Have a Tax Question? Ask a Tax Expert
Hi my name is XXXXX XXXXX I will be helping you today with your tax question.
Employee withholding tax on 941 is one of the forms of a corporate tax that you can be held personally liable for so you need to do what you can to catch up as fast as possible. How delinquent are you? Even though you are a monthly filer with the state you will still be quarterly with the IRS. To calculate what you are delinquent for with the Federal IRS you need to do all the 941 returns by adding income tax withholdings from the employee to 15.3% of their wages for FICA and subtract any tax deposits you made from the total tax. Then for each return for every month you are late filing there is a 5% penalty on unpaid tax for late filing and a 1/2% penalty for late payment. Both penalties max out at a total of 25%. If you did not make your federal tax deposits you also have a 10% penalty on the total tax owed for each quarter. The sooner you get these in the lower your penalties will be.
Thank you, XXXXX XXXXX about state?
The state is simply withholdings there is no FICA tax with the state so what you owe to the state is going to be much less. Just whatever the withholding from the employee is that is the total tax owed. For the penalty rate you will have to look in the instruction book, they are similiar to federal for most states but unfortunately because there are 50 states I dont have those all memorized.
Basically for the state total tax just add up all employee state tax withholding and add it together for months you didnt file that will be the total tax there.
well, my question specifically asked about California. Can you please look it up for me and/or point me to the right web site for the detailed info?
yes I am doing that right now for you
sorry i didnt say that
The penalties are exactly the same as federal for late payment and late filing. Late filing is 5% a month maxing out at 25% and late payment is 1/2% a month maxing out at 25% (after 50 months)
How many periods are you late on? I can help you run the math if you have the total tax for each quarter
As a quick summary for you both the IRS and the state of California have similar tax penalties for late filing and late paying. Most states model themselves after federal for ease. Federally you calculate the 941 tax by adding federal income tax withholding to 15.3% of taxable social security wages (unless the periods are from 2011 and 2012 then this rate was 13.3%). For the state the total employment tax is only the sum of all of the state income tax withholdings. For both sets if you filed the returns late it is 5% a month up to 25% max (5 months). If you paid the tax late it is 1/2% per month up to 25% maximum. If you were required to use the EFTPS system and didn't it is a 10% penalty on the undeposited tax for that. You also pay an annual interest rate for both which right now is about 4% a year.
Filed for April-May-June on 7/15, so they already have made the calculation for late/penalties.
did you file the return on time?
apparently, yes for June, but not for April/May.
Each pay period is gross $12,000.
Paid July 31, August 31, Sept 30
And how often is your pay period? Monthly? Weekly? Biweekly?
THANK YOU FOR HELPING W/Calculation
all is monthly
So federally with the IRS you are not late because you filed the 2nd Quarter return for April May JUne by 7/31/13? And you are going to file the third quarter by 10/31?
Also when you say that gross per monthly pay period is $12,000 I am assuming that is the gross payroll. I need to know what the state tax withholding is and the federal tax withholding is in order to help you with the calculation.
$12k is Gross payroll indeed.
pulling up my IRS & EDD forms to tell you what I did.
this is all for my 7/31 filing. Nothing since
Have you made any deposits for the current quarter?
The third quarter, July, Aug, Sept?
no. only 2Q 2013. I need to do 3Q and start 4Q as appropriate
be just a minute...
state requires monthly; do the feds as well?
Deposits are required monthly, not filing of the return
Deposits are required on the 15th of each month for the prior month's withholding
Are you sure that the state is telling you that you need to file an actual employment tax return monthly? Or just make the tax deposit payment monthly?
Ah! I don't know the difference. I did call them and they said I need to be a monthly depositor, not filer. Here's what I've been doing with payroll
Okay then all you need to do is make a monthly deposit, you only need to file your return quarterly
So its the same exact schedule as the federal is
is schedule to file by end of the month that follows end of the quarter?
Am I killing myself with detail and would I be better off using an online payroll service? If so, what do you recommend?
Yes, the first quarter ends March 31, you must file by April 30th; the second quarter ends June 30th, file by July 31; 3rd Quarter ends Sept 30th, must file by Oct 31; 4th Quarter ends Dec 31, must file by Jan 31
great. So I'm late with payments, but not filing?
You honestly might be better off using an online payroll service, if you have quickbooks you can do it right through there and you basically handle it yourself but it puts together all the forms for you and reminds you when to make deposits and does all of the calculations; or you can use Paychex or ADP who will take complete ownership of it for you
Correct, you are only late with deposits so the penalties are not as bad
Do the online services help me with the catchup, or am I on my own for that?
They probably would but honestly you may be better off just taking care of these yourself, I would even suggest starting with them on Jan 1, 2014 because it is much cleaner to start at the beginning of the year.
Joe, thank you again. is it reasonable for you to double check my math? Happy to pay a bonus
You should not get too tedious about what the penalties would be. If your wages and withholding are the same every month and its $12k of wages, then for each quarter for Federal you will owe $9600.12 (multiply the monthly federal withholding by 3, and then the total wages by 3 for $36K and take 15.3% of that)
For state UI you will owe $2,448, for state employment tax you will owe $2266.35
I cant double check the withholding, but your math for the social security and medicare is right, just remember that is the employee's portion, to get the total you need to double that because the employer pays half the FICA
The figures I gave you above are the totals you will owe for each quarter as long as everything remains constant.
want to check my form again for a moment...
At the end of the year you also have to file a Federal Unemployment Tax Return Form 940 Due 1/31/2014.
If you can copy and paste or type in here surely
So for the may & june (only started 2013 Payroll in May), paid $24k gross, California UI 816.00, ETT 24.00, California PIT 1510.90. Is that correct?
Sorry just checking the math
How many employees did you have?
I am the only employee
okay for UI that makes a diff
bc only first $7k of wages are taxable
Your UI is only $434
Did I overpay?
6.2% of $7,000
For UI you did but they will either refund it to you or offset it as a credit
will my overpayment mitigate the penalties for contributing quarterly rather than monthly?
Your PIT and ETT are good
It wont mitigate them but it can offset to cover the penalties
This is what I would do, with the bill they sent you for penalties I would send in a letter that explains you are a new business and were unaware of the monthly requirement to make depsoits, that you are requesting the abatement of the penalties under a one time waiver.
They should usually grant that the first time
great! For the feds, also just followed the tables on the 941.
is that correct?
"one time abatement," understood for CA. May that also work for the Feds? breathing easier now. Thank you for everything.
yes will work for feds too
does my fed math work?
your math is a little off, medicare is double that, $696
Your withholding math is right, Social security is right
Medicare the employee pays half and employer pays half, total of 2.9% of wages
Just looked at the form. You are correct in correcting me on the Medicare. Don't know how I messed that up. Another vote for Quickbooks payroll!
You can always double check your social security and medicare by multiplying gross wages by 15.3% (For SS each employer and employee pay 6.2% total of 12.4% plus the 2.9% for medicare)
You know enough here to be able to do the Quickbooks way, itll populate all returns for you based on what you punch in for total wages so itll make it very easy
Sooooo... am I $348 delinquent on Medicare? How do I fix that? Do I send a letter with my next 941 and a restated 2Q 941? California is GREAT on the phone; is there a recent resource by phone or web with IRS or do I just rely on the US Mail?
The medicare is federal only, you can call by phone but honestly I would just make the $348 today either mail it in and use a 941-V payment voucher designating it to the 2nd Quater 941 or use EFTPS.Gov to pay it online
If you can also go in today for federal and state and make the deposits you missed for the third quarter, then make sure you have your returns postmarked by 10/31 for the third quarter.
Beginning 11/15/13 make your monthly deposits and then you will be on the right track from here on out
excellent. Anything else?
Hopefully they will work with you on penalties because you are a new business they usually do