiction.

Before December 1.Remind employeesto submit a new Form W-4 if theirwithholding allowances will change for thenext year.

On December 31.Form W-5, EarnedIncome Credit Advance PaymentCertificate, expires. Employees who wantto receive advance payments of the earnedincome credit for the next year must giveyou a new Form W-5.

2. RemindersChange of address.Notify the IRS thatyou changed your business mailingaddress or business location, by filingForm 8822, Change of Address.

When you hire a new employee.Askeach new employee to complete the 1995Form W-4. Also, ask the employee to showyou his or her social security card so youcan record the employees name andsocial security number accurately. If the

employee has lost the card or recentlychanged names, have the employee applyfor a new card. If the employee does nothave a card, have the employee apply forone on Form SS-5, Application for a SocialSecurity Card. (See section 10.)

Eligibility for employment.You mustverify that each new employee is legallyeligible to work in the United States. Thiswill include completing the Immigration andNaturalization Service (INS) Form I-9,Employment Eligibility Verification Form.You can get the form from INS offices.Contact the INS at 1-800-755-0777 forfurther information concerning yourresponsibilities.

When you become aware of a change inan employees name.Continue to reportthe employees wages under the old nameuntil he or she shows you an updatedsocial security card with the new name.

When a crew leader furnishes workersto you.Record the crew leaders name,address, and employer identificationnumber. (See sections 4 and 18.)

Unresolved problems.If you have a taxproblem you have been unable to resolvewith the IRS, write to your IRS DistrictDirector or call 1-800-829-1040 and askfor Problem Resolution assistance. AProblem Resolution employee will takeresponsibility for your problem and ensure

that it receives proper attention. Althoughthis office cannot change the tax law ortechnical decisions, it can frequently clearup problems that resulted from previouscontacts.

Hearing-impaired taxpayers with accessto TDD equipment may call1-800-829-4059 for Problem Resolutionassistance.

3. Information ReturnsYou must file Forms W-2 for employeesyou paid $150 or more in cash wages forthe year and for employees you paid lessthan $150 in some instances. See section6. You also may have to file informationreturns to report certain types of paymentsmade during the year. For example, youmust file Form 1099-MISC, MiscellaneousIncome, to report payments of $600 ormore to persons not treated as employees

(e.g., independent contractors) for servicesperformed for your trade or business. Fordetails about Forms 1099 and forinformation about required magnetic mediafiling, see the separate Instructions forForms 1099, 1098, 5498, and W-2G. Donot use the Forms 1099 to report wagesand other compensation you paid toemployees; report these on Form W-2. Seethe separate Instructions for Form W-2for details.

Information reporting call site.The IRSoperates a centralized call site to answerquestions about reporting on Forms W-2,W-3, 1099, and other information returns. Ifyou have questions related to reporting on

information returns, you may call304-263-8700 (not a toll-free number).

4. Who Are Employers ofFarmworkers?In general, you are an employer offarmworkers if your employees:

Raise or harvest agricultural orhorticultural products on a farm.

Care for your farm and equipment, whenmost of the care is done on a farm.

Handle, process, or package anyagricultural or horticultural commodity ifyou produced over half of the commodity.

Do work related to cotton ginning,turpentine, or gum resin products.

Do housework in your private home if itis on a farm that is operated for profit.

Caution: Household labor may not be adeductible farm expense. SeePub. 225,Farmers Tax Guide.

Crew Leaders

You are an employer of farmworkers if youare a crew leader. A crew leader is aperson who furnishes and pays (either onhis or her own behalf or on behalf of thefarm operator) workers to do farmwork forthe farm operator. If there is no written

agreement between you and the farmoperator stating that you are his or heremployee and if you pay the workers(either for yourself or for the farm operator),then you are a crew leader.


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5. Wages Subject to SocialSecurity and MedicareTaxes, and Income TaxWithholdingOnly cash wages you pay to employees forfarmwork are subject to social security andMedicare taxes, and income taxwithholding. Cash wages include checks,money orders, etc. Do not count the valueof food, lodging, and other noncash items.

Caution: Payments in noncash items(e.g., commodities) that are, in substance,payments of cash are subject to socialsecurity and Medicare taxes.

Note: Taxable noncash fringe benefits areincluded on the Form W-2 as othercompensation to the farmworker. SeePub. 937, Employment Taxes, forinformation on fringe benefits.

The maximum amount of cash wagessubject to social security tax is $61,200.There is no maximum amount of cashwages subject to Medicare and income taxwithholding.

The taxes do not apply to cash wages

for housework in your private home if itwas done by your spouse, or your son ordaughter under age 21. Nor do the taxesapply to housework done by your parentunless:

You have a child who is under age 18 orhas a physical or mental condition thatrequires care by an adult for at least 4continuous weeks in a calendar quarter (acalendar quarter is a 3-month periodending March 31, June 30, September 30,or December 31) and who lives in yourhome; and

You are a widow or widower, ordivorced and not remarried, or have aspouse in the home who, because of a

physical or mental condition, cannot carefor your child for at least 4 continuousweeks in the quarter.

The taxes also do not apply to wagespaid to share farmers or to alien workersadmitted under section 101(a)(15)(H)(ii)(a) ofthe Immigration and Nationality Act on atemporary basis to perform agriculturallabor (H-2(A) workers).

In reporting taxable wages on Form 943,show the full amount before tax wasdeducted. For example, if an employeescash wages were $200 and you deducted$15.30 as employee tax in 1994 ($12.40 ofsocial security tax and $2.90 of Medicaretax), you would include $200 cash wages

on line 2 and $200 cash wages on line 4,Form 943.

Supplemental wages.Supplementalwages are compensation paid to anemployee in addition to the employeesregular wages. They include, but are notlimited to, bonuses, commissions, overtimepay, accumulated sick leave, severancepay, awards, prizes, backpay, andretroactive pay increases for currentemployees, and payments fornondeductible moving expenses. Otherpayments subject to the supplementalwage rules include taxable fringe benefits

and expense allowances paid under anonaccountable plan.

If you pay supplemental wages withregular wages but do not specify theamount of each, withhold income tax as ifthe total were a single payment for aregular payroll period.

If you pay supplemental wagesseparately (or combine them in a singlepayment and specify the amount of each),the income tax withholding methoddepends partly on whether you withholdincome tax from your employees regularwages:

If you withhold income tax from anemployees regular wages, you can useone of the following methods for thesupplemental wages:

1. Withhold a flat 28%.

2. Add the supplemental and regularwages for the most recent payroll periodthis year. Then figure the income taxwithholding as if the total were a singlepayment. Subtract the tax already withheldfrom the regular wages. Withhold theremaining tax from the supplementalwages.

If you did not withhold income tax from

the employees regular wages, use method2. (This would occur, for example, whenthe value of the employees withholdingallowances claimed on Form W-4 is morethan the wages.)

Regardless of the method you use towithhold income tax on supplementalwages, including bonuses, supplementalwages are subject to social security andMedicare taxes.

Social security and Medicare forfarmworkers.Most persons employed orself-employed in farmwork are covered bysocial security and Medicare. When theyreach age 65 or when they becomedisabled at any age, workers and their

dependents may be eligible for monthlybenefits (reduced benefits are payable asearly as age 62). If a worker dies, theworkers family may be eligible forsurvivors insurance benefits. In addition tocash benefits, health insurance benefits areavailable for some workers whether or notthey are retired. The Social SecurityAdministration (SSA) makes thesepayments. For more information aboutthese benefits, please contact any SSAoffice.

6. How To Determine ifSocial Security and

Medicare Taxes Are Due andif the Wages Are Subject toIncome Tax WithholdingThe $150 a Worker Test orthe $2,500 a Year TestSocial security, Medicare, and income taxwithholding apply to all cash wages youpaid during the year to an employee forfarmwork if either of the two tests below ismet:

You pay cash wages to an employee of$150 or more in a year (count all cashwages paid on a time, piecework, or otherbasis) for farmwork. The $150 test appliesseparately to each farmworker you employ.If you employ a family of workers, eachmember is treated separately. Do notcount wages paid by other employers.

You pay $2,500 or more during the yearto all your employees for agricultural labor.

Exceptions:

a. Wages you pay to a farmworker who

receives less than $150 in annual cashwages are not subject to social securitytaxes, Medicare taxes, nor income taxwithholding, even if you pay $2,500 ormore in that year to all your farmworkers, ifthe farmworker:

1. Is employed in agriculture as a hand-harvest laborer,

2. Is paid piece rates in an operationthat is usually paid on a piece-rate basis inthe region of employment,

3. Commutes daily from his or her hometo the farm, and

4. Had been employed in agriculture lessthan 13 weeks in the preceding calendaryear.

The amounts you pay to these seasonalfarmworkers, however, count toward the$2,500-or-more test for determining thesocial security and Medicare coverage ofother farmworkers.

b. Cash wages you pay to householdworkers are counted in the $150 and$2,500 tests, but are not subject to socialsecurity and Medicare taxes unless youhave paid them $1,000 or more in cashwages, after 1993, for the calendar year.See the table of How Employment TaxesApply to Farmwork.

Social security and Medicare taxes applyto most payments of sick pay, including

payments made by third parties such asinsurance companies. For details, get Pub.952, Sick Pay Reporting.

7. Withholding FromEmployees WagesForm W-4.To know how much incometax to withhold from employees wages,you should have a Form W-4 on file foreach employee. Ask all new employees togive you a signed Form W-4 when theystart work. Make the form effective withthe first wage payment. If a new employeedoes not give you a completed Form W-4,withhold tax as if he or she is single, with

no withholding allowances. A Form W-4remains in effect until the employee givesyou a new one. If an employee gives you aForm W-4 that replaces an existing FormW-4, begin withholding no later than thestart of the first payroll period ending on orafter the 30th day from the date youreceived the replacement Form W-4. Forexceptions, see the discussion on page 4on invalid Forms W-4, Forms W-4 thatmust be sent to the IRS, and exemptionfrom income tax withholding.

The amount of income tax withholdingmust be based on filing status and


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withholding allowances. Your employeesmay not base their withholding amounts ona fixed dollar amount or percentage.However, the employee may specify adollar amount to be withheld in addition tothe amount of withholding based on filingstatus and withholding allowances claimedon Form W-4.

Employees may claim fewer withholdingallowances than they are entitled to claim.They may wish to claim fewer allowancesto generate a larger tax refund or to offsetother sources of taxable income that are

not subject to adequate withholding.Note: A Form W-4 that makes a change forthe next calendar year will not take effectin the current calendar year.

Pub. 505, Tax Withholding andEstimated Tax, contains detailedinstructions for completing Form W-4.Along with Form W-4, you may wish toorder Pub. 505 and Pub. 919, Is MyWithholding Correct for 1995, for youremployees.

When you receive a new Form W-4, donot adjust withholding for pay periods priorto the effective date of the new form; thatis, do not adjust withholding retroactively.Also, do not accept any withholding orestimated tax payments from youremployees in addition to withholding basedon their Form W-4. If they requireadditional withholding, they should submita new Form W-4 and, if necessary, payestimated tax by filing Form 1040-ES,Estimated Tax for Individuals.

Exemption from income tax withholdingfor eligible persons.An employee mayclaim exemption from income taxwithholding because he or she had noincome tax liability last year and expectsnone this year. However, the wages maystill be subject to social security andMedicare taxes.

An employee must file a Form W-4 eachyear by February 15 to claim exemptionfrom withholding. Employers should beginwithholding for each employee whopreviously claimed exemption fromwithholding but who has not submitted anew Form W-4 for the current year.Withhold tax as if the employee is singlewith zero withholding allowances.

Withholding on nonresident aliens.Employers should remind nonresidentaliens when completing Form W-4 that toavoid underwithholding of income taxesthey should (1) not claim exemption fromincome tax withholding; (2) requestwithholding as if they are single, regardlessof their actual marital status; and (3) claim

only one allowance. However, if thenonresident alien is a resident of Canada,Mexico, Japan, or Korea, he or she mayclaim more than one allowance. For moreinformation, get Pub. 515, Withholding ofTax on Nonresident Aliens and ForeignCorporations.

Sending certain Forms W-4 to the IRS.You must send the IRS copies of certainForms W-4 received during the quarterfrom employees still employed by you atthe end of the quarter. Send copies whenthe employee (1) claims more than 10withholding allowances or (2) claims

exemption from withholding and his or herwages would normally be $200 or moreper week. You are not required to sendany other Forms W-4 unless the IRSnotifies you in writing to do so.

Send in each quarter copies of anyForms W-4 that meet either of the aboveconditions. Complete boxes 8 and 10 onany Forms W-4 you send in. You may usebox 9 to identify the office responsible forprocessing the employees payrollinformation. Also send copies of anywritten statements from employees in

support of the claims made on Forms W-4.Do this even if the Forms W-4 are not ineffect at the end of the quarter. You cansend them to your Internal RevenueService Center more often if you like.Include a cover letter giving your name,address, employer identification number,and the number of forms included. Incertain cases, the IRS may notify you inwriting that you must submit specifiedForms W-4 more frequently to your districtdirector.

Base withholding on the Forms W-4 thatyou send in unless the IRS notifies you inwriting that you should do otherwise. If theIRS notifies you about a particular

employee, base withholding on the numberof withholding allowances shown in theIRS notice. You will get a copy of thenotice to give to the employee. Also, theemployee will get a similar notice directlyfrom the IRS. If the employee later givesyou a new Form W-4, follow it only if (1)exempt status is not claimed or (2) thenumber of withholding allowances is equalto or fewer than the number in the IRSnotice. Otherwise, disregard it and do notsubmit it to the IRS. Continue to follow theIRS notice. If the employee prepares a newForm W-4 explaining any difference withthe IRS notice, he or she may eithersubmit it to the IRS or to you. If submittedto you, send the Form W-4 and

explanation to the IRS office shown in thenotice. Continue to withhold based on thenotice until the IRS tells you to follow thenew Form W-4.

Filing Form W-4 on magnetic media.Form W-4 information may be filed withthe IRS on magnetic media. If you wish tofile on magnetic media, you must submitForm 4419, Application for FilingInformation Returns Magnetically/Electronically, to request authorization. GetPub. 1245, Specifications for Filing FormW-4, Employees Withholding AllowanceCertificate, on Magnetic Tape, and 5-14and 3-12 Inch Magnetic Diskettes, forinformation on filing Form W-4 on

magnetic media. To get additionalinformation about magnetic media filing,call the IRS Martinsburg Computing Centerat 304-263-8700.

Note: Any Forms W-4 with employeesupporting statements that you mustsubmit to the IRS must be submitted onpaper. They cannot be submitted onmagnetic media.

Invalid Forms W-4.Any unauthorizedchange or addition to Form W-4 makes itinvalid. This includes taking out anylanguage by which the employee certifiesthat the form is correct. A Form W-4 is

also invalid if, by the date an employeegives it to you, he or she indicates in anyway that it is false.

When you get an invalid Form W-4, donot use it to figure withholding. Tell theemployee it is invalid and ask for anotherone. If the employee does not give you avalid one, withhold taxes as if theemployee were single and claiming nowithholding allowances. However, if youhave an earlier Form W-4 for this workerthat is valid, withhold as you did before.

Amounts exempt from levy on wages,salary, and other income.If you receivea Notice of Levy on Wages, Salary, andOther Income (Form 668W or 668W(c)),you must withhold amounts as describedin the instructions for these forms. Pub.1494, Table for Figuring Amount ExemptFrom Levy on Wages, Salary, and OtherIncome (Forms 668W and 668W(C)), showsthe exempt amount. If a levy issued in aprior year is still in effect, use the currentyear Pub. 1494 to compute the exemptamount.

8. Figuring WithholdingThere are several ways to figure incometax withholding:

Percentage method (see pages 1617).

Wage bracket tables (see pages 1837).

Also see page 12 for directions on howto use the tables for employees claimingmore than 10 allowances.

Alternative formula tables for percentagewithholding (get Pub. 493, Alternative TaxWithholding Methods and Tables).

Wage bracket percentage methodwithholding tables (see Pub. 493).

Employers with automated payrollsystems will find the two alternativeformula tables and the two alternative

wage bracket percentage method tablesuseful.

Combined income, employee socialsecurity, and employee Medicare tax table(see Pub. 493).

Annualized wages method (see Pub.493).

Average estimated wages method (seePub. 493).

Cumulative wages and part-yearemployment methods (see Pub. 493).These may be used if your employeerequests that you use them, and you agreeto this.

Other alternative methods (see page 12).

If an employee wants additional taxwithheld, have the employee show theextra amount on Form W-4.

Social security and Medicare taxes:Employers and employees share.Forwages paid in 1995, the social security taxrate is 6.2% and the Medicare tax rate is1.45% each for the employer and theemployee. You can multiply each wagepayment by these percentages or use thetables on pages 38 through 40. You canuse the amounts in the boxes in the lowerright corners of the tables on pages 39and 40 if the wage payment is $100 or


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more. For example, the social security taxon a wage payment of $355 would be$22.01 ($18.60 + $3.41) each. TheMedicare tax would be $5.15 ($4.35 +$.80) each.

If you would rather pay the employeesshare of the social security and Medicaretaxes without deducting them from his orher wages, you may do so. If you do notdeduct the taxes, you must still pay them.Any employee social security and Medicaretax you pay is additional income to theemployee. (Include it in the employees

Form W-2, box 1, but do not count it forsocial security and Medicare wages, boxes3 and 5. Nor is it counted for Federalunemployment tax purposes.)

9. Employer IdentificationNumber (EIN)If you are required to report withheldincome or social security and Medicaretaxes, you must have an EINa nine-digitnumber separated as follows: 00-0000000.

If you do not have an EIN, apply for oneon Form SS-4 available at any IRS or SSAoffice.

If you do not have a number by the timea return is due, write Applied For and thedate you applied in the space shown forthe number. If you do not have a numberby the time a tax deposit is due, send yourpayment to the Internal Revenue ServiceCenter where you file your returns. Make itpayable to the Internal Revenue Serviceand show on it your name (as shown onForm SS-4), address, kind of tax, periodcovered, and date you applied for an EIN.

You should have only one EIN. If youhave more than one, notify the InternalRevenue Service Center where you fileyour return. State the numbers you have,the name and address to which each

number was assigned, and the address ofyour principal place of business. The IRSwill tell you which number to use.

For more information about EINs, getPub. 583, Taxpayers Starting a Business,and Pub. 1635, Understanding Your EIN.

10. Employees SocialSecurity Number (SSN)An employees SSN consists of nine digitsseparated as follows: 000-00-0000.

You must obtain each employees nameand SSN because you must enter them onForm W-2. If you do not provide the

correct name and SSN, you may owe apenalty. Any employee without a socialsecurity card can get one by completingForm SS-5. You can get this form at SSAoffices or by calling 1-800-772-1213. Ifyour employee has applied for an SSN butdoes not have one when you must fileForm W-2, enter Applied For on the form.When the employee receives the SSN, fileForm W-2c, Statement of CorrectedIncome and Tax Amounts, to show theemployees SSN.

Note: Record the name and number ofeach employee exactly as they are shown

on the employees social security card. Ifthe employees name is not correct asshown on the card, including if theemployees name has changed due tomarriage or divorce, the employee shouldrequest a new card from the SSA.

If your employee was given a new socialsecurity card to show his or her correctname and number after an adjustment tohis or her alien residence status, correctyour records and show the newinformation on Form W-2. If you filed FormW-2 for the same employee in prior years

under the old name and SSN, file FormW-2c to correct the name and number.Advise the employee to contact the localSSA office about 9 months after the FormW-2c is filed to ensure that his or herrecords have been updated.

11. Payments of Taxes andDeposit RequirementsGenerally, you must make payments ofemployer and employee social security,Medicare, and withheld income taxesduring the year by depositing them with anauthorized financial institution or a Federal

Reserve bank.If your total deposits of withheld income,

social security, and Medicare taxes duringcalendar year 1993 exceeded $78 million,you are required to deposit all depositorytaxes due in 1995 by electronic fundstransfer (EFT). TAXLINK, an electronicremittance processing system, must beused to make deposits by EFT. If you arenot required to make deposits by EFT, youmay voluntarily participate in TAXLINK. Formore details on TAXLINK, call the toll-freeTAXLINK HELPLINE at 1-800-829-5469.

Note: If you employ both farm and nonfarmworkers, DO NOTcombine the taxesreportable on Form 941 and Form 943 to

decide whether to make a deposit. SeeEmployers of Both Farm and NonfarmWorkersat the end of this section.

Deposit Rules

When To Deposit

There are two deposit schedulesmonthlyor semiweeklyfor determining when youdeposit Federal employment andwithholding taxes (other than FUTA taxes).These rules apply to Federal income taxwithheld on wages, and social security andMedicare taxes.

The IRS will notify you each Novemberwhether you are to follow the monthly orsemiweekly deposit schedule for thecoming calendar year. If you do not receivethe notification, you must determine yourown deposit schedule. You determine yourschedule as a monthly or semiweeklydepositor at the beginning of the calendaryear based on the total tax you reportedon your original Form 943 in the lookbackperiod (explained below).

Lookback period.The lookback period isthe second calendar year preceding thecurrent calendar year. For example, thelookback period for the calendar year 1995is the calendar year 1993.

Adjustments to lookback period taxes.To determine your taxes for the lookbackperiod, use only the tax you reported onthe original return (Form 943). Do notinclude adjustments made on asupplemental return filed after the due dateof the return. However, if you makeadjustments on Form 943, the adjustmentsare included in the total tax for the periodin which the adjustments are reported.

Example of adjustments.An employeroriginally reported total tax of $45,000 forthe lookback period in 1993. The employer

discovered during March 1995 that the taxduring the lookback period wasunderstated by $10,000 and corrected thiserror with an adjustment on the 1995 Form943. The total tax reported in the lookbackperiod is $45,000. The $10,000 adjustmentis treated as part of the 1995 taxes.

Monthly deposit schedule rule.If thetotal tax reported on Form 943 for thelookback period is $50,000 or less, you area monthly depositor for the current year.You must deposit employment taxes andtaxes withheld on payments made during acalendar month by the 15th day of thefollowing month.

New employers.During the first

calendar year of your business, your taxesfor the lookback period are considered tobe zero. Therefore, you are a monthlydepositor for the first calendar year of yourbusiness (but see the $100,000 one-daydeposit rule later).

Semiweekly deposit schedule rule.Ifthe total tax reported on Form 943 for thelookback period is more than $50,000, youare a semiweekly depositor for the currentyear. If you are a semiweekly depositor,you must deposit on Wednesday and/orFriday depending on what day of the weekyou make payments as shown below:

Payment Days/DepositPeriods Deposit by

Wednesday, Thursday,and/or Friday Following Wednesday

Saturday, Sunday,Monday, and/ or Tuesday Following Friday

If a return period ends on a day otherthan Tuesday or Friday, taxes accumulatedon the days in the return period just endingare subject to one deposit obligation, andtaxes accumulated on the days in the nextreturn period are subject to a separatedeposit obligation. For example, if onereturn period ends on Thursday and a newreturn period begins on Friday, taxesaccumulated on Wednesday and Thursdayare subject to one deposit obligation and

taxes accumulated on Friday are subject toa separate obligation. Separate Forms8109, Federal Tax Deposit Coupons, arerequired for each deposit because twodifferent return periods are affected. Besure to clearly mark the return period forwhich the deposit is made on each Form8109.

Example of monthly and semiweeklyrules.Rose Co. accumulated taxes onForm 943 as follows:

Calendar year 1993 $48,000Calendar year 1994 $60,000


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Rose Co. is a monthly depositor for 1995because its taxes for the lookback period($48,000 for calendar year 1993) were notmore than $50,000. However, for 1996,Rose Co. is a semiweekly depositorbecause the total taxes for its lookbackperiod ($60,000 for calendar year 1994)exceeded $50,000.

Deposits on banking days only.If adeposit is required to be made on a daythat is not a banking day, the deposit isconsidered timely if it is made by the closeof the next banking day. In addition to

Federal and state bank holidays, Saturdaysand Sundays are treated as nonbankingdays. For example, if a deposit is requiredto be made on Friday, but Friday is not abanking day, the deposit is consideredtimely if it is made by the followingMonday.

Semiweekly depositors will always have3 banking days to make a deposit. That is,if any of the 3 weekdays after the end of asemiweekly period is a banking holiday,you will have one additional banking day todeposit. For example, if a semiweeklydepositor accumulated taxes for paymentsmade on Friday and the following Mondayis not a banking day, the deposit normally

due on Wednesday may be made onThursday (allowing 3 banking days to makethe deposit).

Application of monthly and semiweeklyrules.The terms monthly depositor andsemiweekly depositor do not refer to howoften your business pays its employees, oreven how often you are required to makedeposits. The terms identify which set ofrules you must follow when a tax liabilityarises (e.g., when you have a payday). Thedeposit rules are based on the dateswages are paid; not on when payrollliabilities are accrued.

Monthly rule example. Red Co. is aseasonal employer who is a monthly

depositor. It pays wages each Friday.During January it paid wages but did notpay any wages during February. Red Co.must deposit the combined tax liabilitiesfor the four January paydays by February15. Red Co. does not have a depositrequirement for February (i.e., due byMarch 15) because no wages were paid inFebruary and, therefore, it did not have atax liability for February.

Semiweekly rule example. Green Inc.,who is a semiweekly depositor, payswages on the last day of the month. GreenInc. will only deposit once a month, but thedeposit will be made under the semiweeklydeposit rule as follows. Green Inc.s taxliability for January 31, 1995 (Tuesday)payday must be deposited by February 3,1995 (Friday).

$500 rule.If you accumulate less than a$500 tax liability during a year, no depositsare required. You may pay it with your taxreturn for the year. However, if you areunsure that you will accumulate less than$500 for the year, deposit under theappropriate rules so that you will not besubject to failure to deposit penalties.

$100,000 one-day deposit rule.If youaccumulate taxes of $100,000 or more onany day during a deposit period, you must

deposit it by the close of the next bankingday, whether you are a monthly or asemiweekly depositor. For monthlydepositors, the deposit period is a calendarmonth. For semiweekly depositors, thedeposit periods are Wednesday throughFriday and Saturday through Tuesday.

For purposes of the $100,000 rule, donot continue accumulating taxes after theend of a deposit period. For example, if asemiweekly depositor has accumulatedtaxes of $95,000 on Tuesday and $10,000on Wednesday, the $100,000 one-day rule

does not apply because the $10,000 isaccumulated in the next deposit period.Thus, $95,000 must be deposited onFriday and $10,000 must be deposited onthe following Wednesday.

In addition, once you accumulate atleast $100,000 in a deposit period, stopaccumulating at the end of that day andbegin to accumulate anew on the next day.For example, Fir Co. is a semiweeklydepositor. On Monday, Fir Co.accumulates taxes of $110,000 and mustdeposit on Tuesday, the next banking day.On Tuesday, Fir Co. accumulatesadditional taxes of $30,000. Because the$30,000 is not added to the previous

$110,000 and is less than $100,000, FirCo. must deposit the $30,000 on Fridayusing the normal semiweekly deposit rule.

If you are a monthly depositor and youaccumulate $100,000 employment taxliability on any day during a deposit period,you become a semiweekly depositor onthe next day and remain so for theremainder of the calendar year and for thefollowing calendar year.

Example of $100,000 one-day depositrule. Elm Inc. started business on February1, 1995. Because Elm Inc. is a newemployer, the taxes for its lookback periodare considered to be zero; therefore, ElmInc. is a monthly depositor. On February 8,

Elm Inc. paid wages for the first time andaccumulated taxes of $60,000. OnFebruary 15, Elm Inc. paid wages andaccumulated taxes of $50,000, for a totalof $110,000. Because Elm Inc.accumulated $110,000 on February 15, itmust deposit $110,000 by February 16, thenext banking day.

Accuracy of deposits (98% rule).Youwill satisfy your deposit obligation if youdeposit timely at least 98% of the taxliability or all but $100 of the tax liability.For this rule to apply, you must depositany shortfall as follows:

Monthly DepositorDeposit or pay theshortfall with your return by the due date

of the Form 943 for the period in which theshortfall occurred. You may pay theshortfall with Form 943 even if the amountexceeds $500.

Semiweekly and $100,000 One-DayDepositorDeposit by the earlier of thefirst Wednesday or Friday that comes on orafter the 15th of the month following themonth in which the shortfall occurred or, ifearlier, the return due date for the period inwhich the shortfall occurred. For example,if a semiweekly depositor has a shortfallduring January 1995, the shortfall makeupdate is February 15, 1995 (Wednesday).

Depositing Taxes

Federal tax deposit (FTD) coupon.UseForm 8109 to deposit employment taxesand all other types of taxes that aredeposited. Do not use Form 8109 to paydelinquent or additional taxes assessed bythe IRS. Pay these taxes directly to the IRSService Center and include a copy of anyrelated bills or notices the IRS sent you.

The IRS will send you an FTD couponbook 5 to 6 weeks after you receive anEIN. (Apply for an EIN on Form SS-4.) The

FTD coupons will be preprinted with yourname, address, and EIN. The IRS will keeptrack of the number of FTD coupons youuse and automatically send you additionalFTD coupons when you need them. If youdo not receive your resupply of FTDcoupons, contact your local IRS office.You can have the FTD coupon books sentto a branch office, tax preparer, or servicebureau that is making your deposits byshowing that address on Form 8109C,FTD Address Change, which is in the FTDcoupon book. (Using Form 8109C will notchange your address of record; it willchange only the address where the FTDcoupons are mailed.)

Include an FTD coupon with eachdeposit. Clearly mark the correct TYPE OFTAX and TAX PERIOD on the FTD couponsince it is used to credit the deposit toyour tax account.

If you have branch offices depositingtaxes, give them FTD coupons andcomplete instructions so they can depositthe taxes when due.

Please use only your FTD coupons. Ifyou use anyone elses FTD coupon, youmay be subject to the failure to depositpenalty. This is because your account willbe underpaid by the amount of the depositcredited to the other persons account.See Penalties below for details.

Making deposits.Mail or deliver thecompleted FTD coupon, along with asingle payment, to a financial institutionqualified as a depositary for Federal taxesor to the Federal Tax Department of theFederal Reserve bank or branch (FRB) thatserves your area. An authorized depositoryis a financial institution (e.g., a commercialbank) which is authorized to acceptFederal tax deposits. Follow theinstructions in the FTD coupon book. Makeyour check or money order payable to thedepositary or FRB where you deposit thetaxes. To help ensure proper crediting ofyour account, include your EIN, the type oftax (e.g., Form 943), and the tax period towhich the payment applies on your check

or money order.Depositing without an EIN.If you haveapplied for an EIN but have not receivedit, and you must make a deposit, make thedeposit with your Internal Revenue ServiceCenter. Do not make the deposit at anauthorized depositary or FRB. Make itpayable to the Internal Revenue Serviceand show on it your name (as shown onForm SS-4), address, kind of tax, periodcovered, and date you applied for an EIN.Attach an explanation to the deposit. Donot use Form 8109-B in this situation.


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Depositing without Form 8109.If youdo not have the preprinted Form 8109, youmay use Form 8109-B to make deposits.Form 8109-B is an over-the-counter FTDcoupon that is not preprinted with youridentifying information. It is available at IRSoffices. You will be able to get this form bycalling the general 1-800-TAX-FORMnumber. Be sure to have your EIN readywhen you contact the office. Use Form8109-B to make deposits only if:

You are a new entity and you alreadyhave been assigned an EIN, but you have

not received your initial supply of Forms8109; or

You have not received your resupply ofpreprinted Forms 8109.

Deposit record.For your records, a stubis provided with each FTD coupon in thecoupon book. The FTD coupon itself willnot be returned. It is used to credit youraccount. Your check, bank receipt, ormoney order is your receipt.

How to claim credit for overpayments.If you deposited more than the rightamount of taxes, on the tax return you file,you can ask to have the overpaymentrefunded or applied as a credit to yournext return. Do not ask the depositary orthe FRB to request a refund from the IRSfor you.

Deposits at authorized financialinstitutions.Authorized depositaries mustaccept cash, a postal money order drawnto the order of the depositary, or a checkor draft drawn on and made payable to thedepositary. You can deposit taxes with acheck drawn on another depositary only ifthe depositary is willing to accept that formof payment.

Note: Deposits made at an unauthorizedfinancial institution may be subject to thefailure to deposit penalty.

Deposits at FRBs.If you want to make a

deposit at an FRB, you must make thatdeposit with the FRB serving your area.Deposits may be subject to the failure todeposit penalty if the payment is notconsidered an immediate credit item onthe day it is received by the FRB. Apersonal check, including one drawn on abusiness account, is not an immediatecredit item. To avoid a penalty, depositsmade by personal checks drawn on otherfinancial institutions must be made inadvance of the deposit due date to allowtime for check clearance. To be consideredtimely, the funds must be available to theFRB on the deposit due date before theFRBs daily cutoff deadline. Contact yourlocal FRB for information on check

clearance and cutoff schedules.Timeliness of deposits.The IRSdetermines whether deposits are on timeby the date they are received by anauthorized depositary or FRB. However, adeposit received by the authorizeddepositary or FRB after the due date willbe considered timely if the taxpayerestablishes that it was mailed in the UnitedStates at least 2 days before the due date.

Note: If you are required to deposit anytaxes more than once a month, any deposit

of $20,000 or more must be made by itsdue date to be timely.

Penalties.Penalties may apply if you donot make required deposits on time, youmake deposits at an unauthorized financialinstitution, you pay directly to the IRS, oryou pay with your return (amounts thatmay be paid with a return are limited). Thepenalties do not apply if any failure tomake a proper and timely deposit was dueto reasonable cause and not to willfulneglect. For amounts not properly or timelydeposited, the penalty rates are:

2%deposits made 1 to 5 days late

5%deposits made 6 to 15 days late

10%deposits made 16 or more dayslate. This also applies to amounts paid tothe IRS within 10 days of the date of thefirst notice the IRS sent you asking for thetax due

10%deposits made at unauthorizedfinancial institutions or directly to the IRS(but see Depositing without an EIN onpage 6)

15%amounts still unpaid more than 10days after the date of the first notice theIRS sent you asking for the tax due or theday on which you receive notice and

demand for immediate payment, whicheveris earlier.

Trust Fund Recovery Penalty.If income,social security, and Medicare taxes thatmust be withheld are not withheld or arenot paid to the IRS, the Trust FundRecovery Penalty may apply. The penaltyis 100% of such unpaid taxes. This penaltymay apply to you if these unpaid taxescannot be immediately collected from theemployer or business.

The Trust Fund Recovery Penalty maybe imposed on all persons determined bythe IRS to be responsible for collecting,accounting for, and paying over thesetaxes, and who acted willfully in not doing

so.A responsible person can be an officer

or employee of a corporation, a partner oremployee of a partnership, an accountant,or an employee of a sole proprietorship. Aresponsible person also may include onewho signs checks for the business orotherwise has authority to cause thespending of business funds.

Willfully means voluntarily, consciously,and intentionally. A responsible personacts willfully if the person knows therequired actions are not taking place.

Order in which deposits are applied.Tax deposits are applied first to satisfy anypast due underdeposits, with the oldest

underdeposit satisfied first.Example. Cedar Inc. is required to make

a deposit of $1,000 on February 15 and$1,500 on March 15. Cedar Inc. does notmake the deposit on February 15. OnMarch 15, Cedar Inc. deposits $1,700assuming that it has paid the Marchdeposit in full and applied $200 to the lateFebruary deposit. However, becausedeposits are applied first to past dueunderdeposits in due date order, $1,000 ofthe March 15 deposit is applied to the lateFebruary deposit. The remaining $700 is

applied to the March 15 deposit.Therefore, in addition to an underdeposit of$1,000 for February 15, A has anunderdeposit for March 15 of $800.Penalties will be applied to bothunderdeposits as explained above.

Employers of Both Farm andNonfarm Workers

If you employ farmworkers whose wagesare reported on Form 943 andnonfarmworkers whose wages are reportedon Form 941, you must treat employmenttaxes reportable on Form 943 (Form 943taxes) separately from employment taxesreportable on Form 941 (Form 941 taxes).Form 943 taxes and Form 941 taxes arenot combined for purposes of determiningif (1) a deposit is due, (2) the $100,000one-day rule applies, or (3) any safe harborapplies.

If a deposit is due, deposit the Form 941taxes and the Form 943 taxes withseparate FTD coupons. For example, ifyour tax liability at the end of April is $800reportable on Form 941 and $100reportable on Form 943, deposit bothamounts by the 15th of May. Use one FTDcoupon to deposit the $800 of Form 941

taxes and another FTD coupon to depositthe $100 of Form 943 taxes.

12. Advance Payment of theEarned Income Credit (EIC)An eligible employee (defined later) whohas a qualifying child is entitled to receiveEIC payments with his or her pay duringthe year. To get these payments, theemployee must give you a properlycompleted Form W-5, Earned IncomeCredit Advance Payment Certificate. Youare required to make advance EICpayments to employees who give you a

completed and signed Form W-5, but youare not required to make these paymentsto agricultural workers paid on a dailybasis.

Certain employees who do not have aqualifying child may be able to claim theEIC on their tax return. However, theycannot get advance EIC payments.

Payment of the advance EIC is limited to60% of the EIC an eligible employee wouldreceive if he or she has only one qualifyingchild. For 1995, the advance payment canbe as much as $1,257. The tables thatbegin on page 41 reflect that limit.

Eligible employee.Only eligibleemployees can get advance EIC payments.

The eligibility requirements for advance EICare shown on Form W-5 and aresummarized below:

1. The employee must have a qualifyingchild as defined on Form W-5.

2. The employees expected 1995earned income and adjusted gross income(including the spouses income if theemployee files a joint return) must each beless than $24,396.

3. The employee expects to be eligibleto claim the EIC for 1995. Employees whoexpect to file Form 2555, Foreign Earned


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Income, or Form 2555-EZ, Foreign EarnedIncome Exclusion, for 1995, cannot claimthe EIC.

Caution: At the time this guide went toprint, Congress was considering legislationthat would make most nonresident aliensineligible to claim the EIC for 1995. Forlater information about this legislation, getPub. 553, Highlights of 1994 Tax Changes.

Form W-5.On Form W-5, an employeestates that he or she expects to be eligiblefor the EIC and shows whether he or shehas a certificate in effect with any othercurrent employer. The employee alsoshows the following:

Whether he or she has a qualifying child.

Whether he or she is married.

If the employee is married, whether hisor her spouse has a certificate in effectwith any employer.

An employee may have only onecertificate in effect with a current employerat one time. If an employee is married andhis or her spouse also works, each spouseshould file a separate Form W-5.

Length of effective period.Form W-5remains in effect until the end of thecalendar year unless the employee revokes

the certificate or files another one. Eligibleemployees must file a new certificate eachyear.

Change of status.If an employeegives you a signed Form W-5 and laterbecomes ineligible for advance EICpayments, he or she must revoke thecertificate within 10 days after learningabout the change of circumstances. Theemployee must give you a new Form W-5stating that he or she is no longer eligiblefor or no longer wants advance EICpayments.

If the employees situation changesbecause his or her spouse files a FormW-5, the employee must file a new Form

W-5 showing that his or her spouse has acertificate in effect with an employer. Thiswill reduce the maximum amount ofadvance payments you can make to thatemployee.

If the employees spouse has filed aForm W-5 that is no longer in effect, theemployee may file a new Form W-5 withyou, but is not required to do so. A newform will certify that the spouse does nothave a certificate in effect and will increasethe maximum amount of advancepayments you can make to that employee.

Invalid certificate.The Form W-5 isinvalid if it is incomplete, unsigned, or hasan alteration or unauthorized addition. The

form has been altered if any of thelanguage has been deleted. Any writingadded to the form other than therequested entries is an unauthorizedaddition.

You should consider a certificate invalidif an employee has made an oral or writtenstatement that clearly shows the Form W-5to be false. If you receive an invalidcertificate from an employee, tell theemployee that the certificate is invalid asof the date the employee made the oral orwritten statement. For advance EIC

payment purposes, the invalid certificate isconsidered void.

You are not required to determine if acompleted and signed Form W-5 iscorrect. However, you should contact theIRS district director if you have reason tobelieve the certificate has any incorrectstatement.

How to figure the advance EICpayment.You must include advance EICpayments with wages you pay to eligibleemployees who give you a signed andcompleted Form W-5. Make the initialcertificate effective for the first payrollperiod ending (or the first wage paymentmade without regard to a payroll period) onor after the date the employee gives youthe form.

For purposes of the advance EICpayment, wages means amounts subjectto income tax withholding. For employeeswho claim exemption from income taxwithholding on Form W-4, wages meansamounts that would have been subject toincome tax withholding. For householdemployees, wages means amounts subjectto social security and Medicare taxes.

To figure the amount of the advance EICpayment to include with the employeespay, you must consider:

1. Wages, including reported tips, for thepay period.

2. Whether the employee is married orsingle.

3. Whether a married employees spousehas a Form W-5 in effect with an employer.

Note: If during the year you have paid anemployee total wages of at least $24,396,you must stop making advance EICpayments to that employee for the rest ofthe year.

Figure the amount of advance EIC toinclude in the employees pay by using thetables that begin on page 41. There are

separate tables for employees whosespouses have a certificate in effect. If anemployee shows on Form W-5 that his orher spouse has a Form W-5 in effect withan employer, use either the wage bracketor percentage method tables titledMARRIED With Both Spouses FilingCertificate. Otherwise, use either the wagebracket or percentage method tables titledSINGLE or MARRIED Without SpouseFiling Certificate. Be sure to use thecorrect table for your pay period (i.e.,weekly, biweekly, monthly, daily, etc.).

Example. You pay Wanda Carter $140 aweek. She has given you a Form W-5 thatshows she is married and her husband has

given his employer a Form W-5. You havedecided to use the wage bracket methodto figure your advance EIC payments. Youturn to the wage bracket tables for aweekly payroll period, and look at the tableMARRIED With Both Spouses FilingCertificate. According to this table, youwill include a $9 advance EIC paymentwith Wanda Carters net pay for the week.

Paying the advance EIC to employees.An advance EIC payment is not wages andis not subject to withholding of income,social security, or Medicare taxes. Anadvance EIC payment does not change the

amount of income, social security, orMedicare taxes you withhold from theemployees wages. You add the EICpayment to the employees net pay for thepay period. At the end of the year, youshow the total advance EIC payments inthe box for Advance EIC payment on theForm W-2. Do not include this amount inthe Wages... box.

Employers returns.Show the totalpayments you made to employees on theadvance EIC line of your Form 943.Subtract this amount from your total taxes

(see the specific instructions for Form 943).Reduce the amounts reported on yourrecord of Federal tax liability by anyadvance EIC paid to your employees.

Generally, employers will make theadvance EIC payment from withheldincome tax and employee and employersocial security and Medicare taxes. Thesetaxes are normally required to be paid overto the IRS either through Federal taxdeposits or with employment tax returns.For purposes of deposit due dates,advance EIC payments are considereddeposited on the day you pay wages(including the advance EIC payment) toyour employees. The advance EIC payment

reduces, in this order, the amount ofincome tax withholding, withheld employeesocial security and Medicare taxes, andthe employers share of social security andMedicare taxes.

Example. You have 10 employees, eachentitled to an advance EIC payment of$10. The total advance payments youmake for the payroll period is $100. Thetotal income tax w ithholding for the payrollperiod is $90. The total employee andemployer social security and Medicaretaxes for the payroll period is $122.60($61.30 each).

You are considered to have made adeposit of $100 advance EIC payment on

the day you paid wages, and you subtractthis amount from your employment taxesfor the payroll period. The $100 is treatedas if you paid the IRS the $90 total incometax withholding and $10 of the employeesocial security and Medicare taxes. Youremain liable only for $112.60 of the socialsecurity and Medicare taxes ($51.30 +$61.30 = $112.60).

Advance EIC payments more than taxesdue.If for any payroll period the totaladvance EIC payments are more than thetotal payroll taxes (withheld income taxand both employee and employer share ofsocial security and Medicare taxes), youmay choose either of the following options:

Option 1. Reduce each employeesadvance payment by an amount figured bymultiplying the employees advancepayment by a fraction. The numerator isthe excess advance amount and thedenominator is the total advance EICpayments for the pay period.

Option 2. Elect to make full payment ofthe advance EIC and treat the excess asan advance payment of employment taxes.The excess payment is applied first toincome tax withholding, next to employeesocial security and Medicare taxes, andthen to employer social security and


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Medicare taxes due for the reportingperiod in which the excess was paid.

Example. You have 10 employees whoare each entitled to an advance EICpayment of $10. The total amount ofadvance EIC payments for the payrollperiod is $100; the total employment tax is$90. The advance EIC amount is $10 morethan the total employment tax.

Under Option 1, reduce the advancepayment to each employee by $1.00, or1/10 of the excess payment, figured asfollows:

$10 (excess advance amount)= 110 $10 = $1.00

$100 (total advance payments)

Under Option 2, you choose to pay eachemployee the full advance EIC amount($100 total) and treat the excess advancepayments ($10) as an advance payment ofemployment taxes. Show the full $100 asadvance EIC on your employment taxreturn for the reporting period in which youmade the payment.

If you elect to make full payment, youmust include with your employment taxreturn a statement of the amount of theexcess advance EIC payments and thepayroll period to which the excess applies.

You may make separate elections forseparate pay periods. If the amount ofemployment taxes you owe on the returnremains less than the amount of excesspayment, you may claim a refund of thedifference or have the credit applied toyour next return.

Penalty.You must make advance EICpayments to employees who correctly fillout Form W-5. If you do not, you may besubject to a penalty equal to the amount ofthe advance EIC payments not made.

Required Notice to Employees

You must notify employees who have noincome tax withheld that they may be able

to claim a tax refund because of the EIC.Although you do not have to notifyemployees who claim exemption fromwithholding on Form W-4 about the EIC,you are encouraged to notify anyemployees whose wages for 1994 wereless than $25,296 that they may be eligibleto claim the credit for 1994. This isbecause eligible employees may get arefund of the amount of EIC that is morethan the tax they owe. For example, anemployee who had no tax withheld in 1994and owes no tax, but is eligible for a $790EIC, can file a 1994 tax return to get a$790 refund.

You can notify your employees by giving

them one of the following:1. The IRS Form W-2 that has the

required statement about the EIC on theback of Copy C.

2. A substitute Form W-2 with the sameEIC statement on the back of theemployees copy that is on Copy C of theIRS Form W-2.

3. Notice 797, Possible Federal TaxRefund Due to the Earned Income Credit(EIC).

4. Your written statement with the samewording as Notice 797.

If you are required to give Form W-2 anddo so on time, no further notice isnecessary if the Form W-2 has therequired statement about the EIC on theback of the employees copy. If asubstitute Form W-2 is given on time butdoesnt have the required statement, youmust notify the employee within 1 week ofthe date the substitute Form W-2 is given.If Form W-2 is required but isnt given ontime, you must give the employee Notice797 or your written statement by the dateForm W-2 is required to be given. If Form

W-2 is not required, you must notify theemployee by February 7, 1995.

For more information about notificationrequirements, get Notice 1015 (formerlyPub. 1325), EmployersHave You ToldYour Employees About the Earned IncomeCredit (EIC)?

Note: You are encouraged to notify thefollowing employees that they may be ableto claim the EIC on their 1995 returns:

Employees with one qualifying child andwages less than $24,396.

Employees with two or more qualifyingchildren and wages less than $26,673.

Employees without a qualifying child and

wages less than $9,230.

13. Requirements for FilingForm 943You must file a Form 943 for eachcalendar year beginning with the first yearyou pay $2,500 or more for farmwork oryou employ a farmworker who meets the$150 test explained in section 6. Do notreport these wages on Form 941.

After you file your first return, each yearwe will send you a Form 943 preaddressedwith your name, address, and EIN. If youdo not receive the preaddressed form,request one from any IRS district office. Ifyou use a blank form, show your nameand EIN exactly as they appeared onprevious returns.

Send Form 943, with payment of anytaxes due that are not required to bedeposited, to the IRS by January 31following the year for which the return isfiled (or February 10 if the tax was timelydeposited in full). Please note that theremay be different addresses for filingreturns, depending on whether you file withor without a payment.

Penalties.For each month or part of amonth a return is not filed when required(disregarding any extensions of the filingdeadline), there is a penalty of 5% of theamount that should have been shown onthe return. The maximum penalty is 25%.Also, for each month or part of a monththe tax is paid late (disregarding anyextensions of the payment deadline), thereis a penalty of 0.5% per month of theamount shown as due. The maximumamount of this penalty cannot exceed25%. The penalties will not be charged ifthere is an acceptable reason for failing tofile or pay. If you file or pay late, attach anexplanation to your Form 943.

In cases where income, social security,and Medicare taxes to be withheld are notwithheld or are not paid to the IRS, certainofficers or employees of a corporation orcertain members or employees of apartnership may become personally liablefor the payment of these taxes andpenalized an amount equal to the taxes.This is known as the Trust Fund RecoveryPenalty. (See page 7.)

14. Correcting Errors

Errors in Withholding SocialSecurity and Medicare Taxes

If you withhold no tax or less than thecorrect amount, you may correct themistake by withholding the tax from a laterpayment to the same employee.

If you withhold employee tax when notax is due or if you withhold more than thecorrect amount, you should repay theemployee.

If you are unable to repay anovercollection to the employee by the endof the year, you must pay it to the IRS inJanuary of the following year. Attach a

separate statement that explains theovercollection and shows your employeessocial security number, name, and theamount you overcollected and did notrepay the employee. If you are required tofile a Form 943 for the year, enter theamount of the overcollection as an additionon line 8 of the return and send thepayment and statement with the return.

You cannot adjust amounts reported asincome tax withheld in a prior calendaryear unless it is to correct anadministrative error. An administrative erroris any error that does not change theamount of income tax that was actuallywithheld or deducted from an employee.For example, if the total income taxactually withheld was incorrectly reporteddue to a mathematical computation ortransposition error, this would be anadministrative error.

You will not be allowed a refund orcredit for any prior year overpayment ofincome tax that you withheld or deductedfrom an employee. This is because theemployee uses the amount shown on FormW-2 as a credit when filing the income taxreturn (Form 1040, etc.).

Other Errors in Reporting SocialSecurity and Medicare Taxes

If, after filing a return, you find you made a

mistake that resulted in your paying toomuch tax, you may file Form 843, Claimfor Refund and Request for Abatement, toclaim a refund of the overpayment or youmay subtract the amount from the tax youreport on your next return. If the mistakeresulted in your not paying enough tax andan additional payment has not beenrequested, add the amount to the tax youreport on your next tax return. You mayreport your mistakes (including decreasesand increases in tax) on your next Form943 by using line 8 of the return. Becauseany amount shown on line 8 increases or


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decreases your tax liability, the adjustmentmust be included on your record of Federaltax liability on Form 943 or 943-A. Yourdeposit requirements determine whichliability report is used. Include theadjustment in the report entry area thatcorresponds with the date on which theerror was found. If you prefer, you mayreport the amount immediately on aseparate return marked Supplemental. Ineither case, attach an explanation of theerror on a sheet of paper or Form 941c tothe return.

Do not file Form 941c separately fromForm 943. Form 941c is not an amendedreturn, but is a statement providingnecessary certification and backgroundinformation supporting the adjustments online 8 of Form 943.

If you incorrectly reported or left outwages on Form 943, show on a statementor on Form 941c the total wages for allyour employees as previously reported andas corrected. Since Form W-2 is used bythe SSA to post the employees socialsecurity wages to his or her earningsrecord, you must give Form W-2c to theemployee and send Copy A of Form W-2cto the SSA if a Form W-2 was issued

showing any incorrect social security entry.Forms W-2c, Statement of Corrected

Income and Tax Amounts, and W-3c,Transmittal of Corrected Income and TaxAmounts, must be used to correct errors inpreviously filed Forms W-2.

Note: For the purposes of filing a claim, atimely filed Form 943 is considered to befiled on April 15 of the year after the closeof the tax year and a claim may be filedwithin 3 years from that date.

15. Filing Forms W-2You must furnish a Form W-2 to everyemployee to whom you paid any amountfor services, including the cash value ofany payment you made that was not incash (e.g., noncash fringe benefits). If youemploy a family of workers, you mustprepare a Form W-2 for each familyworker, not just the head of the household.

Furnish Form W-2 to each recipient ofsupplemental unemployment compensationbenefits or third-party sick pay.

You must furnish a Form W-2 to anyemployee if the wages were subject tosocial security and Medicare taxes. OnForm W-2, you must show social securitywages separately from Medicare wages,and you must show social security taxesseparately from Medicare taxes.

By January 31, 1995, furnish Form W-2to each employee who was working foryou at the end of 1994. If an employeestops working for you during 1995, furnishhim or her Form W-2 any time afteremployment ends but no later thanJanuary 31, 1996. However, if theemployee asks you for Form W-2, furnishhim or her the completed form within 30days of the request or the last wagepayment, whichever is later.

Furnish each employee from whom youwithheld no income tax (other than those

who claimed exemption from withholdingon Form W-4) a copy of Notice 797. SeeNotice 1015 for information on when andhow to furnish it. Both items are availablefrom the IRS.

How to get forms.You can get FormW-2 from the IRS (see page 47). Privateprinters also produce them. You can usethese substitute forms for filing returnswith the SSA and for furnishing statementsto employees if they comply with therequirements in Pub. 1141. The paperforms you send to the SSA must be in

scannable format.

Preparing Forms W-2 and W-3

For more information, see the instructionsfor Form W-2 and Form W-3. Mostemployers of farmworkers will completeonly the following boxes on the 1994Forms W-2 and W-3. If any entry does notapply to you, leave it blank. Also, seeReconciling the Forms W-2, W-3, and943 on page 11.

Form W-2

Boxes b, c, d, e, and f.

Boxes 1 through 6, 9, and 16 through 21.

Form W-3Boxes b, c, e, f, g, and i.

Boxes 1 through 6, 9, 13, and 14.

16. Magnetic MediaReportingYou may be required to use magneticmedia to furnish the information requiredby Forms W-2, W-2G, 1042S, 1098, 1099,and 5498. This requirement appliesseparately to each type of informationreturn. Generally, you are required to usemagnetic media if you file at least 250

returns on any of the above forms otherthan Forms 1099-INT, DIV, OID, PATR, andB. Magnetic media reporting is required ifyou file more than 50 returns on 1099-INT,DIV, OID, or PATR. Any returns filed onForm 1099-B must be on magnetic media.

For the requirements for furnishinginformation on magnetic media for FormW-2, get Pub. 1141 and write to: SocialSecurity Administration, Attn: ResubmittalGroup, 3-E-10 NB, Metro West Building,P.O. Box 2317, Baltimore, MD 21235. Forrequirements for the Forms 1042S, 1098,1099, 5498, and W-2G, get Pub. 1220,Specification for Filing Forms 1098, 1099,5498, and W-2G Magnetically orElectronically, and write to: InternalRevenue Service, Martinsburg ComputingCenter, P.O. Box 1359, Martinsburg, WV25401-1359 (or phone 304-263-8700).

If filing on magnetic media would be anundue hardship, you can apply for a waiverfrom this requirement, for 1 year at a time,by filing Form 8508, Request for WaiverFrom Filing Information Returns onMagnetic Media. Generally, apply for thiswaiver at least 45 days before the duedate of the returns. For more informationon obtaining a waiver, see Form 8508.

If you are filing Forms 1099, 1098, 5498,or W-2G data on magnetic media for thefirst time, you must obtain IRS approval ofthe data format you plan to use. Form W-2filers should see SSAs TIB-4 publication.

Filers with access to a personalcomputer and a modem may also obtaininformation on magnetic media filing fromthe electronic Bulletin Board System (BBS)through either the SSA-BBS or theIRP-BBS (IRS). By using your computerand modem, you can access the SSA-BBSby dialing 410-965-1133 or the IRP-BBS

by dialing 304-263-2749 (these lines arenot toll free or for voice use).

17. Paying and DepositingFederal Unemployment(FUTA) TaxIn general, cash wages paid to yourfarmworkers are subject to the Federalunemployment tax (FUTA) if you:

Paid cash wages of $20,000 or more tofarmworkers in any calendar quarter in1993 or 1994; or

Employed 10 or more farmworkers

during some portion of a day (whether ornot at the same time) for at least 1 dayduring any 20 different weeks in 1993 or1994.

Count aliens admitted on a temporarybasis to the United States to performfarmwork, also known as workers withH2(A) visas, to determine if you meet eitherof the above tests. Wages paid to thesealiens are exempt through 1994. (SpecialAgricultural Workers are not members ofthis group.)

Farmworkers supplied by a crew leaderare considered employees of the farmoperator for purposes of the FUTA taxunless (1) the crew leader is registered

under the Migrant and SeasonalAgricultural Worker Protection Act, or (2)substantially all the workers supplied bythe crew leader operate or maintaintractors, harvesting or cropdustingmachines, or other machines provided bythe crew leader.

You must deposit FUTA tax with anauthorized financial institution or the FRBthat serves your area. The deposit rulesfor FUTA tax are different from those forincome, social security, and Medicaretaxes.

Figure your liability for FUTA tax on aquarterly basis. To determine whether youmust make a deposit for any of the first

three quarters in 1995, figure your FUTAtax by multiplying by .008 that part of thefirst $7,000 of each employees annualwages that you paid during the quarter. Ifany part of the first $7,000 paid toemployees is exempt from stateunemployment taxes, you may deposit anamount in excess of the .008 rate.

If the amount of FUTA tax for thecalendar quarter (plus any undepositedFUTA tax for earlier quarters in the year) ismore than $100, deposit the total amountduring the first month following the quarter.If the total amount is $100 or less, add it


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to the FUTA tax for the next quarter anddo not make a deposit. Do this for the firstthree quarters of the year. Use Form 8109to make these deposits.

By January 31, file Form 940 or Form940-EZ. If you make deposits on time infull payments of the tax due for the year,you may file Form 940 or 940-EZ on orbefore February 10.

Form 940-EZ is a simple unemploymenttax return for filers with uncomplicated taxsituations. You can generally use Form940-EZ if:

You pay state unemployment taxes(contributions) to only one state;

You make the payments to the state bythe due date of Form 940-EZ; and

All wages subject to FUTA tax are alsosubject to state unemployment tax.

If you do not meet these conditions, fileForm 940 instead.

If the FUTA tax reported on Form 940 or940-EZ minus the amounts deposited forthe first three quarters is more than $100,deposit the whole amount by January 31.If the tax (minus any deposits) is $100 orless, you may either deposit the tax or payit with the return by January 31.

Once you have filed a Form 940 or940-EZ, we will send you a preaddressedform near the end of each calendar year. Ifyou do not receive a form, request onefrom an Internal Revenue Service office intime to file when due.

To amend a return after you have filed it,complete a Form 940 or 940-EZ with therevised figures. Check the box above Part Iand attach an explanation of the revision.

Note: If you have acquired a business fromsomeone else, you may be able to claim aspecial credit as a successor employer,under Code section 3302(e). This creditapplies only if the previous owner was not

an employer liable for the FUTA tax in theyear you acquired the business. SeeRegulations section 31.3302(e)-1 fordetails. Also see Rev. Proc. 84-77, 1984-2C.B. 753, for the procedures used in filingreturns in a predecessor-successorsituation.

Magnetic tape filing of Form 940.Reporting agents filing Forms 940 forgroups of taxpayers can file them onmagnetic tape (see Pub. 1314, MagneticTape Reporting of Form 940, EmployersFederal Unemployment (FUTA) Tax Return).

18. Records You Should

KeepEvery employer subject to employmenttaxes must keep all related recordsavailable for inspection for at least 4 yearsafter the due date of the return period towhich the records relate, or the date thetaxes are paid, whichever is later. You maykeep the records in whatever form youchoose.

Keep a record of:

Your EIN.

Names, addresses, social securitynumbers, and occupations of employees.

Dates of employees employment.

Amounts and dates of all cash wages,noncash payments, annuity, and pensionpayments.

Periods for which employees were paidwhile absent due to sickness or injury, andthe amount and weekly rate of paymentsyou or third-party payers made to them.

Copies of employees income taxwithholding allowance certificates.

Copies of Form W-5.

Advance EIC payments.

Dates and amounts of tax deposits youmade.

Copies of returns filed.

Any amount deducted as employeesocial security and Medicare taxes.

The amount of income tax withheld.

Records of fringe benefits provided,including substantiation required underCode section 274 and related regulations.

If you did not keep records because youdid not expect to pay $2,500 or more foragricultural labor or did not expect anemployee to meet the $150 test and youlater find the wages will be taxable, youshould begin keeping records for theemployee. Estimate as best you can whatyou paid the employee previously duringthe year.

If a crew leader furnished you withfarmworkers, you must keep a record ofthe name, permanent mailing address, andEIN of the crew leader. If the crew leaderhas no permanent mailing address, recordhis or her present address.

19. Reconciling the FormsW-2, W-3, and 943When there are discrepancies betweenamounts reported on Form 943 filed withthe IRS and Forms W-2 and W-3 filed withthe SSA, we must contact you to resolvethe discrepancies. This costs time andmoney, both for the Government and foryou the employer.

To eliminate errors that can causediscrepancies

1. Report bonuses as wages and associal security and Medicare wages onForms W-2 and 943.

2. Report both social security andMedicare wages and taxes separately onForms W-2, W-3, and 943.

3. Report social security taxes on FormW-2 in the box for social security taxwithheld, not as social security wages.

4. Report Medicare taxes on Form W-2in the box for Medicare tax withheld, notas Medicare wages.

5. Make sure social security wageamounts for each employee do not exceedthe annual social security wage maximumlimits.

6. Do not report noncash wages notsubject to social security or Medicaretaxes as social security or Medicarewages.

To reduce the discrepancies betweenamounts reported on Forms W-2, W-3, and943

1. Be sure the amounts on Form W-3are the total amounts from Forms W-2.

2. Reconcile Form W-3 with your Form943 by comparing amounts reported for

Social security wages, social security

tips, and Medicare wages and tips. Theamounts may not match if, for example,you made adjustments for the current yearon Form 941c. In this case, the amountsreported in boxes 13 and 14 of Form W-3should include Form 941c adjustmentsonly for the current year (i.e., if the Form941c adjustments include amounts for aprior year, do not report those adjustmentson the current year Form W-3).

Social security and Medicare taxes. Theamounts shown on the Form 943, includingcurrent year adjustments, should beapproximately twice the amounts shownon Form W-3.

Advance earned income credit.

As noted, amounts reported on FormsW-2, W-3, and 943 may not match forvalid reasons (e.g., you paid a householdemployee less than $1,000 for 1994,reported the wages on Form W-2, andrefunded the Medicare and social securitytaxes to the employee. See section 21.). Ifthey do not match, you should determinethat the reasons are valid. Keep yourreconciliation so you will have a record ofwhy amounts did not match in case thereare inquiries from the IRS or the SSA.

20. How to Use the IncomeTax Withholding andAdvance Earned IncomeCredit (EIC) Payment Tables

Percentage Method

If you do not want to use the wage brackettables on pages 18 through 37 to figurehow much income tax to withhold, you canuse a percentage computation based onthe table below and the appropriate ratetable. This method works for any numberof withholding allowances the employeeclaims.

Use these steps to figure the income taxto withhold under the percentage method:

1. Multiply one withholding allowance(see table below) by the number ofallowances the employee claims.

2. Subtract that amount from theemployees wages.

3. Determine amount to withhold fromappropriate table on page 16 or 17.


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Percentage MethodAmount for OneWithholding Allowance

One with-Payroll period holding

allowance

Weekly $48.08Biweekly 96.15Semimonthly 104.17Monthly 208.33Quarterly 625.00Semiannually 1,250.00Annually 2,500.00

Daily or miscellaneous (eachday of the payroll period) 9.62

Example. An unmarried employee ispaid $450 weekly. This employee has ineffect a Form W-4 claiming twowithholding allowances. Using thepercentage method, figure the income taxas follows:

1. Total wage payment $450.00

2. One allowance $48.08

3. Allowances claimedon Form W-4 2

4. Line 2 times line 3 96.16

5. Amount subject to

withholding (subtract line 4from line 1) $353.84

6. Tax to be withheld on$353.84 from Table 1single person, page 16 45.58

To figure the income tax to withhold, youmay reduce the last digit of the wages tozero, or figure the wages to the nearestdollar.

Annual income tax withholding.Figurethe income tax to withhold on annualwages under the Percentage Method ofWithholding for an annual payroll period.Then prorate the tax back to the payrollperiod.

Example. A married person claims fourwithholding allowances. She is paid $1,000a week. Multiply the weekly wages by 52weeks to figure the annual wage of$52,000. Subtract $10,000 (the value offour withholding allowances) for a balanceof $42,000. The table for the AnnualPayroll Period gives a tax of $5,340 to bewithheld. Divide the annual tax by 52. Theweekly tax is $102.69.

Wage Bracket Method

Under the wage bracket method, find theproper table (on pages 18 through 37) foryour payroll period and the employeesmarital status as shown on his or her FormW-4. Then, based on the number of

withholding allowances claimed on theForm W-4 and the amount of wages, findthe amount of tax to withhold. If youremployee is claiming more than 10withholding allowances, see below.

Note: If you cannot use the wage brackettables because wages exceed the amountshown in the last bracket of the table, usethe percentage method of withholdingdescribed above. Be sure to reduce wagesby the amount of total withholdingallowances before using the percentagemethod tables on pages 16 and 17.

Adjusting Wage BracketWithholding for EmployeesClaiming More Than 10Withholding Allowances

Note: The percentage method of figuringwithholding adapts to any number ofallowances.

The wage bracket tables can be used ifan employee claims up to 10 allowances.More than 10 allowances may be claimedbecause of the special withholding

allowance, additional allowances fordeductions and credits, and the systemitself.

To adapt the tables to employees withmore than 10 allowances:

a. Multiply the number of w ithholdingallowances over 10 by the allowance valuefor the payroll period. (The allowancevalues are in the Percentage MethodAmount for One Withholding Allowancetable above.)

b. Subtract the result from theemployees wages.

c. On this amount, find and withhold thetax in the column for 10 allowances.

This is a voluntary method. If you usethe wage bracket tables, you may continueto withhold the amount in the 10 columnwhen your employee has more than 10allowances, using the method above. Youcan also use any other methods describedbelow.

Alternative Methods ofIncome Tax WithholdingRather than the Percentage or WageBracket Methods described above, youcan use an alternative method to withholdincome tax. Pub. 493 describes thesealternative methods and contains:

a. Formula tables for percentage methodwithholding (for automated payrollsystems).

b. Wage bracket percentage methodtables (for automated payroll systems).

c. Combined income, social security,and Medicare tax withholding tables.

Some of the alternative methodsexplained in Pub. 493 are annualizedwages, average estimated wages,cumulative wages, and part-yearemployment. For more information onalternative methods, also see Regulationssections 31.3402(h)(1)-1 through (h)(4)-1.

Advance Earned IncomeCredit (EIC) PaymentMethodsTo figure the advance EIC payment, youmay use either the Percentage Method orthe Wage Bracket Method explainedbelow. You may use other methods forfiguring advance EIC payments if theamount of the payment is about the sameas it would be using tables in this booklet.See the tolerances allowed in the chartunder Other Methods in Pub. 493. Seesection 12 in this publication for an

explanation of the advance payment ofEIC.

Percentage Method

If you do not want to use the wage brackettables to figure how much to include in anemployees wages for the advance EICpayment, you can use the percentagecomputation based on the appropriate ratetable.

Find the employees gross wages beforeany deductions in the appropriate table onpages 41 and 42. There are different tablesfor (a) single or married employees withoutspouse filing a certificate and (b) marriedemployees with both spouses filingcertificates. Determine the amount of theadvance EIC payment shown in theappropriate table for the amount of wagespaid.

Wage Bracket Method

If you use the wage bracket tables onpages 43 through 45, figure the advanceEIC payment as follows.

Find the employees gross wages beforeany deductions, using the appropriatetable. There are different tables for(a) single or married employees withoutspouse filing a certificate and (b) marriedemployees with both spouses filingcertificates. Determine the amount of theadvance EIC payment shown in theappropriate table for the amount of wagespaid.

With either method, the number ofwithholding allowances an employeeclaims on Form W-4 is not used in figuringthe advance EIC payment. Nor does itmatter that the employee has claimedexemption from income tax withholding onForm W-4.

Whole Dollar Withholding

and Paying Advance EICThe income tax withholding amounts in thewage bracket tables (pages 18 through 37)have been rounded to whole dollars.

When employers use the percentagemethod (pages 16 and 17) or an alternativemethod of income tax withholding, the taxfor the pay period may be rounded to thene

Documents

US Internal Revenue Service: p51--1995