Canadian Payroll Reporter - sample

October 2018

Focuses on issues of importance to payroll professionals across Canada. It contains news, case studies, profiles and tracks payroll-related legislation to help employers comply with all the rules and regulations governing their organizations.

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News October 2018 | CPR News U.S. employers must consider local, state rules insurance) tax and a Medicare (hospital insurance) tax. Em- ployers deduct the taxes from employees' wages and pay an employer contribution. The IRS states that generally employee wages are subject to the taxes, regardless of an em- ployee's age or whether the em- ployee is receiving social secu- rity benefits. The social security tax is subject to an annual maxi- mum wage (called a base wage limit). There is no maximum wage limit for the Medicare tax. For 2018, the social security tax rate is 6.2 per cent each for employers and employees on annual wages up to $128,400 (all figures U.S.). The Medicare tax rate is 1.45 per cent each for em- ployees and employers. An addi- tional 0.9 per cent Medicare tax applies to employees only on an- nual wages exceeding $200,000. Federal Unemployment Tax Act (FUTA): FUTA is not a payroll deduction, but an employer-paid tax. Employers are prohibited from deducting it from employees' wages. Most employers pay both federal and state unemployment taxes. Employers are generally re- quired to pay FUTA if, in the current or previous calendar year, they paid wages of at least $1,500 in any quarter or had an employee for at least part of a day in each of 20 different weeks. For 2018, the tax rate is six per cent on the first $7,000 in wages paid to each employee during the year; however, employers are allowed to credit amounts paid for state unemployment taxes, which can lower their FUTA rate. Deposits: This is the term for remittances that employers must make to the IRS for FITW, FICA, and FUTA, although FUTA is deposited separately. The IRS requires employers to make their FITW and FICA deposits using electronic funds transfer (EFT). Employers make their FITW and FICA deposits either monthly or semi-weekly, based on their total FITW and FICA liability reported on form 941 (see below) during a specified "lookback" period. The "look- back" period is a four-quarter, 12-month period that ends on June 30 of the previous year (for example: July 1, 2016 to June 30, 2017 for 2018). Employers whose FITW and FICA liability is no more than $50,000 during the lookback period are monthly depositors. Those with a liability exceed- ing $50,000 are semi-monthly depositors. The IRS requires employers on a monthly schedule to deposit their FITW and FICA taxes for the month by the 15 th day of the following month. Semi-weekly depositors must generally make their deposits within three bank- ing days after the semi-weekly period (Wednesday-Friday and Saturday-Tuesday) in which they are incurred. For instance, for paydays on Wednesday, Thursday, or Friday, employers must deposit the tax- es by the following Wednesday (since Saturday and Sunday are not banking days). For paydays on Saturday, Sunday, Monday, or Tuesday, the deposits are due by the following Friday. Some exceptions apply. For instance, employers who accu- mulate an undeposited FITW- FICA liability of $100,000 or more during a deposit period must deposit the taxes by the next banking day regardless of their deposit schedule. Employers who accumulate a FITW-FICA liability of less than $2,500 for a calendar quarter may pay the taxes at the end of the quarter. In addition, if de- posit due dates fall on a Satur- day, Sunday or bank holiday, the deposit is not due until the next banking day. FUTA deposits that exceed $500 are due on a quarterly ba- sis and must be paid using EFT. Amounts under $500 can be car- ried to the next quarter in the year, but must be paid by Jan. 31 of the following year. Reporting: Employers have both quarterly and annual feder- al reporting requirements. On a quarterly basis, employers must submit form 941, Employer's Quarterly Federal Tax Return, to the IRS. On the form, employers re- port total wages paid, total FITW and FICA taxes incurred, and total deposits made during the quarter. Employers required to pay FUTA must file an annual re- port, using form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. On the form, employers cal- culate the FUTA tax payable on their total taxable wages for the year; determine their credit for state unemployment taxes, and report the amount of FUTA they deposited during the year. The form is due by Jan. 31 of the following year, although employers who paid all of their FUTA deposits on time have an extra 10 days to submit it. Each year, employers must also complete a W-2, Wage and Tax Statement. Similar to a T4, employers use the form to re- port wages, tips, and other com- pensation paid to employees, as well as FITW and FICA taxes withheld. There are also boxes for re- porting employees' wages and taxes deducted at the state and local level. The deadline for giving em- ployees their W-2 copies and sending the form to the Social Security Administration (SSA) is Jan. 31. Employers filing 250 or more W-2s must submit them to the SSA electronically. Employers must also submit a copy of the form to the applicable state or local government. In addition to federal payroll requirements, employers in the U.S. may also have to comply with state and local (cities, coun- ties, school districts) rules. Note: For more detailed information on U.S. payroll rules, visit the IRS website at www.irs. gov/businesses/small-businesses- self-employed/employment-taxes. from W-2s, W-4s on page 3 Published 12 times a year by Thomson Reuters Canada Ltd. 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