acct state tax 1a
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Identify the types and uses of payroll taxes
Social Security Taxes - also called FICA (federal insurance; contribution act) provides benefits to retired, disabled and surviving spouses & children; Medicare tax - provides Medicare benefits to people ages 65 and above; Federal taxes – finance the programs of the federal government
Explain how federal income taxes are used
national defense, veterans, foreign affairs, social programs, development of physical human and community, law enforcement & interest on national debt
Distinguish between gross and net pay
- Gross pay is the pay before any taxes and withholdings are removed.
- Net pay is the pay after all withholdings are taken out also know as take home pay
Explain purpose of Form W-4
The form is to let the employer know how much to withhold in federal taxes from an employee.
Describe self-employment tax
The tax paid by individuals that are self employed (do not have a boss), the pay social security and Medicare taxes
FICA withholdings when taxpayer worked more than one job
Fill out worksheet for multiple jobs to figure out the additional withholding needed
Maximum wage bases for social security and Medicare.
- Max wage base for SS – 106,800 (2010)
- Max wage base for Medicare – no limit
Withholding rates for social security and Medicare
- Withholding rate for SS – 6.2% (2010)
- Withholding rate for Medicare – 1.45% (for both employee & employer)
Rules, income subject to, and imposition limits for self-employment taxes
- It is a social security & Medicare tax for people who work for themselves. Figured by individual on Schedule SE.
- Max of $106,800 for combined 12.4%, additional 2.9% on all wages
Purpose of W-4
Purpose – to help determine how much federal income tax to withhold
what employer responsibilities are when W-4 not received
Treat the employee as if single with 0 withholding allowances unless earlier W-4 is valid then base on that
When extra allowances may be claimed on W-4.
# of exemptions on tax return; child & dependent care credit; child tax credit
When penalties may be imposed regarding estimated taxes
If you do not pay the estimated amount by the due date of each payment period there may be a penalty.
FUTA tax rules and amounts
Must pay if you paid wages $1500+ in calendar quarter or 1 or more employees in any 20+ weeks in 08 or 09; paid $1000+ to household employee in calendar quarter for 08 or 09; for farm workers 20,000+ during calendar quarter or 10+ farm workers 20+ weeks 08 or 09. 6.2% of the first 7,000 paid to each employee during the year for federal and a credit of up to 5.4% for state unemployment funds to pay .8% for FUTA
FICA definitions and rules
Federal Insurance Contributions Act also known as SS tax and Medicare Tax; both employee and employer tax; formally known as OASDI (old Age, Survivors & Disability Insurance; SS tax 6.2% of 1st 106800 for both employee & employer; Medicare tax 1.45% of all annual wages & salary for both employee & employer all together 15.3%
Purpose of Forms 940 and 941
To report the annual FUTA tax for 940 and pay FUTA taxes as well as other taxes for 941
FUTA liabilities after credits for SUTA.
To report wages paid, employee tips, federal tax withheld, FICA both employee & employer share (SS & Medicare) advanced earned income payments & credit for COBRA payments
Deposits of withholdings
No deposit required for quarter if under $2,500, by EFTPS or at authorized financial institution, must when either above 2,500 quarterly or with timely filed return
Frequency of withholding deposits
Look back period (7/1 to 6/30 of last year) $50,000 or less for look back is monthly otherwise semiweekly
Typical due date for Ohio Individual Income Tax return
Filing requirements for Ohio Individual Income Tax
- 1. Ohio residents with wages earned in Ohio, Ohio lottery winnings, Ohio property income or gain, Ohio business sole prop income or gain, income or gain from pass through entity in Ohio
- 2. Same for nonresident unless lives in border state & Ohio income is from unrelated employer
- 3. Not required to file if 65+ married filed joint & Fed. Adj. Gross income 13,000 or less & no sch. A adj.
- 4. Not required to file if 65+ single resident & fed adj. gross income 11,500 or less & no sch. A adj.
- 5. Not required to file if Only source of income is retirement income eligible for retirement income credit & credit same or larger than tax before credits
- 6. Not required to file if Exemption amount same as or more than Ohio than Ohio adj. gross income
Exclusions from, exemptions, and credits allowed for Ohio Individual Income Tax
Exemption 1500 for # of exemptions on Fed Return & 20 for same; child may claim self; Joint filing credit if both have at least $500; Adj. gross income does not include SS benefits, RR retirement, military retirement, interest, dividend, cap gain distribution (not income), royalties, rent, cap gain & state & local income tax refunds
General outline of Ohio IT-1040
Federal Adj. Gross income + Adjustments (additions and deductions), gives Ohio Adj. Gross Income, then tax minus and credits from schedule B to give Ohio tax less then Sch. B with exemption credit $20 to come directly off of tax giving Ohio tax less exemption credit; then joint filing credit & credits for income not earned in Ohio, Ohio resident credit & nonrefundable business credits; leaving the income tax
Payment of liability when filing extension for Ohio Income Tax
If you file an extension with the Federal you must still make a payment to Ohio on time or interest will apply & penalties may apply
Rules when prior federal tax return was modified
If Federal tax return was modified you must amend you Ohio tax return
Filing rules Ohio Individual Income Tax (i.e., MFJ, MFS, Single, etc.).
However you file with Federal you must file your Ohio taxes the same with the exception of qualified widow(er) with dependent child you then file as single, head of household or qualifying widow(er) box
Typical deductions from income for Ohio Income Tax
Dependent exemption (1500 per), federal interest & dividends exempt from state taxes, employee comp earned in Ohio by neighboring states & military nonresidents, military pay if included in federal adj. gross income, state or municipal income tax overpayments on Federal form, disability & survivorship payments (not pension continuation), included qualifying SS benefits & certain railroad retirement benefits, College Adv. Payments & tuition credits payments, Ohio National Guard reimbursement & benefits, Unsubsidized Medicare, long term insurance & excess medical expenses, medical savings account expenses, wage & salary expense not deducted to federal target jobs or work opportunity tax credits, interest income from Ohio public obligations & from purchase obligations & gains from sale or disposition of public obligations, refund or reimbursements shown on federal form for itemized deductions from prior year, repayment of income reported prior year, Qualified organ donor expenses & amounts contributed to individual development acct. , adj for IRS code for 168 & 179 depreciation, military retirement income & military injury relief fund included in Federal adj. gross income
Importance of residency status
Makes difference in income claimed and not claimed on Ohio income taxes as well as if on a joint return the spouse has to sign
Joint filing credit
Only if both earn $500 or more; credit is 20% if $25,000 or less, 15% if more than $25,000 to $50,000, 10$ if more than $50,000 to $75,000; 5% if more than $75,000 of the tax after the 2nd exemption credit
Can have longer to pay and file their taxes, do not have to pay on income while stationed outside of Ohio
School District number and Ohio income tax
Can find out school district on Ohio Tax Finder on the tax web site for Ohio; number is in the back of the info book for all districts to place the number on the form; different form to file the taxes owed for school,
Tax year and method of accounting for Ohio Individual Income Tax
Keep tax forms for 4 years, for tax years other than calendar year 15th day of 4th month after end of tax year
Administration of School District Tax.
Ohio Department of Taxation collects and administers the tax for school districts and makes quarterly distributions of revenue
Taxpayers subject to School District Tax.
Applies to every taxpayer residing in a school district that imposes the tax; traditional is paid by estates & persons who at time of death residents of that school district
File tax in each district that imposes a tax, there is an area to place income that was earned while not a resident of that district
Employer remittance of School District Tax withheld
If quarterly for state then payment due for both taxes by last day of month following March, June, Sept. & Dec.; If monthly basis for state then 15 days after end of month; this is the same as for state
Incorrect School District number withheld for by employer
File SD 100 for correct school district pay those taxes & request a refund from school district that was paid by employer
Estimated payment due dates.
4/15, 6/15, 9/15, 1/15
Types of income subject to tax in “Earned Income Only” school district
Wages, salaries, tips & other employee compensation as well as self employment income from sole proprietorships, partnerships & LLC treated as partnerships for income tax purposes; does not include retirement income, lottery winnings, interest, dividends, capital gains, rent profits, distributive shares from S Corps, & most other unearned income
Types of income subject to municipal income tax
Wages, salaries, & other compensation earned, net profits from business & rent net profits (net profits from business or rent can be offset by losses in business or rent)
Working vs. living in taxing municipality
Some allow you to take a tax credit in municipality of living for working out of the city
Priority when more than one municipality tax is owed
Working over living
Treatment of municipal taxes paid to city other than city of residence.
The taxes are filed and the city of residences sometimes allows credit for taxes. You have to file in city of resident but not if you also work in that same city
Imposing municipal tax with/without vote.
Can impose up to and including 1% without vote anything over that must be approved by voters
How to find out where you live.
Contact Dept. of Taxation “Finder”
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