Payroll Practice Fundamentals Chapter 1

PAYROLL PRACTICE
FUNDAMENTALS
2004 Edition
Chapter 1: Payroll Fundamentals
The American Payroll Association

Payroll Fundamentals Chapter 1
Payroll is the process used to pay employees accurately and on Payroll is the
time. Thus, the most obvious job of payroll is to issue payments process used to
to employees. Undoubtedly, few employees understand how pay employees
complicated this task can be. They correctly assume that every accurately and
payday their paycheck should be on time and accurate. This on time.
chapter describes some of the legal and operational factors that
make issuing timely, accurate paychecks a job for professionals.
The functions within a payroll department vary from company to

company. Some common examples of payroll tasks are listed
below.
Paying employees Depositing and reporting taxes

Verifying the integrity of pay data Communicating with employees
Collecting/inputting time data Balancing payroll input
Inputting new hires Modifying existing employee files
Recordkeeping Reconciling payroll data
Reporting payroll data Processing deductions
Distributing paychecks and Researching federal and state
pay stubs regulations
Creating Automated
Clearinghouse files
This list includes only a few of the responsibilities a payroll
department may have. What are some of the tasks in your payroll
department?
1.1 Challenges
Those who work in payroll face the following kinds of challenges:
Complexity: Many federal, state, and local laws affect the way
companies can pay their workers. These laws change frequently.
Thus, it is necessary to evaluate these laws in order to determine
which prevail. Then, those laws must be incorporated into the
company policies and followed.
Payroll Fundamentals 1–1

Chapter 1 Communication: Paychecks are the most scrutinized products of
a company. Clear, concise explanations of payroll information
benefit employees as well as those who work in payroll.
Technology: New software and web-based applications can

enhance the payroll process as well as human resource functions.
Such products can automate time keeping, record storage, and
record retrieval.
The Payroll Process

Employee: new hire, changes, time data, Form W-4, Form W-5
Payroll: inputs, verifies, processes, distributes, reports, reconciles
Government: tax deposits, monthly and quarterly reports, annual
returns
Employee: Form W-2
1.2 Concepts
Worker Status
Employers must Employers must make two distinctions when classifying workers.
make two A worker can be an employee or an independent contractor.
distinctions when Employees can be exempt or nonexempt. Both of these
distinctions are discussed in this chapter.
classifying workers.
Workers
Employees Independent
contractors
Exempt Nonexempt
First, you need to determine who is an employee and who is not.

Every worker is not necessarily an employee. Is the part-time
secretary in marketing an employee? How would you classify the
free-lance artist who has handled all your firm’s graphics for the
1–2 Payroll Practice Fundamentals

last five years (and regularly attends the holiday party)? What is Chapter 1
the status of a 16-year-old summer worker in shipping or a
commission-only salesperson? These questions aren’t academic.
The answers determine whether the company must withhold
taxes and pay overtime.
1.2.1 Employees vs. independent contractors

Employers must withhold federal income tax, social security tax,
Medicare tax, state income tax, and local income tax from
employees’ paychecks. In addition, the company must match the
social security tax and Medicare tax payments of employees and
make federal and state unemployment insurance contributions on
their behalf. However, withholding is not required for independent Withholding is
contractors, who provide the company with a Taxpayer generally not
Identification Number (TIN). Nor must the company pay social required for
security tax or Medicare tax on the services provided by an independent
independent contractor. contractors.
Designating a worker’s status as employee or independent

contractor is the responsibility of the employer, not the
employee. The primary way that an individual qualifies as an
employee or independent contractor is the common law test.
However, exceptions do allow a worker qualifying as an
employee under the common law test to be classified as an
independent contractor when meeting the requirements of the
reasonable basis test.
1.2.2 Common law test

The common law test asks these critical questions: How
independent is the employee? How much control can be
exercised over the worker? The following table compares and
contrasts employees and independent contractors under the
common law test. The crucial distinction is the employer’s right
to control the worker.

Chapter 1 Common Law Test of Determining Whether a Worker
Is an Employee
Employee Independent Contractor
• Required to comply with • Sets own hours; determines

employer’s instructions about own sequence of work
when, where, and how to work
• Works exclusively for the • Can work for multiple

employer employers; services available to
the public
• Hired by the employer • Is self-employed
• Subject to dismissal; can quit • A contract governs how the

without liability relationship can be severed
• Has a continuing relationship • Works by the job

with the employer
• Work done personally • Permitted to employ assistants
• Performs services under the • Performs services under the

company’s name worker’s business name
• Paid a salary; reimbursed for • Payment by the job;

expenses; participates in opportunity for profit and loss
company’s fringe benefits
programs
• Furnished tools, equipment, • Furnishes own tools, equipment,

materials, and training and training; substantial
investment by worker
• If an outside salesperson: • Controls the sales process and

company provides leads, terms
sets terms and conditions of
the sale, assigns a territory,
and controls the sales process
1.2.3 Temporary service/leased employees
Organizations may have individuals who are not classified as

employees or independent contractors performing services.

These individuals are employed by organizations described as Chapter 1
temporary service agencies, leasing companies, or Professional
Employer Organizations. The temporary service agency or
leasing company bears the burdens of an employer—paying,
withholding, reporting, and providing benefits. The company for
which the employee provides service contracts with the
temporary service agency or leasing company, not with the
individual workers.
1.2.4 Misclassifying workers.

If you misclassify an employee as an independent contractor,
your company can have significant problems. Misclassifications
represent a potential loss of revenue for all levels of government.
Therefore, the IRS, the Department of Labor, state unemployment
agencies, and other state and local government agencies look
closely at employee classifications and assess severe penalties
for misclassification.
Check Your Understanding

Quiz 1.1. Answer the following questions to test your
understanding of worker status.
1. Payroll’s chief product – the paycheck – must be:
a. accurate
b. timely
c. both accurate and timely
d. none of the above
2. What taxes must be withheld from an employee’s pay?
a. Federal income, social security and Medicare

b. Federal income
c. Social security and Medicare
d. None of the above

Chapter 1 3. What taxes must be withheld from an independent
contractor’s pay?
a. Federal income, social security and Medicare

b. Federal income
c. Social security and Medicare
4. Who has the responsibility to determine if the worker is an

employee or independent contractor?
a. Employer
b. Social Security Administration
c. Worker
d. Internal Revenue Service
5. Prior to affiliating with Radar Chemicals, Rebecca, a chemical

engineer, signed a contract stating that she agreed to work as
an independent contractor. Rebecca performs all her duties in
Radar’s laboratories, where she has full access to the
company’s testing equipment. She works under their direction
and maintains regular office hours.
a. Rebecca is an independent contractor under common

law.
b. Rebecca is an independent contractor under the
reasonable basis test
c. Rebecca is an employee.
6. Roger, a retired safety inspector for Rocco Manufacturing, was

hired back as a consultant when Rocco expanded its plant
operations. Roger was a natural choice. The tasks he
undertook as a consultant were the same as the ones he
performed before retirement. Paid monthly, he has agreed to
work under the direction of his old boss until the new plant
facilities are fully operational.
a. Roger is an independent contractor under common law.

b. Roger is an independent contractor under the
c. Roger is an employee.

7. Rachel, a receptionist, has agreed to work afternoons at Chapter 1
Rapid Office Supply until they can find a full-time
replacement.
a. Rachel is an independent contractor under common

law.
b. Rachel is an independent contractor under the
c. Rachel is an employee.
8. Which of the following would be considered an independent

contractor?
a. A temporary receptionist from an agency

b. A lawyer hired on a project-by-project basis, with the
company providing secretarial service and office space
for the lawyer
c. A lecturer who is paid a percentage of the money
collected at fund raisers when he speaks on behalf of a
nonprofit clinic
d. An outside salesperson who is paid by commission but
guaranteed a minimum salary
Answers to Quiz 1.1

1. c An employer can face severe consequences when
paychecks are not issued timely or correctly.
2. a In addition to federal income, social security and Medicare

taxes, employers may have to withhold state and local income
taxes.
3. d Independent contractors must pay their own taxes as,

generally, no taxes are withheld.
4. a Even though the IRS and SSA have a stake in determining

who is an employee, the employer is responsible for the
determination.

Chapter 1 5. c. Do not assume that the employer has fulfilled its
responsibilities and is free from penalty simply by having
someone sign a contract such as Rebecca’s. Individuals do not
have a right to waive their employee status in a contract.
Rebecca is behaving like an employee (use of employer’s

tools, working on site, maintaining regular working hours,
working under Radar Chemicals’ direction). The IRS may rule
that she is an employee. If so, Radar Chemicals could be
subject to penalties for failure to withhold federal income tax,
social security tax, and Medicare tax from Rebecca’s wages.
6. c. Consultants are generally treated as independent

contractors. However, when an ex-employee is performing the
same or a similar job as before retirement or termination, it is
unlikely that he or she qualifies as an independent contractor
after termination.
7. c. Whether or not an employee is full-time or part-time or

works a few weeks or a lifetime for the company is not
relevant here. Rachel is an employee.
8. c. Being paid by the job rather than a guaranteed salary is a

sign of an independent contractor. Workers from an agency
(a) are employees of the temporary help agency. A lawyer (b)
who is furnished all the equipment necessary to do a
particular job is an employee. Payment of a guaranteed salary
(d) usually indicates an employee.
1.3 The Fair Labor Standards Act

As you know, issuing paychecks is the main job of the payroll
department. A paycheck includes more than an individual’s
Paychecks include
regular wage or salary. Paychecks include pay for overtime work,
pay for overtime paid time off, bonuses, and other types of compensation.
work, paid time off, Calculating the correct amount of earnings for each employee is
bonuses, and other essential.
types of
The Fair Labor Standards Act of 1938 (FLSA), as well as state
compensation.
wage and labor laws, govern the payment of wages to employees.
The FLSA guarantees employees a minimum wage and requires

employers to pay an overtime premium. The FLSA is regulated Chapter 1
by the Wage and Hour Division of the U.S. Department of Labor.
1.3.1 Exempt vs. nonexempt employees

Not all employees are subject to the minimum wage and
overtime requirements of the Fair Labor Standards Act.
Employees who meet certain criteria are exempt from minimum
wage, overtime and some record keeping regulations. Employees
who are covered by the FLSA are called nonexempt employees.
Those who are not covered by the FLSA are called exempt
employees.
The Department of Labor has proposed significant changes to the

following rules. Watch APA’s Payroll Currently for the status of
this proposal.
1.3.2 Exempt Employees

Exemptions to the FLSA are not based on job title but on the
employee’s actual duties, responsibilities, and level of
discretionary authority. In addition, for most exempt employees a
minimum salary requirement must be met.
The following are four white collar types of exempt employees. Executives,
administrative
Executives employees,
The main duty of an executive is to manage an enterprise, a professionals and
department, or a departmental subdivision. To be classified as an outside salespeople
executive, a person must direct the work of at least two workers, are four types of
have hiring/firing authority, and use discretionary powers. No white collar exempt
more than 20% (40% if retail) of the executive’s workweek can be
employees.
spent in nonexempt work. The executive must be paid a
minimum weekly salary of $155. Executives include department
managers and supervisors who are directly associated with
management decisions and the direction of the staff. If the
executive is paid a salary more than $250 a week, to be an
exempt executive, the employee must manage a portion of the
company and direct the work of two or more employees.

Chapter 1 Administrative employees
The main duty of exempt administrative employees is either (1)
the performance of office work related to management policies or
general business operations or (2) the administration of a school
system. Employees and people who perform special assignments
(like purchasing agents or auditors) are exempt administrative
employees. One test an administrator must meet is the use of
independent judgment and discretion. Like executives, no more
than 20% (40% if retail) of an administrative employee’s workweek
can be spent in nonexempt work. An exempt administrative
employee must also be paid a weekly salary of at least $155.
Examples of administrative exempt employees might include
executive secretaries or confidential or administrative assistants.
An administrative employee may also be exempt if the employee:
1) is paid a salary of $250 a week; 2) performs office/non-manual
work related to the organization’s management, and 3) exercises
discretion and independent judgement.
Professionals
The main work of professional exempt employees requires either
(1) advanced knowledge customarily acquired by specialized
study or (2) originality and creativity. Professionals must use
discretion and independent judgment in their work. The work
must be intellectual and varied, not standardized. No more than
20% of a professional’s workweek can be spent in nonexempt
tasks. The minimum weekly salary an exempt professional
employee must be paid is $170. Teachers, engineers, and
attorneys are examples of professional employees.
A professional employee may also be exempt if the employee: 1) is

paid a salary of $250 a week, 2) performs work requiring advanced
knowledge, and 3) exercises discretion and independent judgement.
Those in highly skilled computer software occupations fall into

another category of professional employees. The main duties of
exempt computer professionals must include systems analysis,
system or program design, or computer programming. To qualify,
employees must be proficient in their field. The same minimum
salary thresholds of $170 or $250 per week are applicable, but
computer professionals paid by the hour may also be exempt if
their hourly rate exceeds $27.63.

Outside salespeople Chapter 1
Outside salespeople are exempt if they meet two requirements:
(1) they are customarily engaged in selling or getting orders for
the company’s product/service and (2) they spend less than 20%
of their workweek in nonsales activities. There is no salary
requirement for outside salespeople.
Laws change over time. Stay informed. The minimum salaries

listed above may be superseded by applicable state laws. You will
need to stay informed about changes in these laws.
Special exemptions exist

In addition to these four categories of exempt workers, certain
classifications of employees are covered by overtime provisions
different from the normal FLSA provisions. Some of these special
exemptions are covered later under calculating overtime. Special
provisions are made in the law for the following categories of
workers:
• Various transportation workers—motor and rail carrier workers,

taxicab drivers, seamen, airline employees
• Agricultural workers
• Hospital and nursing home workers
• Public sector employees, firefighters, police officers, and others
All exempt employees are exempt from FLSA regulations

concerning overtime or the minimum wage. Nonexempt
employees must be paid the minimum wage and overtime pay.
1.4 Federal minimum wage

The federal government and most states have set a minimum
wage for nonexempt workers. The minimum wage applies to
workers’ hourly compensation, not to their net pay. Thus, after
deductions, a worker’s take-home pay may legally fall below the
required minimum wage.
The federal minimum wage, effective since September 1, 1997, is

$5.15 per hour. Employees under age 20 can be paid $4.25 per
hour in their first 90 calendar days on the job. The minimum
wage listed above may change with the enactment of a new law.

Chapter 1 1.4.1 State Minimum Wage
Many states have set their own minimum wage. If the employer is
covered by both state and federal law and the two are not the
same, then the employer is required to pay the higher minimum
wage based on the state in which the employee works.
1.4.2 Tip credit

The FLSA defines a tip as an amount presented by a customer as
a gift or gratuity in recognition of a service performed. The tip is
to be distinguished from the payment of a charge for services
performed.
You may know that restaurant wait staff may be paid a rate that is
below the federal minimum wage. This subminimum wage
applies to wait staff, bartenders, and some other workers who
typically earn tips in addition to their wages. In such cases, the
employer may be able to reduce these employees’ hourly rate to
$2.13 per hour. The tip credit can be used to reduce these
employees’ hourly rate only if the employee regularly earns more
than $30 per month in tips. Various states also regulate tip
credits. Make sure you are aware of any applicable state laws,
which change the federal tip credit.
However, the actual tips received plus the cash wage must equal
the required minimum wage, as shown below.
Calculating Minimum Cash Wage

Federal Minimum Wage Tip Credit Minimum Cash Wage
$5.15 per hour $3.02 per hour $2.13 per hour
In addition to a
wage or salary,
employees may
1.5 Additional earnings
receive additional In addition to a wage or salary, employees may receive additional
compensation, such compensation, such as tips, shift premiums, paid time off, and
as tips, shift bonuses. The discussion below looks at some of the legal aspects
premiums, paid of handling these earnings. Your company may have other
time off, and policies, which you need to follow as well.
bonuses.

1.5.1 Tips Chapter 1
If an employee receives and declares $20 or more in tips in a
calendar month, employers must withhold federal income tax,
social security tax, and Medicare tax on tips as well as cash
wages. Employers must also match the social security tax and
Medicare tax and pay federal unemployment tax on the tip
amount.
Tips are considered supplemental income and federal income tax

withholding can be done at the flat 25% rate.
1.5.2 Shift premiums

Although there is no federal requirement, many companies pay
shift premiums (also called shift differentials) to employees who
work certain shifts. For example, a company might pay assembly
workers $10 per hour for the 8:00 a.m. to 4:00 p.m. shift, $11 per
hour for the 4:00 p.m. to midnight shift, and $12 per hour for the
shift from midnight to 8:00 a.m.
Shift premiums must be included when determining a regular rate

of pay for overtime (discussed later).
1.5.3 Paid time off

The Fair Labor Standards Act does not require employers to pay
employees for days off for holidays (such as Christmas or
Independence Day) or vacation. Nor are employers obliged to
pay workers for unworked sick days, holidays, or vacation days
or pay a premium to employees who work on holidays (although
many companies have such policies). Under federal law, holiday,
vacation, and sick pay is not counted in determining the regular
rate of pay for overtime.
1.5.4 Bonuses
Employees may receive supplemental payments from their
employers such as bonuses, commissions, production pay, etc.,
as an incentive for increased productivity. These payments may
be a factor in determining an employee’s regular rate of pay for
overtime purposes.

Chapter 1 Check Your Understanding
understanding of calculating earnings.
1. What are exempt employees exempt from?
a. Minimum wage
b. Overtime pay
c. Both a and b
2. Which of the following is NOT a classification of employees

exempt from minimum wage and overtime requirements?
a. Professional
b. Outside salesperson
c. Administrative
d. Team leader
3. Kathy, a waitress, is paid $2.25 per hour, and she receives

tips which average $150 a week. She works 40 hours per
week. Which of the following is true?
a. Kathy’s employer is allowed to reduce her cash wage to
no less than $2.13 per hour.
b. Kathy’s base pay must be increased to $4.25 per hour
after a 90-day training period.
c. Kathy must be paid $2.62 per hour by her employer.
d. Kathy’s base salary must be raised to $3 per hour to
comply with federal minimum wage requirements.
4. What is the current federal minimum wage?

a. $2.13
b. $3.02
c. $4.25
d. $5.15
5. If a state sets the minimum wage at a rate greater than the

federal minimum wage the state minimum wage must be paid.
True
False

6. Kevin, a nonexempt employee, works in Connecticut but lives Chapter 1
in Massachusetts. The minimum wage in Connecticut is $6.90
per hour, while the Massachusetts minimum is $6.75. Kevin’s
employer must pay him at least:
a. $6.90 per hour

b. $5.15 per hour
c. $6.75 per hour
d. There is no minimum because Kevin is nonexempt.
7. Tips can be counted toward the employee’s minimum wage.
True
False
8. Kelly, who works 40 hours per week, is a fry cook at Kris’s

Kountry Kitchen. Occasionally, she substitutes for one of the
waitresses and claims $5 per week in tips. Can Kelly’s
employer pay her $2.13 per hour?
Yes
No
9. Employers who provide paid vacation leave must count the

hours of paid time off when determining if the employee must
receive an overtime premium when the total hours worked in
a week exceed 40.
True
False
10. Kyle, a nonexempt employee, works the graveyard shift

(midnight to 8:00 a.m.) at a kennel. Under the FLSA, Kyle’s
employer must pay him:
a. A shift differential for working the late-night shift.

b. Time and one-half for working Christmas.
c. The federal minimum wage.
d. All of the above.

Chapter 1 Answers to Quiz 1.2
1. c Most exempt employees must be paid a fixed salary for
each work week.
2. d A team leader who meets the Executive exemption

requirements could be an exempt employee, but not all team
leaders do.
3. a. Kathy’s employer can claim the full federal tip credit

because Kathy receives tips and with her tips is paid more
than the current federal minimum wage. For federal minimum
wage purposes, her employer must pay her at least $2.13 per
hour and her hourly rate plus tips must equal at least the
current federal minimum wage.
4. d
5. True
6. a. When the federal and state minimum wages differ, the

higher must be paid. So the Connecticut minimum wage takes
precedence over the federal minimum wage. Where Kevin
lives is irrelevant.
7. True
8. No. The tip credit can be used to reduce the minimum wage
only if the employee claims more than $30 per month in tips.
9. False – Only hours worked count toward determining whether

overtime premiums must be paid under the FLSA.
10. c. Kyle’s employer is obliged to pay him at or above the

federal minimum wage. No federal law requires either a shift
premium or special holiday pay.

1.6 Defining Overtime Chapter 1
The Fair Labor Standards Act requires that all nonexempt The Fair Labor
employees be paid 11⁄2 times their regular rate of pay when they Standards Act
work more than 40 hours in one week. Complying with these
requires that all
federal overtime regulations can be complex, particularly when
employees earn an irregular rate of pay.
nonexempt
employees be paid
Under the FLSA, the term “hours worked” includes all time an 11⁄2 times their
employee is required to be on duty, whether on the employer’s regular rate of pay
premises or at a prescribed workplace. In addition, “hours
when they work
worked” includes all time an employee is suffered or permitted to
more than 40
work whether or not required to do so. Hours worked is not
limited to active productive labor but also may include waiting for hours in one week.
work, remaining “on call”, or traveling on the employer’s
business, etc.
Ensuring that the employee’s hours worked are reported correctly

is the employer’s responsibility. Payroll frequently reviews the
time recorded on an employee’s time sheet, time card or in the
electronic time and attendance system, ensuring compliance with
both company policy and the FLSA.
1.6.1 When must overtime be paid?

FLSA regulations require that an overtime premium of 50% for
any hours physically worked over 40 hours per workweek be paid
to nonexempt employees. Note that overtime is paid only for time
worked, not time compensated. Therefore, overtime need not be
paid when time worked is less than 40 hours in the week but the
employee receives sick pay, holiday pay, vacation pay, jury duty
pay, or similar pay for unworked hours and the time paid exceeds
40 hours
The FLSA does not require overtime premiums to be paid for work
on Saturdays, Sundays, or holidays unless actual overtime is
incurred (although many companies do pay overtime premiums
for such hours). Nor are employers required to pay overtime
premium when employees work more than eight hours in one day.
With the exception of fire protection, law enforcement, and hospital
employees, overtime is based on having physically worked more
than 40 hours during a workweek. The exceptions are discussed
later in this section.

Chapter 1 1.6.2 Other overtime regulations exist
State rules on overtime may differ from the federal regulations.
Company policies on overtime and union contracts may also
differ from the federal regulations. Generally, a company must
follow the rule that most benefits the employee—federal
regulations, state laws, company policies, or union contracts.
1.6.3 Defining the workweek

A workweek is defined by the FLSA as a fixed, recurring period of
168 consecutive hours (7 days 24 hours). An employer’s
workweek need not coincide with the calendar week or payroll
period. It may begin on any day of the week and at any hour of
the day. For example, all of the following could be considered a
workweek:
• Sunday through Saturday

• Monday through Sunday
• Saturday through Friday
Employers may establish a single workweek for the entire firm or

different workweeks for various groups of employees.
Each workweek stands on its own. So an employee who works 35

hours in week one and 60 hours in week two is paid overtime on
the 20 extra hours worked in week two. (There are exceptions for
hospital, law enforcement, and fire protection workers, as
explained below.)
1.6.4 Time of payment

Overtime pay need not be paid weekly. The general rule is to pay
overtime on the next regular payday after the end of the workweek. If
this doesn’t permit the payroll department enough time to collect
time sheets and complete the necessary calculations, then the
overtime pay must be paid as soon as practically possible, generally
the next payday. State regulations may differ from the federal ones.
1.6.5 Workweek exceptions

There are many variations of the standard workweek and many
different regulations for each variation. For example, fluctuating
workweek plans require that the employee’s work schedule vary
so that neither the employer nor the employee can anticipate the

schedule from week to week. Salary amounts must be set at a Chapter 1
fixed amount and not fall below the current minimum wage.
Public sector/hospital special rules under FLSA

The Fair Labor Standards Act provides hospitals and nursing
homes an exemption from the requirement that overtime be
computed on a workweek basis. Hospitals and nursing homes
can use a 14-day period to compute overtime. However, certain
conditions must be met.
Hospitals and
First, the hospital/nursing home and the employee must agree to
nursing homes have
use the 14-day period for computing overtime before the work is
actually performed. The agreement may be reached directly with
an exemption from
the employee or with his or her representative. The 14-day period the requirement
may begin at any hour of any day of the week, not necessarily at that overtime be
the beginning of a calendar day or week. It includes 14 computed on a
consecutive 24-hour periods. The 14-day period must be used workweek basis.
permanently or for a substantial period of time. The employer
cannot change back and forth between the workweek and 14-day
period in order to reduce its overtime payments.
Second, an employer is not required to compute overtime pay

unless the employee works more than eight hours in any workday
or more than 80 hours in the 14-day period. The employer must
calculate the overtime pay under whichever scenario provides the
most benefit to the employee.
Firefighters’ and Police Officers’ Exception

Public safety employees are also covered by another exception to
the FLSA’s overtime requirements. Where firefighters have a
work period lasting from 7-28 consecutive days, no overtime pay
or compensatory time off is due until the ratio of the number of
hours worked to the number of days in the work period exceeds
the ratio of 212 hours to 28 days (171 hours to 28 days for law
enforcement officers). The firefighter exemption also includes
paramedics, emergency medical technicians, rescue workers,
ambulance personnel and hazardous materials workers who are
trained and engage in fire prevention and suppression or respond
to emergency situations. This exception allows public employers
to spread hours worked for public safety employees over the
entire work period, thus saving on overtime costs.

understanding of issues related to defining and calculating
overtime.
1. The FLSA requires that time worked on Saturday be paid at

overtime rates and time worked on Sunday be paid at double
time rates.
True
False
2. If a state wage and hour law requires an employee be paid an

overtime premium when the employee works more than 8
hours in a day and the employee works the following schedule,
how many overtime hours must the employee be paid?
Sun Mon Tue Wed Thur Fri Sat
5 7 6 8 10 8 6
a. 0
b. 2
c. 10
d. 14
3. Last week Charles, a high-school teacher, spent 40 hours in

the classroom, worked 10 hours grading papers at home, and
was required to put in another 8 hours on Saturday at the
school-sponsored science fair. Under the FLSA, the school
district must pay Charles:
a. Time and one-half for 18 hours.

b. Time and one-half for 10 hours.
c. Time and one-half for 8 hours.
d. His regular salary.

4. Circle C Contractors, Inc., pays semimonthly on the 15th and Chapter 1
last day of each month. Their workweek is Sunday through
Saturday. Memorial Day is May 31. Colin worked the
following hours.
MAY
Sun Mon Tue Wed Thu Fri Sat
Date 16 17 18 19 20 21 22
Hours Worked 8 8 0 0 8 8 8
Date 23 24 25 26 27 28 29
Hours Worked 8 10 4 0 8 8 0
Date 30 31
Hours Worked 8 12
How many hours of overtime did Colin work during this pay
period?
a. 10 hours
b. 6 hours
c. 4 hours
d. 0 hours
5. During Thanksgiving week, Chris was paid for the following

hours.
Sun Mon Tue Wed Thur Fri Sat
none 10 hrs. 10 hrs. 8 hrs. 8 hrs. 8 hrs. 8 hrs.
sick holiday vacation
day day
How many hours of overtime did Chris work?
a. 12 hours
b. 4 hours
c. 0 hours

Chapter 1 6. When must overtime be paid?
a. Each week
b. With the next payroll
c. As soon as practically possible
7. An employee of a hospital can work more than 40 hours in a

week and not be paid overtime.
True
False
Answers to Quiz 1.3

1. False – Under the FLSA, overtime premiums must be paid
only when the employee works more than 40 hours in a
workweek.
2. c. The employee has worked 50 hours in the week and

must be paid the overtime premium on 10 hours.
3. d. Teachers are exempt under the professional exemption.

Only nonexempt employees must be paid overtime.
4. d. Overtime is based on time worked in excess of 40 hours

each workweek. There is no federal requirement to pay an
overtime premium for long hours on one day, such as May 24
or May 31. Also, employers are not required to pay overtime
for working on holidays, such as May 31, although many firms
have such a policy. (Also remember to check your state’s
laws.)
Further, each workweek stands alone. Colin worked 40 hours

during the workweek of May 16-22 and 38 hours in the
workweek of May 23-29. The hours worked on May 30-31
must be considered when determining overtime for the
workweek of May 30-June 5, however, even though these
hours are included in the May 31 paycheck.

5. c. None. Overtime is based on time worked, not time Chapter 1
compensated. Chris physically worked only 28 hours that
week. (Remember to check your state’s laws.)
6. c Overtime is to be paid with the next regular payday.

However, if overtime can not be paid with the next regular
payday due to administrative reasons it can be delayed until
the next payday.
7. True – Employees of hospitals can have their overtime

calculated on a 14-day-work period instead of a workweek.
1.7 Calculating Overtime Payments

There are different ways to calculate overtime pay. In all
instances, the first step is to calculate the regular rate of pay.
Remember the employee is first paid for all time worked. Then
the FLSA requires an overtime premium be paid in addition to
the employee’s pay for time worked when the employee has
worked more than 40 hours in a week. In many cases, the term
overtime pay will include both the pay for time worked and the
overtime premium.
1.7.1 Establishing a regular rate of pay

Overtime is based
Overtime is based on an employee’s regular rate of pay, which
must be at or above the minimum wage. The following table lists on an employee’s
some of the types of compensation that are and are not included regular rate of pay.
when determining an employee’s regular rate. The employee’s
base pay is pay for all hours worked.

Chapter 1 What to Include in the Regular Rate of Pay
Regular Rate Includes Regular Rate Excludes
• Base pay for all hours worked • Reimbursed business expenses
• Nondiscretionary bonuses • Overtime in excess of FLSA

requirement
• Fair market value of noncash • Employer benefit plan

compensation contributions
• Shift premiums • Vacation/holiday/sick pay for

unworked hours
• Production bonuses • Gifts on special occasions
• Cost-of-living adjustments • Discretionary bonuses
• Retroactive pay • Stock options
• All payments not specifically

excluded by law
1.7.2 Issues when calculating regular rate of pay
Nondiscretionary bonuses
Any contractual or agreed-upon bonus related to production,
efficiency, attendance, quality, or another measure of performance
must be included in the calculation of the employee’s regular rate
of pay during the workweek the bonus is earned.
If the bonus is not If the bonus is not determined each week but at a later date (such
determined each as at the end of the month, quarter, year, or when a specific goal
week but at a later has been reached), the bonus must be allocated to each
workweek in which it was earned for the regular rate of pay
date, the bonus
calculation. If not specifically tied to the work done during each
must be allocated
workweek, it may be allocated equally to each workweek or each
to each workweek it hour worked during the period for which the bonus is earned. If,
was earned for the before the work is performed, the contract or bonus plan says
regular rate of pay that the bonus will be paid as a “percentage of total earnings”
calculation. (which includes both pay for time worked and the overtime
premium), then the bonus satisfies the overtime requirements
and no recomputation is necessary.

Discretionary bonuses Chapter 1
Bonuses paid for services performed are not included in the
employees’ regular rate of pay if the employer has the discretion If, before the work
whether to pay the bonus and to determine the amount of the is performed, the
bonus. The bonus must not be promised in advance by a contract contract or bonus
or other agreement. The employer’s discretion must be exercised plan says that the
at or near the end of the period during which the services were
bonus will be paid
performed.
as a “percentage of
Overtime in excess of requirements total earnings,”
If your firm pays double time, triple time, overtime for working then the bonus
more than eight hours a day, or other compensation in excess of satisfies the
the FLSA requirement, the extra compensation can be excluded overtime
from an employee’s regular rate of pay. It may also be credited requirements and
toward the FLSA’s overtime premium payments. no recomputation
Extra compensation at a premium rate of at least time and one- is necessary.
half for working Saturdays, Sundays, or holidays may be treated
as overtime pay. If the premium rate is less than time and one-
half, it must be included in determining the regular rate of pay.
Noncash payments
The fair market value of goods and services provided by the
employer must be included in establishing a regular rate of pay.
An example might be lodging that an employer furnishes in
addition to cash payments.
Benefit plans
Contributions irrevocably made by an employer to a trustee or
third person or to profit-sharing plans, qualified retirement plans,
insurance plans, supplemental unemployment benefits, or similar
plans may be excluded from the regular rate of pay.
Retroactive pay
Retroactive pay increases an employee’s regular rate of pay. It
must be prorated over the period covered and overtime
calculated on the new regular rate.

Chapter 1 1.7.3 Doing the Math - Calculating Overtime Pay
The formula for calculating overtime pay for hourly nonexempt
employees is outlined below.
Calculating Overtime Pay
Step 1 Total pay for workweek – Exclusions = Regular pay
Regular pay
Step 2 Regular rate of pay
Hours worked
Step 3 Regular rate of pay .5 Hours of overtime

Premium pay for overtime
Step 4 Total pay for workweek Premium pay for overtime

Total weekly compensation
Note that in step 3, you multiply the regular rate of pay by .5

rather than 1.5 because the overtime hours have already been
counted at the regular rate. Therefore, you need to account only
for the overtime hours worked at one-half (.5) that rate.
For example, calculate the total compensation for an electrician

who worked 44 hours last week. In addition to his regular wage of
$10 per hour, the electrician was paid $50 for supervising a
trainee. What is the electrician’s total weekly compensation?
Step 1 44 hours $10/hour $440 $50

$490 Regular pay
$490
Step 2 $11.14 Regular rate of pay
44 hours
Step 3 $11.14 .5 4 hours $22.28 Premium pay for

overtime
Step 4 $490 $22.28 $512.28 Total weekly compensation
Calculating overtime using a weighted average

When an employee is compensated at more than one rate of pay
in the workweek, the regular rate of pay must be at least the
weighted average of all rates used in the week.

For example, calculate the overtime for the following employee Chapter 1
who was paid a shift differential for working different shifts.
Using Weighted Average to Calculate Overtime Pay
Monday $7.00/hour 8 hours $56.00

Tuesday $7.00/hour 9 hours 63.00
Wednesday $8.50/hour 8 hours 68.00
Thursday $9.50/hour 10 hours 95.00
Saturday $7.00/hour 8 hours 56.00
TOTAL 43 hours $338.00
Step 1 Regular pay $338
$338
43 hours
Step 3 $7.86 .5 3 hours $11.79 Premium pay
for overtime
Step 4 $338 $11.79 $349.79 Total weekly compensation
Calculating overtime for pieceworkers

When an employee works on a piece rate, the regular rate of pay
is calculated by adding the total earnings for the workweek from
piece rates plus all other earnings (such as a bonus) and then
following the standard procedure.
For example, assume that a lathe operator earns $1 for each

sheet of metal cut on the machine. Last week, the employee
finished 1,100 sheets and worked 45 hours. Overtime pay would
be calculated as follows.
Step 1 $1 1,100 sheets $1,100 Regular pay
$1,100
45 hours
Step 3 $24.44 .5 5 hours $61.10 Premium pay

for overtime
Step 4 $1,100 $61.10 $1,161.10 Total weekly

compensation
Chapter 1 Calculating overtime for salaried employees
Fixed workweek
Under this plan, the employer pays a nonexempt employee a

salary that is intended to compensate the employee for a
specified number of hours per week. If the stipulated salary
covers a period longer than a workweek, such as a month, it
must be reduced to its workweek equivalent.
For example, a nonexempt secretary is paid $1,250 per month

for working a 40-hour week. Calculate the secretary’s total
weekly compensation for a week in which he or she works 48
hours.
$15,000
Step 1 $1,250/month 12 months
52 weeks
$288.46 Regular pay
$288.46
Step 2 $7.21 Regular rate of pay (fixed workweek)
40 hours
Step 3 8 hours $7.21 1.5 $86.52 Total pay for

overtime hours
Step 4 $288.46 $86.52 $374.98 Total weekly

compensation
In this case 1.5 was used instead of .5 as the employee has only
been paid for working 40 hours not 48.
In many situations you will need to convert a salary to a weekly

or hourly rate. The following formulas are used to make the
conversion.
Monthly to weekly
Annual salary
Monthly salary 12 Weekly rate of pay
52
Semimonthly to weekly*
Annual salary
Semimonthly salary 24 Weekly rate of pay
52
Biweekly to weekly*
Annual salary
Biweekly salary 26 Weekly rate of pay
52

Monthly to hourly rate Chapter 1
Annual salary
Monthly salary 12 Hourly rate of pay
2,080 hours**
*Semimonthly is defined as two pay periods per month (24 pay

periods per year); biweekly means being paid every other week
(26 times per year).
**Note: 2,080 hours/year is an acceptable standard for

determining an hourly rate whenever the employee normally
works 40 hours/week.
1.7.4 Acceptable Rounding

The Wage and Hour Division has accepted the practice of
rounding off an employee’s worktime, especially where time
cards are used, to the nearest tenth (6 minutes) or quarter (15
minutes) of an hour. The practice must be used consistently,
however, so that employees are compensated, over a period of
time, for all time actually worked.

understanding of calculating overtime.
1. Which of the following is excluded in calculating an

employee’s regular rate of pay for overtime purposes?
a. Shift premium of $50 for working the night shift

b. Production bonus of $15
c. 4 hours paid but not worked
d. 4% cost-of-living adjustment
2. What type of pay is included in the regular rate of pay

calculation?
a. Discretionary bonuses
b. Paid sick leave
c. Paid vacation leave
d. Production bonuses

Chapter 1 3. Which of the following is a discretionary bonus which need
not be included in the regular rate of pay?
a. A bonus to be paid in June which the employer

announced in January
b. An agreement with the union to pay one-half of one
week’s salary to workers with over five years of service
c. A traditional $50 gift certificate which the firm has paid
for the past five years at Christmas
4. Clifford worked for 30 hours on his regular shift at $6 per hour

and 16 hours on the late-night shift at $7 per hour. In
addition, he earned a production bonus of $15. What is his
total weekly compensation?
$________________
Answers to Quiz 1.4

1. c. Only hours physically worked are included in the regular
rate of pay overtime calculation under the FLSA.
2. d The FLSA excludes paid time off and discretionary

bonuses from the regular rate of pay.
3. c. If a bonus paid at Christmas or on other occasions is a

gift, it may be excluded from the regular rate of pay even if it
is paid with regularity and employees come to expect it. To be
excluded, the employer must retain discretion over (1)
whether the bonus is paid and (2) the amount.
Preannouncements or union agreements make the bonus
nondiscretionary.
4. Clifford earned $327.01, calculated as follows:
Step 1 30 $6 $180
16 $7 $112
Bonus $15
$307 Regular pay
$307
46

Step 3 $6.67 .5 6 hours overtime $20.01 Premium Chapter 1
pay for overtime
Step 4 $307 $20.01 $327.01 Total weekly

compensation
1.8 Record Keeping and Systems

Payroll could easily get buried in its own paperwork. Employment
records, numerous IRS forms, state and local tax records, social
security and Medicare data, canceled checks, time cards, policies
and procedures manuals, state unemployment records—
countless documents require your careful attention and retention.
It is difficult to imagine how any payroll department could

function without computerized payroll systems and other
technology designed to generate, store, and retrieve data. This
section looks at payroll from a systems point of view. It suggests
some ways you can streamline the paperwork associated with
payroll.
1.8.1 Handling Payroll Paperwork Each major payroll

responsibility is
The volume of documents flowing into and out of the payroll
accompanied by a
department is enormous. Each major responsibility is
trail of paper that
accompanied by a trail of paper that could easily become an
avalanche without careful paper processing. could easily
become an
How the data is obtained from the employee is determined by the avalanche without
employer in most instances, either by paper or electronically. The careful paper
employer in most instances defines the actual elements of the
processing.
data which must be obtained. However in some circumstances
either the law or regulations will define the data to be obtained,
e.g., marital status and allowances are obtained from Form W-4
as the IRS requires them to be obtained under penalties of
perjury.

Chapter 1 Major Payroll Tasks
• Compliance with federal, state, and local regulations
• Timely and accurate issuance of paychecks
• Periodic reporting
• Record retention
• Control and security
1.8.2 Maintaining a master file

Federal and state Both federal and state regulations require employers to keep
regulations require many records on employees. The following table summarizes the
employers keep federal requirements for a master file. However, your company
records. may choose to keep more information for their business needs.
What Must Be Kept in a Master File?

Employee data
____ Name ____ Social security number

____ Address ____ Occupation
____ Sex ____ State where services are
____ Birth date rendered
Employment data
____ Hire date ____ Hours worked/day

____ Termination date ____ Hours worked/week
____ Payment date ____ Workweek
____ Regular rate of pay ____ Straight time hours/pay
____ Additions/deductions ____ Overtime hours/pay
from pay ____ Shift bonus
____ Frequency of payment
Tax and payroll data
____ Allowances claimed ____ Marital status
For both payroll period and calendar year
____ Total wages subject to ____ Total federal income tax

federal, state, and local withheld
income taxes ____ Total social security tax withheld
____ Total wages subject to ____ Total Medicare tax withheld
social security tax and ____ Tax paid by employer but
Medicare tax not deducted from wages
____ Total remuneration

1.8.3 Why a master file? Chapter 1
Master file records are required for federal income tax Without complete
withholding, social security and Medicare withholding, calculating and accurate
unemployment tax, and overtime. Furthermore, without complete
records, an
and accurate records, an employer has no way to verify whether
an employee’s claim for back pay is justified.
employer has no
way to verify
Media whether an
Records may be maintained in any legible, retrievable form
employee’s claim
(electronic storage, microfilm, microfiche, hard copy, etc.). There for back pay is
is no federal requirement to maintain a paper copy of these justified.
records.
Updating the file

The master file should be up-to-date. There are no federal
requirements for how often the file must be updated. The more The more up-to-
up-to-date the record, the more reliable it is if the Department of date the record, the
Labor or court needs to investigate contested wages. Thus, you more reliable it is.
may want to consider updating the files more often than once per
month.
As the master file is updated, the information must remain in

balance – the values from the prior pay period added to the
changes and new entries must equal the updated master file. The
most reliable balancing requires maintaining the prior period
values and the changes to the value independently to ensure that
the correct entries have been made to the correct data base.
Combining files
Many organizations benefit by combining their human resources
and payroll data into a single database. Such a database might
include, for example, tax deferral agreements, affirmative action
policies, etc.
Without the information in the master file, it would be impossible

to pay employees accurately or timely.

Chapter 1 1.8.4 Record Retention
Gathering and reporting data efficiently and cost-effectively is
one problem. Another problem is how long to retain that
information without turning the payroll department into a
warehouse of old files.
Retention requirements
Federal retention requirements are shown in the following table.
How Long Must Documents Be Kept?

OSHA1 documents . . . 5 years
One payroll • Log of all occupational illnesses and accidents
problem is how • Other OSHA records
long to retain
information without IRS/SSA/FUTA2 documents . . . 4 years
• Duplicate copies of tax returns/tax deposits
turning the payroll • Returned copies of Form W-2
department into a • Canceled/voided checks
warehouse of old • Employee’s name/address/occupation/social security number
• Amount and date of payments for wages, annuities, pensions,
files. tips; fair market value of wages-in-kind
• Record of allocated tips
• Amount of wages subject to withholding
• Taxes withheld (and date if different from pay date)
• Copies of Form W-4 (for at least four years after the date the last
return was filed using the information on the Form W-4)
• Agreements to withhold additional amounts
• Dates when employee was absent due to injury and received
payments; amount/rate of such payments (by employer or third
party)
• Dates when employee was absent from work and payments were
made under a contingency plan; amount/rate of such payments
• Copies of Forms 941, 940, 945, 945A, W-2, W-3, Schedule B,
1042-S, 1042, 1099-MISC, 1099-R and other returns filed
electronically or on magnetic media

FLSA/IRCA3 record retention . . . 3 years Chapter 1
• Name of employee/address/occupation/birth date/sex
• Hours worked each day/week
• Amount and date of payment
• Amounts earned for straight time and overtime/additions to and
deductions from wages
• Collective bargaining agreements
• Sales and purchase records
• Immigration Reform and Control Act, Form I-9—three years after
date of hire or one year after date of termination (whichever is later)
Family and medical leave recordkeeping requirements . . . 3 years

The following records must be kept for at least three years, in any
format, and made available no more frequently than once every 12
months for Department of Labor inspection.
• Name, address, occupation, rate of pay, daily and weekly hours
worked per pay period
• Additions to and deductions from wages, total compensation
• Dates of FMLA leave (or hours if taken in increments of less than
one day)
• Copies of written notices of intention to take FMLA leave provided
by employee
• Copies of general and specific notices provided to employees
• Plan descriptions/policies and procedures dealing with unpaid and
paid leaves
• Premium payments for employee benefits
• Records of any disputes
Supplemental record retention . . . 2 years

• Time cards
• Wage rate tables
• Work time schedules
• Order, shipping, and billing records
• Records of additions to or deductions from wages
1 Occupational Safety and Health Administration

2 Internal Revenue Service/Social Security Administration/Federal
Unemployment Tax Act
3 Fair Labor Standards Act/Immigration Reform and Control Act

Chapter 1 Some states require you to keep records longer than
the federal government does.
In addition to the federal requirements, each state has its own
requirements for state income tax, unemployment insurance tax,
and other state-mandated programs. Some states have longer
retention requirements than the federal government. You should
be aware of the applicable laws in the states where your company
operates.
Should you retain documents beyond these dates? Many

employers do. Clearly, the main reason for keeping records is to
protect the company from audits and lawsuits. Government
contracts require companies to keep records longer. For tax
audits, many companies keep payroll tax returns for the life of
the company, or at least seven years. The statute of limitations
for back wage suits under the FLSA is two years (three years for
willful violations). Your company should establish policies as to
which files will be kept beyond the legal requirements.

understanding of handling paperwork.
1. What is NOT a reason payroll keeps records?
a. Compliance with laws

b. Demonstrate accuracy of paychecks
c. Demonstrate security of payroll
d. Periodic reporting

2. Aaron, Abbott, and Abelson, attorneys-at-law, maintain the Chapter 1
following information in their employee master file:
• Hire date
• Termination date
• Payment date
• Regular rate of pay
• Additions/deductions from pay
• Frequency of payment
Name two other records that must be kept in order to
calculate overtime pay.
3. Anderson Abstracts maintains their employee master file on

microfilm. Which of the following statements is true?
a. Under federal law, they are required to keep a backup

copy of these records.
b. Employment records must be kept for seven years.
c. There is no federal requirement to update the data
monthly.
4. What types of records will not be combined with payroll data?
a. Personnel
b. Benefits
c. Purchasing
d. Human Resources

Chapter 1 5. How long must you retain each of the following records in
your files?
• Proof of tax deposits
• Form I-9
• Copies of your quarterly tax returns
• Wage and hour records
• Employee time cards
• Canceled checks
• Name/address/occupation of each employee
• Work time schedules
• Form W-4
• Total wages and tips
• Overtime information
• Log of injuries on the job
6. How long should employer’s keep payroll records beyond

legal requirements?
a. 2 years
b. 3 years
c. 4 years
d. As long as the company needs the records
Answers to Quiz 1.5

1. c
2. To comply with Fair Labor Standards Act requirements for

wage and hour reporting, you must also keep data on the
following:
• Hours worked/day
• Hours worked/week
• Workweek
• Overtime hours/pay
• Shift bonus

3. c. While records should be current, no federal regulations Chapter 1
mandate monthly updating. It is in the company’s interest,
however, to update at least that frequently. Records may be
maintained in any legible media; no backup copies are
required. Most employment data (wages, occupation, hours
worked, etc.) must be kept for only three years.
4. c
5. Remember to keep tax files for four years, most FLSA

information for three years, and supplemental employment
information for two years. The answers are as follows:
• Proof of tax deposits: 4 years.
• Form I-9: 3 years after date of hire or 1 year after date of
termination, whichever is later.
• Copies of your quarterly tax returns: 4 years.
• Wage and hour records: 3 years.
• Employee time cards: 2 years.
• Canceled checks: 4 years.
• Name/address/occupation of each employee:
3 years—FLSA/IRCA, 4 years—IRS/SSA/FUTA.
• Work time schedules: 2 years.
• Form W-4: for at least 4 years after the date the last return
was filed using the information on the Form W-4.
• Total wages and tips: 4 years.
• Overtime information: 3 years.
• Log of injuries on the job (OSHA): 5 years.
6. d
The amount of
1.9 Withholding Allowances (Form W-4) federal income tax
withheld from an
The amount of federal income tax withheld from an employee’s employee’s
paycheck is determined by prescribed formulas. These formulas
paycheck is
take into account an employee’s wages, pay period, marital
determined by
status, and withholding allowances. Employees provide their
marital status and withholding allowances when they fill out the prescribed
Employee’s Withholding Allowance Certificate, or Form W-4. formulas.

Chapter 1 The IRS allows employees to change their marital status and
withholding allowances on the Form W-4 through electronic
systems. However, the IRS has placed requirements on the
systems to make sure the person making the change is actually
the employee.
1.9.1 Forms W-4 and W-4P

The Employee’s Withholding Allowance Certificate (Form W-4)
and its counterpart for retired employees, Withholding Certificate
for Pension or Annuity Payments (Form W-4P), tell employers
four crucial types of information:
Whether to withhold taxes at the single or married rate

How many withholding allowances are claimed
Whether the employee wants any additional amount withheld
Whether the employee is claiming to be exempt from withholding
The work sheet portion of Form W-4 helps employees find out
how many allowances they can claim. (See Appendix, p. A-21.)
1.9.2 Filing requirements

All employees All employees should complete a Form W-4 when they are first
should complete a hired. The form stays in effect until the employee fills out a new
Form W-4 when one. Employees should fill out a new Form W-4 if their marital
status or allowances change or if too much or too little is being
they are first hired.
withheld from their wages.
If an employee fails to furnish a Form W-4

If a new employee does not fill out a Form W-4 by the first pay
period, you must withhold as if he or she were single with no
allowances. This procedure maximizes the amount withheld. It
may also motivate employees to complete the Form W-4.
Employees are not required to complete a new Form W-4 every
year.
If allowances increase
Current employees can file an amended Form W-4 any time their
number of allowances increases, for example, at the birth or
adoption of a child.

If allowances decrease Chapter 1
If allowances decrease (thus increasing the amount withheld each
pay period), employees must file an amended Form W-4 within
10 days. This could happen when
An employee is divorced or legally separated.

Someone else takes over support of a dependent.
A nonworking spouse takes a job.
Employers are not required to monitor employees for changes
that decrease allowances.
Death of spouse
The death of a spouse does not affect withholding marital status
until the next year.
Notify employees by December 1

The employer is required to notify employees by December 1 that
they need to file an amended Form W-4 if their filing status or
number of allowances has changed.
Changes cannot be made in advance

Employees cannot submit a revised Form W-4 before a change
actually occurs. For example, if an employee expects to be
married, he cannot change his marital status or number of
allowances until after the wedding.
When you must change withholding

After a current employee files an amended Form W-4, you must
reflect the change in withholding no later than the first payroll
period ending on or after the 30th day after you received the
amended Form W-4.
1.9.3 Invalid Form W-4

An employee’s Form W-4 is invalid when there is any alteration,
addition, or deletion to the language or format of the form,
especially to the perjury statement, which certifies the accuracy

Chapter 1 of the data. Form W-4 is also invalid if the employee indicates in
any way that it is false.
If the employee gives you an invalid W-4, do not use it to

calculate withholding. Ask the employee for a valid form. If none
is provided, withhold as if the employee were single and claiming
zero withholding allowances. However, if you have a prior form
from this employee that is valid, you can withhold based on that
form. A Form W-4 on which an employee requests a flat dollar
amount or a percentage amount to calculate withholding is also
invalid.
1.9.4 Exempt Form W-4

Employees may be exempt from withholding if they had no taxes
due last year and none are expected to be due this year.
Who is exempt?
Unless employees Unless employees are claimed as a dependent, those who earn
are claimed as a less than the standard deduction can ordinarily claim to be
dependent, those exempt from withholding. See the table below. However, as
discussed next, earning less than these amounts does not
who earn less than
guarantee that an employee qualifies for an exemption.
the standard
deduction can Who Can Claim an Exemption?
ordinarily claim to
Standard Deduction Applies To
be exempt from
$9,700 Married persons filing jointly or
withholding. qualified widows (widowers)
$7,150 Unmarried heads of household
$4,850 Single taxpayers
$4,850 Married persons filing separately
Personal Exemption Applies To

$3,100 Taxpayers, their spouses, and
dependents
Dependents
Being a full-time student and a dependent does not automatically
exempt a part-time employee from withholding requirements.
When total income (both wage and nonwage income) exceeds

$800 and includes more than $250 of unearned income per year, Chapter 1
an employee who is being claimed as a dependent by their
parents (or someone else) cannot claim exemption from
withholding. Unearned income includes interest earned on a
savings account, dividends, capital gains, or other investment
income. This provision was inserted into the tax code to prevent
high-income parents from shifting assets to their children in order
to avoid taxes.
Exempt employees must refile each year

Employees who want to continue their exempt status must file a
new Form W-4 with their employer by February 15 of each year.
Remind employees that if no valid Form W-4 is filed by the
deadline, you must withhold as if they were single with no
allowances.
1.9.5 Employer’s responsibilities

Employers are not required to verify whether an employee’s
marital status or withholding allowances are accurate. Your
responsibilities center on the following activities.
Ensuring that Form W-4 is complete

Check to make certain that each employee’s Form W-4 is signed
and dated and that the social security number is accurate. Reject
any Forms W-4 that are invalid.
Withholding as claimed
Withhold based on the number of allowances claimed by the
employee on Form W-4. Also deduct any additional amount
requested on the form.
Requesting that employees change Forms W-4 when

appropriate
IRS regulations require employers to remind their employees by
December 1 to submit revised Forms W-4 if their marital status or
number of allowances has changed.
Employees may also want to submit an amended Form W-4 if

they want their employer to withhold additional amounts to cover

Chapter 1 nonwage income. For example, if an employee sells stock during
the year and incurs capital gains taxes, he may want to cover that
tax obligation through payroll deductions with additional
withholding.
Record keeping
Keep all Forms W-4 on file for at least four years from the last tax
return filed using information from the Form W-4. Note the last
tax return filed using information from the W-4 is the employee’s
Form 1040.
Submitting Forms W-4 claiming excessive allowances

or exempt Forms W-4
When an employee claims more than 10 withholding allowances,
submit a copy of the Form W-4 to the IRS with your quarterly tax
return (Form 941). Also submit a copy of Form W-4 if the
employee claims exempt status but normally earns more than
$200 per week. You are not required to send any others unless
the IRS specifically requests them in writing. Continue
withholding on the basis of the employee’s claims until notified
differently by the IRS.
Checking forms claiming exempt status

Be sure the employee understands the rules for being exempt
from withholding. An employee who submits a false Form W-4
may be subject to a $500 penalty.
Be cautious about helping employees complete

Form W-4
You certainly want to help employees understand Form W-4. But
do not put yourself in the role of their tax adviser. If you consult
with employees as to the number of allowances to claim or the
amount of withholding, you may be liable for penalties for
underwithholding.
Here is how you can help employees with their Forms W-4:
• Provide only published or recognized sources of information (IRS

Publications 919 or 501 or videotapes available through the IRS).

• Tell employees that a copy of their Form W-4 will be submitted to Chapter 1
the IRS if they claim more than 10 allowances or exempt from
withholding.
• Before December 1, remind all employees to submit a revised Form
W-4 if their allowances increase or decrease or their marital status
changes.
1.9.6 Deducting from pension income (Form W-4P)

Periodic taxable distributions from qualified pension plans, profit-
sharing plans, and other deferred compensation plans and
annuities are subject to federal income tax withholding. However,
recipients of such distributions can decline to have taxes withheld
by filing Form W-4P, Withholding Certificate for Pension or Annuity
Payments (see page A-23). Recipients also file Form W-4P to
specify the number of withholding allowances and any additional
amount they want withheld. If they do not file Form W-4P, you
must figure withholding as if the recipients were married with three
allowances.
1.9.7 Deducting from sick pay (Form W-4S)

When an employee who is disabled by a non-job-related illness or
injury is being paid sick pay by a third-party insurer, no federal
income tax will be withheld unless the employee requests it by
submitting Form W-4S, Request for Federal Income Tax
Withholding From Sick Pay, (see page A-25) to the third party.
The employee uses this form to tell the third party to withhold a
flat dollar amount. The minimum amount that can be withheld is
$20 per week, and after withholding, the employee must receive
at least $10. If a payment is smaller or larger than a regular
payment, the amount withheld must be changed in the same
proportion as the payment.
1.9.8 State Withholding Allowance Certificates

More than 40 states have a state income tax and require
withholding from wages to collect it. Many of those states allow
employers to use the employee’s federal Form W-4 to calculate
state income tax withholding. However, others require that a state
withholding allowance certificate be completed and submitted to
the employer.

Chapter 1 1.10 Advance Earned Income Credit
(Form W-5)
Eligible employees can receive the earned income tax credit
(EIC) when they file their tax return. Or, by completing Form W-
5, Earned Income Credit Advance Payment Certificate, they can
get a portion of the credit in advance with their pay. Form W-5
expires on December 31 of each year. A new form must be filed
each year in order to continue receiving advance EIC in the next
year. See Appendix (p. A-27) for a copy of this form.
1.10.1 Wage limit on AEIC

An employer who has paid an individual claiming single or head
of household total wages of at least $30,338 or has paid an
individual claiming married filing jointly total wages of at least
$31,338 in 2004 must stop making advance earned income
payments to that employee. The same holds true once the
employee has received $1,563 in AEIC payments in 2004.
1.10.2 Employer’s responsibility for notification

You are required to notify eligible employees about the EIC. You
must provide all the information outlined in IRS Notice 797 to
employees who had no income tax withheld yet did not claim to
be exempt from withholding on their Form W-4.
1.10.3 Ways to notify employees about the EIC

The easiest way to let employees know about the EIC is to use
the official Form W-2. The IRS’s W-2 contains EIC information on
the back of the employee’s Form W-2 Copy B. Privately printed
W-2s can have the EIC information on the back of Copy B or C.
You must give written notice to each eligible employee

If you do not include an IRS-approved notice on the employee’s
Form W-2, you must give written notice to the employee within
one week of the date you deliver Forms W-2. Posting this
information on your company bulletin board will not suffice.

Your own statement Chapter 1
You can use your own written statement as long as it has the
exact wording of Notice 797. The law’s purpose
is to protect the
1.11 Child Labor health and well
being of the child
Employers must meet specific requirements when employing and ability of the
minors under the age of 18. The law’s purpose is to protect the child to receive an
health and well being of the child and ability of the child to
education.
receive an education.
Minors under 14 years of age generally are forbidden from

working, other than on family farms. Minors 14 and 15 years of
age are not allowed to work more than 3 hours per day or 18
hours per week while school is in session. During school sessions,
the minor can only work between the hours of 7 a.m. and 7 p.m.
When school is not in session, the minor may not work more than
8 hours per day, or 40 hours per week, and only between the
hours of 7 a.m. and 9 p.m.
14- and 15-year-olds may not work in hazardous jobs. Minors

under 16 years of age can perform certain work in retail, food
service, and gasoline service establishments, but may not work in
a job defined by the U. S. Department of Labor’s Wage and Hour
Division as hazardous, manufacturing, or mining. Actors or
performers (in radio, television, movies, or theater) and
newspaper carriers under the age of 14 are exempt from child
labor restrictions.
Minors 16 and 17 years of age are only limited to not working in

hazardous jobs. Employers may be fined up to $11,000 for each
violation of the child labor laws that leads to the death or serious
injury of a minor.
Many states have also enacted child labor laws. In some cases,
these laws are more restrictive when a minor can work.

understanding of Forms W-4 and W-5.
1. The amount of federal income that tax is withheld from an

employee’s wages is determined by a formula that DOES
NOT use _______ .
a. Employee’s taxable wages

b. Pay period
c. A flat rate
d. Marital status
2. When does an employee first complete Form W-4?
a. When first hired

b. When they need to have federal income tax withheld
c. When the employee is married
d. When the employee is divorced
3. When must an employee amend their W-4?
a. After receiving a pay increase

b. After receiving overtime pay
c. After becoming divorced
d. After their spouse quits working
4. Which of the following events would require an employee to

fill out an amended Form W-4 within 10 days of its
ocurrance?
a. Employee becomes legally separated from his or her

spouse who was claimed as an allowance
b. Employee’s spouse quits job to stay home with a new
baby
c. Death of spouse
d. Adoption of a child

5. Hank, an administrative assistant in your firm’s marketing Chapter 1
department, was recently married. Your firm pays on the 15th
and last day of every month. On June 10, Hank submitted a
revised Form W-4, changing his marital status and number of
allowances from one to four. When must you change the
amount of his withholding?
a. On his June 15th paycheck

b. On his June 30th paycheck
c. On his July 15th paycheck
6. Harry, a newly hired horticulturist, is married with one child.

His beginning salary is $1,000 semimonthly. Because of an
unexpected business trip, Harry fails to submit Form W-4 by
his first payday. What withholding status must Harry’s
employer use for his first paycheck?
a. Single, no allowances
b. Single, 3 allowances
c. Married, no allowances
d. Married, 3 allowances
7. Under what conditions can an employee claim exemption

from withholding on Form W-4?
a. Receiving overtime pay

b. Had no tax liability last year and expects no tax liability
this year
c. Anticipates receiving a bonus
8. Heather, a freshman at the university, works a few hours each

week as a receptionist. Her father claims her as a dependent
on his tax return. Last year, she had no income. This year, her
anticipated annual income is less than $500. Which of the
following statements is true?
a. She can claim to be exempt from withholding.

b. Once she files an exempt Form W-4, it stays in effect
until a new Form W-4 is submitted.
c. She is not exempt because she is a dependent.

Chapter 1 9. All employees must complete a new Form W-4 each year.
True
False
10. The personnel of the payroll department must assist

employees in determining their marital status and number of
allowances for Form W-4.
True
False
11. All employees must receive notice of the Advance Earned

Income Credit.
True
False
12. To continue to receive the Advance Earned Income Credit, the

employee must complete a new Form W-5 each year.
True
False
13. Howard, married with five allowances, earns $1,000 per

month. Although he hasn’t claimed exempt status on his
Form W-4, no federal income tax is withheld from his wages.
Which of the following is true?
a. Howard must be paid the advance earned income
credit.
b. If he filed Form W-5 last year, he will continue to
receive advance EIC payments this year.
c. You must provide Howard detailed information about
the EIC.
d. Howard can get the EIC even if he doesn’t file a tax
return.
14. Henry claims exempt from withholding on his Form W-4. To

continue the exempt status for the next year, a new Form W-4:
a. Must be filed by December 31.
b. Must be filed by February 15 of the following year.
c. Is not necessary.
d. Is illegal unless Henry has more than 10 allowances.

Answers to Quiz 1.6 Chapter 1
1. c
2. a
3. c
4. a. When allowances increase (such as when a child is

adopted or a spouse stops working), less tax is withheld; an
employee can fill out a new Form W-4 any time. However,
when allowances decrease (as in a), the employee must fill
out a new Form W-4 within 10 days. In case of the death of a
spouse, marital status and allowances are not affected until
the next year. However, it is not the employer’s responsibility
to track or require these changes.
5. c. You must reflect the change in withholding no later than

the first payroll period ending on or after the 30th day from the
date you received the amended Form W-4.
6. a. If a new employee fails to submit a Form W-4, withhold

the maximum amount for single, 0 allowances.
7. b Employees claiming exempt must owe no federal income

tax for the year as no tax will be withheld.
8. a. Heather apparently meets the requirements for exempt

status. To maintain this status, however, she must file a new
Form W-4 by February 15 of the following year.
9. False. Only employees wishing to continue an exempt status

must file a Form W-4 each year.
10. False. Assisting employees with their Form W-4 may imply
that you are providing them with tax advice.
11. False. Only employees meeting the IRS eligibility requirement

must receive notice of the AEIC.

Chapter 1 12. True
13. c. Employers are required to provide EIC information to all

employees who do not claim exempt status yet have no tax
withheld. Eligible employees can receive EIC when they file
their tax return. If they receive advance EIC payments and
don’t file a return or are not eligible, they must pay it back.
Form W-5, Earned Income Credit Advance Payment
Certificate, expires on December 31 and must be refiled each
year. It is not effective for the new year until the Form W-5 is
filed with the employer.
14. b. The exempt status expires on February 15 of the

following year. Employees must refile their Forms W-4 by that
date to continue to be exempt from withholding.

APPENDIX A
a Control number For Official Use Only 䊳
22222 Void
OMB No. 1545-0008
b Employer identification number 1 Wages, tips, other compensation 2 Federal income tax withheld
c Employer’s name, address, and ZIP code 3 Social security wages 4 Social security tax withheld
5 Medicare wages and tips 6 Medicare tax withheld
7 Social security tips 8 Allocated tips
d Employee’s social security number 9 Advance EIC payment 10 Dependent care benefits
e Employee’s first name and initial Last name 11 Nonqualified plans 12a See instructions for box 12
C
o
d
e
13 Statutory Retirement Third-party 12b

employee plan sick pay C
o
d
e
14 Other 12c
C
o
d
e
12d
C
o
d
e
f Employee’s address and ZIP code

15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax 18 Local wages, tips, etc. 19 Local income tax 20 Locality name
2004
Wage and Tax
W-2
Department of the Treasury—Internal Revenue Service
Form Statement For Privacy Act and Paperwork Reduction
Act Notice, see back of Copy D.
Copy A For Social Security Administration — Send this
entire page with Form W-3 to the Social Security
Administration; photocopies are not acceptable. Cat. No. 10134D
Do Not Cut, Fold, or Staple Forms on This Page — Do Not Cut, Fold, or Staple Forms on This Page
A–1
DO NOT STAPLE OR FOLD
a Control number For Official Use Only 䊳
33333 OMB No. 1545-0008
䊳
b 941 Military 943 1 Wages, tips, other compensation 2 Federal income tax withheld
Kind
of Hshld. Medicare Third-party
CT-1 emp. govt. emp. sick pay 3 Social security wages 4 Social security tax withheld
Payer
c Total number of Forms W-2 d Establishment number 5 Medicare wages and tips 6 Medicare tax withheld
e Employer identification number 7 Social security tips 8 Allocated tips
f Employer’s name 9 Advance EIC payments 10 Dependent care benefits
11 Nonqualified plans 12 Deferred compensation
13 For third-party sick pay use only
14 Income tax withheld by payer of third-party sick pay

g Employer’s address and ZIP code
h Other EIN used this year
15 State Employer’s state ID number 16 State wages, tips, etc. 17 State income tax
18 Local wages, tips, etc. 19 Local income tax
Contact person Telephone number For Official Use Only

( )
Email address Fax number
( )
Under penalties of perjury, I declare that I have examined this return and accompanying documents, and, to the best of my knowl edge and belief,
they are true, correct, and complete.
Signature 䊳 Title 䊳 Date 䊳
Form W-3 Transmittal of Wage and Tax Statements 2004 Department of the Treasury
Internal Revenue Service
Send this entire page with the entire Copy A page of Form(s) W-2 to the Social Security Administration.
Photocopies are not acceptable.
Do not send any payment (cash, checks, money orders, etc.) with Forms W-2 and W-3.
An Item To Note Where To File

Separate instructions. See the 2004 Instructions for Send this entire page with the entire Copy A page of Form(s)
Forms W-2 and W-3 for information on completing this W-2 to:
form.
Social Security Administration
Purpose of Form Data Operations Center
Wilkes-Barre, PA 18769-0001
Use this form to transmit Copy A of Form(s) W-2, Wage and
Tax Statement. Make a copy of Form W-3, and keep it with Note: If you use “Certified Mail” to file, change the ZIP code
Copy D (For Employer) of Form(s) W-2 for your records. Use to “18769-0002.” If you use an IRS-approved private delivery
Form W-3 for the correct year. File Form W-3 even if only service, add “ATTN: W-2 Process, 1150 E. Mountain Dr.” to
one Form W-2 is being filed. If you are filing Form(s) W-2 the address and change the ZIP code to “18702-7997.” See
on magnetic media or electronically, do not file Form W-3. Circular E (Pub. 15), Employer’s Tax Guide, for a list of IRS
approved private delivery services.
When To File Do not send magnetic media to the address shown
File Form W-3 with Copy A of Form(s) W-2 by above.
February 28, 2005.
For Privacy Act and Paperwork Reduction Act Notice, see back of Copy D of Form W-2.
Cat. No. 10159Y
A–2
2004 Department of the Treasury
Instructions for Forms W-2

and W-3
Wage and Tax Statement and
Transmittal of Wage and Tax Statements
Section references are to the Internal Revenue Code unless otherwise noted.
Contents Page for filing with state or local governments, distribution to your
Items To Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 1 employees, and for your records.
Need Help? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 1 Substitute forms. If you are not using the official IRS form to
How To Get Forms and Publications . . . . . . . . . . . . . ... 1 furnish Form W-2 to employees or to file with the SSA, you may
Earned Income Credit (EIC) Notice . . . . . . . . . . . . . . . ... 2 use an acceptable substitute form that complies with the rules
Common Errors on Forms W-2 . . . . . . . . . . . . . . . . . . ... 2 in Pub. 1141, General Rules and Specifications for Substitute
General Instructions for Forms W-2 and W-3 . . . . . . . ... 2 Forms W-2 and W-3. Pub. 1141, which is revised annually, is a
Special Reporting Situations for Form W-2 . . . . . . . . . ... 3 revenue procedure that explains the requirements for format
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 6 and content of substitute Forms W-2 and W-3. Your substitute
Specific Instructions for Form W-2 . . . . . . . . . . . . . . . ... 7 forms must comply with the requirements in Pub. 1141.
Specific Instructions for Form W-3 . . . . . . . . . . . . . . . . . 10
Reconciling Forms W-2, W-3, 941, and 943 . . . . . . . . . . . 11 Need Help?
Form W-2 Reference Guide for Box 12 Codes . . . . . . . . . 12 Information reporting call site. The IRS operates a
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 centralized call site to answer questions about reporting on
Forms W-2, W-3, 1099, and other information returns. If you
Items To Note have questions about reporting on these forms, call
1-866-455-7438 (toll free), Monday through Friday, 8:30 a.m. to
New size for 2004 Forms W-2 and W-3. The 2004 Forms W-2 4:30 p.m. Eastern time. If you have questions about magnetic
and W-3 were reformatted to conform with the size and margins media or electronic filing of Forms W-2, contact the SSA at
used in the substitute black and white laser Forms W-2 and 1-800-772-6270 or visit the SSA website at
W-3 shown in Exhibits E and F of the May 2003 revision of www.socialsecurity.gov/employer.
Pub. 1141, General Rules and Specifications for Substitute
Forms W-2 and W-3. This change allows programmers to write Help for people with disabilities. Telephone help is available
universal code for data entry on both the official and the laser using TTY/TDD equipment. If you have questions about
printed versions of the forms. Make certain that Copy A of reporting on information returns — Forms 1096, 1098, 1099,
your paper Forms W-2 and Form W-3 reflect these 5498, W-2, W-2G, and W-3, you may call 304-267-3367. For
changes. any other tax information, call 1-800-829-4059.
Health Savings Account (HSA). A new code Online wage reporting. Using a personal computer and a
(Code W – Employer’s contribution to an employee’s Health modem, you can access SSA’s Business Services Online
Savings Account), has been added to Form W-2 for use in (BSO) to electronically report wage data. To obtain information
2004. See Health Savings Account on page 5. regarding filing wage data electronically with SSA or to access
BSO, visit the SSA’s Employer Reporting Instructions and
Removal of dollar signs. The dollar signs have been removed Information website at www.socialsecurity.gov/employer.
from Copy A of Forms W-2 and W-3 to provide more space. Call the SSA at 1-888-772-2970 if you experience problems
The Privacy Act and Paperwork Reduction Act Notice has using any of the services within BSO.
been relocated to the back of Copy D of Form W-2. The website includes magnetic media filing information,
Distributions from governmental section 457(b) plans of some IRS and SSA publications, information on electronic filing,
state and local agencies. Generally, report distributions and general topics of interest about annual wage reporting. You
after December 31, 2001, from section 457(b) plans of state can also use BSO to ask questions about wage reporting.
and local agencies on Form 1099-R, Distributions From Employment tax information. Detailed employment tax
Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, information is given in:
Insurance Contracts, etc. See Notice 2003-20 for details. You • Circular A (Pub. 51), Agricultural Employer’s Tax Guide
can find Notice 2003-20 on page 894 of Internal Revenue • Circular E (Pub. 15), Employer’s Tax Guide
Bulletin 2003-19 at www.irs.gov/pub/irs-irbs/irb03-19.pdf. • Pub. 15-A, Employer’s Supplemental Tax Guide, and
Electronic payee statements. If your employees give their • Pub. 15-B, Employer’s Tax Guide to Fringe Benefits.
consent, you may be able to furnish Copies B, C, and 2 of You can also call the IRS with your employment tax
Forms W-2 to your employees electronically. See Pub. 15-A for questions at 1-800-829-4933.
additional information.
Extended due date for electronic filers. If you file your 2004 How To Get Forms and Publications
Forms W-2 with the Social Security Administration (SSA) Personal computer. You can access the IRS website 24
electronically (not by magnetic media), the due date is extended hours a day, 7 days a week at www.irs.gov to:
to March 31, 2005. For information on how to file electronically, • Download forms, instructions, and publications.
see Magnetic media/electronic reporting on page 2. • See answers to frequently asked tax questions.
Online filing of Forms W-2 and W-3. File Forms W-2 and W-3 • Search publications on-line by topic or keyword.
electronically by visiting the SSA’s Employer Reporting • Send us comments or request help by email.
Instructions and Information website at • Sign up to receive local and national tax news by email.
www.socialsecurity.gov/employer and selecting “Business CD-ROM. Order Pub. 1796, Federal Tax Products on
Services Online.” SSA’s “Create Forms W-2 Online” option CD-ROM, and get:
allows you to create “fill-in” versions of Forms W-2 and Form • Current year forms, instructions, and publications.
W-3 for filing with the SSA and to print out copies of the forms • Prior year forms, instructions, and publications.
Cat. No. 25979S
A–3
• Popular tax forms that may be filled in electronically, printed Forms W-2 and W-3 are the same as those used on the
out for submission, and saved for recordkeeping. Form 941, Employer’s Quarterly Federal Tax Return, Form
• The Internal Revenue Bulletin. 943, Employer’s Annual Federal Tax Return for Agricultural
Buy the CD-ROM on the Internet at www.irs.gov/cdorders Employees, Form CT-1, Employer’s Annual Railroad
from the National Technical Information Service (NTIS) or call Retirement Tax Return, or Schedule H (Form 1040) filed by or
1-877-CDFORMS (1-877-233-6767) toll free. for the payer.
By phone and in person. You can order forms and When to file. File Copy A of Form W-2 with the entire page of
publications 24 hours a day, 7 days a week, by calling Form W-3 (or reports filed on magnetic media) by February 28,
1-800-TAX-FORM (1-800-829-3676). You can also get most 2005. However, if you file electronically (not by magnetic
forms and publications at your local IRS office. media), the due date is March 31, 2005. You may owe a
penalty for each Form W-2 that you file late. See Penalties on
Earned Income Credit (EIC) Notice page 6. If you terminate your business, see Terminating a
You must notify employees who have no income tax withheld business on page 6.
that they may be able to claim an income tax refund because of Extension to file. You may request an automatic extension
the EIC. You can do this by using the official IRS Form W-2 with of time to file Form W-2 by sending Form 8809, Request for
the EIC notice on the back of Copy B or a substitute Form W-2 Extension of Time To File Information Returns, to the address
with the same statement. You must give your employee shown on Form 8809. You must request the extension before
Notice 797, Possible Federal Tax Refund Due to the Earned the due date of Forms W-2. You will have an additional 30 days
Income Credit (EIC), or your own statement that contains the to file. See Form 8809 for details.
same wording if: (a) you use a substitute Form W-2 that does Even if you request an extension to file Form W-2, you
not contain the EIC notice, (b) you are not required to furnish
Form W-2, or (c) you do not furnish a timely Form W-2 to your !
CAUTION
must still furnish Form W-2 to your employees by
January 31, 2005. But see Extension to furnish Forms
employee. For more information, see section 10 in Circular E W-2 to employees on page 3.
(Pub.15).
Where to file. File the entire Copy A page of Form W-2 with
Common Errors on Forms W-2 the entire page of Form W-3 at the following address:
Forms W-2 provide information to your employees, the SSA,
the IRS, and state and local governments. Avoid making the Social Security Administration
following errors, which cause processing delays. Data Operations Center
Do not: Wilkes-Barre, PA 18769-0001
• Use ink that is too light to make entries. Use only black ink. If you use “Certified Mail” to file, change the ZIP code to
• Make entries that are too small or too large. Use 12-point TIP “18769-0002.” If you use an IRS-approved private
Courier font, if possible. delivery service, add “ATTN: W-2 Process, 1150 E.
• Add dollar signs to the money-amount boxes. They have Mountain Dr.” to the address and change the ZIP code to
been removed from Copy A and are not required. “18702-7997.” See Circular E (Pub.15) for a list of
• Inappropriately check the “Retirement plan” checkbox in IRS-approved private delivery services.
box 13. (See Retirement plan on page 10.)
• Misformat the employee’s name in box e. Enter the Do not send cash, checks, money orders, etc. with the
employee’s first name and middle initial in the first box and his !
CAUTION
Forms W-2 and W-3 that you submit to the SSA. Do not
use the address above to file by magnetic media.
or her surname in the second box.
See SSA’s MMREF-1, Magnetic Media Reporting and
Electronic Filing, for the magnetic media filing address.
General Instructions for Forms Employment tax forms (e.g., Form 941 or Form 943),
W-2 and W-3 remittances, and Forms 1099 must be sent to the IRS.
Send Copy 1 of Form W-2 to your state, city, or local tax
Who must file Form W-2. Employers must file Form W-2 for department. For more information concerning Copy 1 (including
wages paid to each employee from whom: how to complete boxes 15-20), contact your state, city, or local
• Income, social security, or Medicare tax was withheld or tax department.
• Income tax would have been withheld if the employee had
claimed no more than one withholding allowance or had not Shipping and mailing. If you file more than one type of
claimed exemption from withholding on Form W-4, Employee’s employment tax form, please group Forms W-2 of the same
Withholding Allowance Certificate. type, with a separate Form W-3 for each type, and send them in
separate groups. See the specific instructions for box b of Form
Also, every employer engaged in a trade or business who W-3 on page 10.
pays remuneration for services performed by an employee,
including noncash payments, must furnish a Form W-2 to each Prepare and file Forms W-2 either alphabetically by
employee even if the employee is related to the employer. employees’ last names or numerically by employees’ social
security numbers. Please do not staple or tape Form W-3 to
If you are required to file 250 or more Forms W-2, see the related Forms W-2 or Forms W-2 to each other. These
Magnetic media/electronic reporting below. forms are machine read. Staple holes or tears interfere with
Who must file Form W-3. Anyone required to file Form W-2 machine reading. Also, do not fold Forms W-2 and W-3. Send
must file Form W-3 to transmit Copy A of Forms W-2. Make a the forms to the SSA in a flat mailing.
copy of Form W-3; keep it and Copy D (For Employer) of Forms
W-2 with your records for 4 years. Be sure to use Form W-3 for If you have a large number of Forms W-2 to send with one
the correct year. Form W-3, you may send them in separate packages. Show
your name and EIN on each package. Number them in order
Household employers, even those with only one household (1 of 4, 2 of 4, etc.) and place Form W-3 in package 1. Show
employee, must file Form W-3 with Form W-2. On Form W-3 the number of packages at the bottom of Form W-3 below the
check the “Hshld. emp.” checkbox in box b. For more title. If you mail them, you must send them First-Class.
information, see Schedule H, (Form 1040), Household
Employment Taxes, and its separate instructions. Magnetic media/electronic reporting. If you are required to
file 250 or more Forms W-2, you must file them on magnetic
Who may sign Form W-3. A transmitter or sender (including a media (or electronically) unless the IRS granted you a waiver.
service bureau, paying agent, or disbursing agent) may sign You may be charged a penalty if you fail to file on magnetic
Form W-3 for the employer or payer only if the sender: media (or electronically) when required.
• Is authorized to sign by an agency agreement (either oral,
written, or implied) that is valid under state law and You are encouraged to file electronically even if you
• Writes “For (name of payer)” next to the signature. TIP are filing fewer than 250 Forms W-2. Small submitters
If an authorized sender signs for the payer, the payer is still may be able to file Forms W-2 online. Visit the SSA’s
responsible for filing, when due, a correct and complete Form Employer Reporting Instructions and Information website at
W-3 and related Forms W-2, and is subject to any penalties that www.socialsecurity.gov/employer for more information.
result from not complying with these requirements. Be sure that You may request a waiver on Form 8508, Request for
the payer’s name and employer identification number (EIN) on Waiver From Filing Information Returns Magnetically. Submit
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Form 8508 to the IRS at least 45 days before the due date of Special Reporting Situations for
Form W-2. See Form 8508 for filing information.
If you are filing Forms W-2 using magnetic tape or
Form W-2
cartridge, complete Form 6559, Transmitter Report and Adoption benefits. Amounts paid or expenses incurred by an
Summary of Magnetic Media; you may also need Form 6559-A, employer for qualified adoption expenses under an adoption
Continuation Sheet for Form 6559. Do not use Form W-3. assistance program are not subject to income tax withholding
and are not reportable in box 1. However, these amounts
If you file on magnetic media (or electronically), do not (including adoption benefits paid from a section 125 (cafeteria)
!
CAUTION
file the same returns on paper. plan, but not including adoption benefits forfeited from a
cafeteria plan) are subject to social security, Medicare, and
railroad retirement taxes and must be reported in boxes 3
Magnetic media reporting specifications for Form W-2 are in and 5. Also, the total amount must be reported in box 12 with
the SSA’s MMREF-1, a publication that can be downloaded by code T.
accessing the SSA’s Employer Reporting Instructions and See Notice 97-9, 1997-1 C.B. 365, for more information on
Information website at www.socialsecurity.gov/employer. adoption benefits. You can find Notice 97-9 on page 35 of
You can also get magnetic media (or electronic) specifications Internal Revenue Bulletin 1997-2 at www.irs.gov/pub/irs-irbs/
by calling SSA’s Employer Reporting Branch at irb97-02.pdf. Advise your employees to get Pub. 968, Tax
1-800-772-6270. Benefits for Adoption.
Reporting instructions for magnetic media/electronic filing Agent reporting. Generally, an agent who has an approved
may differ from the paper reporting instructions. For example, Form 2678, Employer Appointment of Agent, should enter the
magnetic media/electronic filers may enter more than four items agent’s name as the employer in box c of Form W-2, and file
in box 12 in one individual’s wage report, but paper filers are only one Form W-2 for each employee. However, if the agent:
limited to four entries in box 12 on Copy A of each Form W-2. (a) is acting as an agent for two or more employers or is an
employer and is acting as an agent for another employer and
Furnishing Copies B, C, and 2 to employees. Furnish (b) pays social security wages for more than one employer in
Copies B, C, and 2 of Form W-2 to your employees, generally, excess of the wage base to an individual, special reporting for
by January 31, 2005. You will meet the “furnish” requirement if payments to that employee is needed.
the form is properly addressed and mailed on or before the
due date. If both (a) and (b) above apply, the agent must file separate
Forms W-2 for the affected employee reflecting the wages paid
If employment ends before December 31, 2004, you may by each employer. On each Form W-2, the agent should enter
furnish copies to the employee at any time after employment the following in box c of Form W-2:
ends, but no later than January 31, 2005. If an employee asks (Name of agent)
for Form W-2, give him or her the completed copies within 30 Agent for (name of employer)
days of the request or within 30 days of the final wage payment, Address of agent.
whichever is later. However, if you terminate your business, see
Terminating a business on page 6.
Each Form W-2 should reflect the EIN of the agent in box b.
You may furnish Forms W-2 to employees on IRS official An agent files one Form W-3 for all of the Forms W-2 and
forms or on acceptable substitute forms (see Substitute forms enters its own information in boxes e, f, and g of Form W-3 as it
on page 1). Be sure that the Forms W-2 you provide to appears on the agent’s related employment tax returns (e.g.,
employees are clear and legible and comply with the Form 941). Enter the client-employer’s EIN in box h of Form
requirements in Pub. 1141. W-3 if the Forms W-2 relate to only one employer (other than
Extension to furnish Forms W-2 to employees. You may the agent); if not, leave box h blank. See Rev. Proc. 70-6,
request an extension of time to furnish Forms W-2 to 1970-1 C.B. 420, for procedures to be followed in applying to be
employees by sending a letter to: an agent.
Generally, an agent is not responsible for refunding
IRS-Martinsburg Computing Center TIP excess social security or railroad retirement (RRTA) tax
Information Reporting Program on employees. If an employee worked for more than one
Attn: Extension of Time Coordinator employer during 2004 and had more than $5,449.80 in social
240 Murall Drive security and Tier 1 RRTA tax withheld (or more than $3,189.90
Kearneysville, WV 25430 in Tier 2 RRTA tax withheld), he or she should claim the excess
on the appropriate line of Form 1040 or Form 1040A.
Mail your letter on or before the due date for furnishing
Forms W-2 to employees. It must include: Archer MSA. An employer’s contribution to an employee’s
• Your name and address, Archer MSA is not subject to income tax withholding, or social
• Your employer identification number, security, Medicare, or railroad retirement taxes if it is
• Type of return, reasonable to believe at the time of the payment that the
• A statement that you are requesting an extension to furnish contribution will be excludable from the employee’s income.
Forms W-2 to employees, However, if it is not reasonable to believe at the time of
• Reason for delay, and payment that the contribution will be excludable from the
• Your signature or that of your authorized agent. employee’s income, employer contributions are subject to
income tax withholding and social security and Medicare taxes
Undeliverable Forms W-2. Keep for four years any (or railroad retirement taxes, if applicable) and must be reported
employee copies of Forms W-2 that you tried to deliver but in boxes 1, 3, and 5.
could not. Do not send undeliverable Forms W-2 to the SSA. You must report all employer contributions to an Archer MSA
Taxpayer identification numbers. Employers use an in box 12 of Form W-2 with code R. Employer contributions to
employer identification number (EIN) (00-0000000). an Archer MSA that are not excludable from the income of the
Employees use a social security number (SSN) employee also must be reported in box 1.
(000-00-0000). When you list a number, please separate the An employee’s contributions to an Archer MSA are
nine digits properly to show the kind of number. Do not accept includible in income as wages and are subject to income tax
an individual taxpayer identification number (ITIN) for withholding and social security and Medicare taxes (or railroad
employment purposes. See section 4 of Circular E (Pub. 15) for retirement taxes, if applicable). Employee contributions are
details. deductible, within limits, on the employee’s Form 1040.
The IRS uses SSNs to check the payments that you report See Notice 96-53, 1996-2 C.B. 219 and Pub. 969, Medical
against the amounts shown on the employees’ tax returns. The Savings Accounts (MSAs) for more information. You can find
SSA uses SSNs to record employees’ earnings for future social Notice 96-53 on page 5 of Internal Revenue Bulletin 1996-51 at
security and Medicare benefits. When you prepare Form W-2, www.irs.gov/pub/irs-irbs/irb96-51.pdf.
be sure to show the correct SSN for each employee. See Clergy and religious workers. For certain members of the
section 4 of Circular E (Pub.15) for information on verification of clergy and religious workers who are not subject to social
SSNs. security and Medicare taxes as employees, boxes 3 and 5 of
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Form W-2 should be left blank. You may include a minister’s Example. Before Employee A’s death on June 15, 2004, A
parsonage and/or utilities allowance in box 14. For information was employed by Employer X and received $10,000 in wages
on the rules that apply to ministers and certain other religious on which Federal income tax of $1,500 was withheld. When A
workers, see Pub. 517, Social Security and Other Information died, X owed A $2,000 in wages and $1,000 in accrued
for Members of the Clergy and Religious Workers, and vacation pay. The total of $3,000 (less the social security and
section 4, Religious Exemptions, of Pub. 15-A. Medicare taxes withheld) was paid to A’s estate on July 20,
Corrections. Use the current revision (December 2002) of 2004. Because X made the payment during the year of death, X
Form W-2c, Corrected Wage and Tax Statement, to correct must withhold social security and Medicare taxes on the $3,000
errors (such as incorrect name, SSN, or amount) on a payment and must complete Form W-2 as follows:
previously filed Form W-2. • Box d – Employee A’s SSN
• Box e – Employee A’s name
If your employee was given a new social security card • Box f – Employee A’s address
following an adjustment to his or her resident status that shows
a different name or SSN, file a Form W-2c for the most current • Box 1 – 10000.00 (does not include the $3,000 accrued
wages and vacation pay)
year only. • Box 2 – 1500.00
File Form W-3c, Transmittal of Corrected Wage and Tax • Box 3 – 13000.00 (includes the $3,000 accrued wages and
Statements, whenever you file a Form W-2c with the SSA, even vacation pay)
if you are only filing a Form W-2c to correct an employee’s • Box 4 – 806.00 (6.2% of the amount in box 3)
name or SSN. However, see Incorrect address on • Box 5 – 13000.00 (includes the $3,000 accrued wages and
employee’s Form W-2 below for information on correcting an vacation pay)
employee’s address. Use Form W-3c to correct a previously • Box 6 – 188.50 (1.45% of the amount in box 5)
filed Form W-3.
If you discover an error on Form W-2 after you issue it to Employer X also must complete Form 1099-MISC as
your employee but before you send it to the SSA, check the !
CAUTION
follows:
“Void” box at the top of the form on Copy A. Prepare a new
Form W-2 with the correct information, and send Copy A to the
SSA. Write “CORRECTED” on the employee’s new copies (B, • Boxes for: Recipient’s name, address, and TIN — The
estate’s name, address, and TIN
C, and 2), and furnish them to the employee. If the “Void” Form
W-2 is on a page with a correct Form W-2, send the entire page • Box 3 – 3000.00 (Even though amounts were withheld for
to the SSA. The “Void” form will not be processed. Do not write social security and Medicare taxes, the gross amount is
“CORRECTED” on Copy A of Form W-2. reported here.)
If you are making an adjustment in 2004 to correct social If Employer X made the payment after the year of death,
security and Medicare taxes for a prior year, you must file the $3,000 would not be subject to social security and Medicare
Form 941c, Supporting Statement To Correct Information, with taxes and would not be shown on Form W-2. However, the
your Form 941 or Form 943 in the return period that you find the employer would still file Form 1099-MISC.
error, and issue the employee a Form W-2c for the prior year. If Educational assistance programs. A $5,250 exclusion for
you are correcting social security or Medicare wages or tips, employer-provided educational assistance applies to benefits
also file the entire Copy A page of Form W-2c and Form W-3c provided to your employees under an educational assistance
with the SSA to correct the social security records and any program. See Pub. 970, Tax Benefits for Education, and
other items on the original Form W-2 (or previously filed Form section 2 of Pub. 15-B for more information. Also see the
W-2c) that were in error. instructions for box 1 on page 7.
Incorrect address on employee’s Form W-2. If you filed a Election workers. Report on Form W-2 payments of $600 or
Form W-2 with the SSA showing an incorrect address for the more to election workers for services performed in state,
employee but all other information on Form W-2 is correct, do county, and municipal elections. File Form W-2 for payments of
not file Form W-2c with the SSA merely to correct the less than $600 paid to election workers if social security and
address. Medicare taxes were withheld under a section 218 (Social
However, if the address was incorrect on the Form W-2 Security Act) agreement. Do not report election worker
furnished to the employee, you must do one of the following: payments on Form 1099-MISC.
• Issue a new, corrected Form W-2 to the employee, including Employee business expense reimbursements.
the new address. Indicate “REISSUED STATEMENT” on the Reimbursements to employees for business expenses must be
new copies. Do not send Copy A to the SSA. reported as follows:
• Issue a Form W-2c to the employee showing the correct • Generally, payments made under an accountable plan are
address in box f and all other correct information. Do not send excluded from the employee’s gross income and are not
Copy A to the SSA. reported on Form W-2. However, if you pay a per diem or
• Mail the Form W-2 with the incorrect address to the mileage allowance and the amount paid exceeds the amount
employee in an envelope showing the correct address or treated as substantiated under IRS rules, you must report as
otherwise deliver it to the employee. wages on Form W-2 the amount in excess of the amount
Deceased employee’s wages. If an employee dies during the treated as substantiated. The excess amount is subject to
year, you must report the accrued wages, vacation pay, and income tax withholding and social security and Medicare taxes.
other compensation paid after the date of death. Report the amount treated as substantiated (i.e., the nontaxable
portion) in box 12 using code L. See page 9.
If you made the payment in the same year that the • Payments made under a nonaccountable plan are reported
employee died, you must withhold social security and as wages on Form W-2 and are subject to income tax
Medicare taxes on the payment and report the payment on the withholding and social security and Medicare taxes.
employee’s Form W-2 only as social security and Medicare
wages to ensure proper social security and Medicare credit is For more information on accountable plans, nonaccountable
received. plans, amounts treated as substantiated under a per diem or
mileage allowance, the standard mileage rate, the per diem
On the employee’s Form W-2, show the payment as social substantiation method, and the high-low substantiation method,
security wages (box 3) and Medicare wages and tips (box 5) see Pub. 463, Travel, Entertainment, Gift, and Car Expenses;
and the social security and Medicare taxes withheld in boxes 4 Pub. 1542, Per Diem Rates; and section 5 of Circular E
and 6. Do not show the payment in box 1. (Pub.15).
If you made the payment after the year of death, do not Employee’s taxes paid by employer. If you paid your
report it on Form W-2, and do not withhold social security and employee’s share of social security and Medicare taxes rather
Medicare taxes. than deducting them from the employee’s wages, you must
Whether the payment is made in the year of death or include these payments as wages subject to income tax
after the year of death, you also must report it in box 3 of withholding and social security, Medicare, and Federal
Form 1099-MISC, Miscellaneous Income, for the payment to unemployment (FUTA) taxes. Generally, this increase in your
the estate or beneficiary. Use the name and taxpayer employee’s wages for your payment of the employee’s social
identification number (TIN) of the payment recipient on Form security and Medicare taxes is also subject to employee social
1099-MISC. security and Medicare taxes. The amount to include as wages
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is determined by using the formula contained in the discussion HSA that are not excludable from the income of the employee
of Employee’s Portion of Taxes Paid by Employer in also must be reported in box 1.
section 7 of Pub. 15-A. An employee’s contributions to an HSA are includible in
This does not apply to household and agricultural income as wages and are subject to income tax withholding and
!
CAUTION
employers. If you pay a household or agricultural
employee’s social security and Medicare taxes, you
social security and Medicare taxes (or railroad retirement taxes,
if applicable). Employee contributions are deductible, within
must include these payments in the employee’s wages. limits, on the employee’s Form 1040.
However, the wage increase due to the tax payments is not Lost Form W-2 — reissued statement. If an employee loses
subject to social security, Medicare, or FUTA taxes. See the a Form W-2, write “REISSUED STATEMENT” on the new copy
Instructions for Schedule H (Form 1040), Household and furnish it to the employee. Do not send Copy A of the
Employers for information on completing Forms W-2 and W-3. reissued Form W-2 to the SSA. Employers are not prohibited
Fringe benefits. Include all taxable fringe benefits in box 1 of (by the Internal Revenue Code) from charging a fee for the
Form W-2 as wages, tips, and other compensation and, if issuance of a duplicate Form W-2.
applicable, in boxes 3 and 5 as social security and Medicare Moving expenses. Report moving expenses as follows:
wages. Although not required, you may include the total value • Qualified moving expenses that an employer paid to a third
of fringe benefits in box 14 (or on a separate statement). party on behalf of the employee (e.g., to a moving company)
However, if you provided your employee a vehicle and included and services that an employer furnished in kind to an employee
100% of its annual lease value in the employee’s income, you are not reported on Form W-2.
must separately report this value to the employee in box 14 (or • Qualified moving expense reimbursements paid directly to
on a separate statement). The employee can then figure the an employee by an employer are reported only in box 12 of
value of any business use of the vehicle and report it on Form W-2 with code P.
Form 2106, Employee Business Expenses. Also see Pub. 15-B • Nonqualified moving expense reimbursements are reported
for more information. in boxes 1, 3, and 5 of Form W-2. These amounts are subject to
income tax withholding and social security and Medicare taxes.
If you used the commuting rule or the vehicle
! cents-per-mile rule to value the personal use of the
CAUTION vehicle, you cannot include 100% of the value of the use
Railroad employers. Railroad employers must file Form W-2
to report their employees’ wages and income tax withholding in
of the vehicle in the employee’s income. See Pub. 15-B. boxes 1 and 2. Reporting on magnetic media (or electronic
reporting) may be required; see Magnetic media/electronic
Golden parachute payments. Include any golden parachute reporting on page 2.
payments in boxes 1, 3, and 5 of Form W-2. Withhold income,
social security, and Medicare taxes as usual and report them in If an employee is covered by social security and Medicare,
boxes 2, 4, and 6, respectively. Excess parachute payments also complete boxes 3, 4, 5, 6, and 7 of Form W-2 to show the
are also subject to a 20% excise tax. If the excess payments social security and Medicare wages and the amounts withheld
are considered wages, withhold the 20% excise tax and include for social security and Medicare taxes. On the Form W-3 used
it in box 2 as income tax withheld. Also report the excise tax in to transmit these Forms W-2, check the “941” box in box b.
box 12 with code K. For definitions and additional information, For employees covered by RRTA tax, you also must report
see Regulations section 1.280G-1 and Rev. Proc. 2003-68. You the Tier 1 and Tier 2 taxes withheld in box 14 of Form W-2.
can find Rev. Proc. 2003-68 on page 398 of Internal Revenue Label them “Tier 1 tax” and “Tier 2 tax.” Boxes 3, 4, 5, 6, and 7
Bulletin 2003-34 at www.irs.gov/pub/irs-irbs/irb03-34.pdf. apply only to covered social security and Medicare employees
Government employers. Federal, state, and local agencies and are not to be used to report railroad retirement wages and
have two options for reporting their employees’ wages that are taxes. On the Form W-3 used to transmit these Forms W-2,
subject only to Medicare tax for part of the year and full social check the “CT-1” box in box b.
security and Medicare taxes for part of the year. Repayments. If an employee repays you for wages received in
Option one (which the SSA prefers) is to file a single Form error, do not offset the repayments against current year’s
W-2 with the Medicare-only wages and the social security and wages unless the repayments are for amounts received in error
Medicare wages combined. The Form W-3 must have the “941” in the current year. Repayments made in the current year, but
box checked in box b. related to a prior year or years, require special tax treatment by
employees in some cases. You may advise the employee of the
Option two is to file two Forms W-2 and two Forms W-3. total repayments made during the current year and the amount
File one Form W-2 for wages subject to Medicare tax only. Be (if any) related to prior years. This information will help the
sure to check the “Medicare govt. emp.” box in box b of Form employee account for such repayments on his or her Federal
W-3. File the second Form W-2 for wages subject to both social income tax return.
security and Medicare taxes with the “941” box checked in
box b of Form W-3. If the repayment was for a prior year, you must file Form
Group-term life insurance. If you paid for group-term life W-2c with the SSA to correct only social security and Medicare
insurance over $50,000 for an employee or a former employee, wages and taxes. Do not correct “Wages” in box 1 on Form
you must report the taxable cost of excess coverage, W-2c for the amount paid in error. See section 13 of Circular
determined by using the table in section 2 of Pub.15-B, in E (Pub 15) or section 9 of Circular A (Pub. 51), for information
boxes 1, 3, and 5 of Form W-2. Also, show the amount in on reporting adjustments to Form 941 or Form 943.
box 12 with code C. For employees, you must withhold social Tell your employee that the wages paid in error in a prior
security and Medicare taxes, but not income tax. Former TIP year remain taxable to the employee for that year. This
employees must pay the employee part of social security and is because the employee received and had use of those
Medicare taxes on the taxable cost of group-term life insurance funds during that year. The employee is not entitled to file an
over $50,000 on Form 1040. You are not required to collect amended return (Form 1040X) to recover the income tax on
those taxes. However, you must report the uncollected social these wages. Instead, the employee is entitled to a deduction
security tax with code M and the uncollected Medicare tax with (or a credit, in some cases) for the repaid wages on his or her
code N in box 12 of Form W-2. Form 1040 for the year of repayment.
Health Savings Account. An employer’s contribution to an Scholarship and fellowship grants. Give a Form W-2 to
employee’s Health Savings Account (HSA) is not subject to each recipient of a scholarship or fellowship grant only if you
income tax withholding, or social security, Medicare, or railroad are reporting amounts includible in income under section 117(c)
retirement taxes (or FUTA tax) if it is reasonable to believe at (relating to payments for teaching, research, or other services
the time of the payment that the contribution will be excludable required as a condition for receiving the qualified scholarship).
from the employee’s income. However, if it is not reasonable to Also see Pub. 15-A and Pub. 970. These payments are subject
believe at the time of payment that the contribution will be to income tax withholding. However, their taxability for social
excludable from the employee’s income, employer contributions security and Medicare taxes depends on the nature of the
are subject to income tax withholding and social security and employment and the status of the organization. See Students
Medicare taxes (or railroad retirement taxes, if applicable) and in section 15 of Circular E (Pub.15).
must be reported in boxes 1, 3, and 5 (and on Form 940). Sick pay. If you had employees who received sick pay in 2004
You must report all employer contributions to an HSA in from an insurance company or other third-party payer and the
box 12 of Form W-2 with code W. Employer contributions to an third party notified you of the amount of sick pay involved, you
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may be required to report the information on the employees’ • $15 per Form W-2 if you correctly file within 30 days (by
Forms W-2. If the insurance company or other third-party payer March 30 if the due date is February 28); maximum penalty
did not notify you in a timely manner about the sick pay $75,000 per year ($25,000 for small businesses, defined later).
payments, it must prepare Forms W-2 and W-3 for your • $30 per Form W-2 if you correctly file more than 30 days after
employees showing the sick pay. See Sick Pay Reporting in the due date but by August 1; maximum penalty $150,000 per
section 6 of Pub. 15-A for specific reporting instructions. year ($50,000 for small businesses).
SIMPLE retirement account. An employee’s salary reduction • $50 per Form W-2 if you file after August 1 or you do not file
contributions to a SIMPLE (savings incentive match plan for required Forms W-2; maximum penalty $250,000 per year
employees) retirement account are not subject to income tax ($100,000 for small businesses).
withholding but are subject to social security, Medicare, and If you do not file corrections and you do not meet any of
railroad retirement taxes. Do not include an employee’s
contribution in box 1 but do include it in boxes 3 and 5. An !
CAUTION
the exceptions to the penalty stated below, the penalty
is $50 per information return.
employee’s total contribution also must be included in box 12
with code D or S. Exceptions to the penalty. The following are exceptions
An employer’s matching or nonelective contribution to an to the failure to file correction information returns penalty:
employee’s SIMPLE is not subject to income tax withholding or 1. The penalty will not apply to any failure that you can
social security, Medicare, or railroad retirement taxes and is not show was due to reasonable cause and not to willful neglect.
to be shown on Form W-2. In general, you must be able to show that your failure was due
See Notice 98-4, 1998-1 C.B. 269, for more information on to an event beyond your control or due to significant mitigating
SIMPLE retirement accounts. You can find Notice 98-4 on factors. You must also be able to show that you acted in a
page 25 of Internal Revenue Bulletin 1998-2 at www.irs.gov/ responsible manner and took steps to avoid the failure.
pub/irs-irbs/irb98-02.pdf. 2. An inconsequential error or omission is not considered
Successor/predecessor employers. If you buy or sell a a failure to include correct information. An inconsequential error
business during the year, see Rev. Proc. 96-60, 1996-2 C.B. or omission does not prevent or hinder the SSA/IRS from
399, for information on who must file Forms W-2 and processing the Form W-2, from correlating the information
employment tax returns. You can find Rev. Proc. 96-60 on required to be shown on the form with the information shown on
page 24 of Internal Revenue Bulletin 1996-53 at www.irs.gov/ the payee’s tax return, or from otherwise putting the form to its
pub/irs-irbs/irb96-53.pdf. intended use. Errors and omissions that are never
Terminating a business. If you terminate your business, you inconsequential are those relating to:
must provide Forms W-2 to your employees for the calendar • A TIN,
year of termination by the due date of your final Form 941. You • A payee’s surname, and
must also file Forms W-2 with the SSA by the last day of the • Any money amounts.
month that follows the due date of your final Form 941. 3. De minimus rule for corrections. Even though you
However, if any of your employees are immediately employed cannot show reasonable cause, the penalty for failure to file
by a successor employer, see Successor/predecessor correct Forms W-2 will not apply to a certain number of returns
employers above. Also, see Rev. Proc. 96-57, 1996-2 C.B. if you:
389, for information on automatic extensions for furnishing • Filed those Forms W-2 on or before the required filing
Forms W-2 to employees and filing Forms W-2. You can find date,
Rev. Proc. 96-57 on page 14 of Internal Revenue Bulletin • Either failed to include all of the information required on
1996-53 at www.irs.gov/pub/irs-irbs/irb96-53.pdf. the form or included incorrect information, and
USERRA makeup amounts to a pension plan. If an
• Filed corrections of these forms by August 1.
employee returned to your employment after military service If you meet all of the conditions above, the penalty for filing
and certain makeup amounts were contributed to a pension incorrect Forms W-2 will not apply to the greater of 10 Forms
plan for a prior year(s) under the Uniformed Services W-2 or 1/2 of 1% of the total number of Forms W-2 that you are
Employment and Reemployment Rights Act of 1994 required to file for the calendar year.
(USERRA), report the prior year contributions separately in
box 12. See the TIP above Code D on page 9. You also may Lower maximum penalties for small businesses. For
report certain makeup amounts in box 14. See the box 14 purposes of the lower maximum penalties shown in
instructions on page 10. parentheses above, you are a small business if your average
Instead of reporting in box 12 (or box 14), you may choose annual gross receipts for the three most recent tax years (or for
to provide a separate statement to your employee showing the period that you were in existence, if shorter) ending before
USERRA makeup contributions. The statement must identify the calendar year in which the Forms W-2 were due are $5
the type of plan, the year(s) to which the contributions relate, million or less.
and the amount contributed for each year. Intentional disregard of filing requirements. If any failure
to file a correct Form W-2 is due to intentional disregard of the
Penalties filing or correct information requirements, the penalty is at least
The following penalties generally apply to the person required $100 per Form W-2 with no maximum penalty.
to file Form W-2. The penalties apply to paper filers as well as Failure to furnish correct payee statements. If you fail to
to magnetic media/electronic filers. provide correct payee statements (Forms W-2) to your
Use of a reporting agent or other third-party payroll employees and you cannot show reasonable cause, you may
be subject to a penalty. The penalty applies if you fail to provide
! service provider does not relieve an employer of the
CAUTION responsibility to ensure that Forms W-2 are furnished to
the statement by January 31, if you fail to include all information
employees and are filed correctly and on time. required to be shown on the statement, or if you include
incorrect information on the statement.
Failure to file correct information returns by the due date.
If you fail to file a correct Form W-2 by the due date and cannot The penalty is $50 per statement, no matter when the
show reasonable cause, you may be subject to a penalty as correct statement is furnished, with a maximum of $100,000 per
provided under code section 6721. The penalty applies if you: year. The penalty is not reduced for furnishing a correct
• Fail to file timely, statement by August 1.
• Fail to include all information required to be shown on Exception. An inconsequential error or omission is not
Form W-2, considered a failure to include correct information. An
• Include incorrect information on Form W-2, inconsequential error or omission cannot reasonably be
• File on paper when you were required to file on expected to prevent or hinder the payee from timely receiving
magnetic media or electronically, correct information and reporting it on his or her income tax
• Report an incorrect TIN, return or from otherwise putting the statement to its intended
• Fail to report a TIN, or use. Errors and omissions that are never inconsequential
• Fail to file paper Forms W-2 that are machine readable. are those relating to:
The amount of the penalty is based on when you file the • A dollar amount,
correct Form W-2. The penalty is: • A significant item in a payee’s address, and
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• The appropriate form for the information provided Card. If the employee has applied for a card but the number is
(i.e., whether the form is an acceptable substitute for the not received in time for filing, enter “Applied For” in box d.
official IRS form).
Ask the employee to inform you of the number and the exact
Intentional disregard of payee statement requirements. way that his/her name is printed on the card when it is received.
If any failure to provide a correct payee statement (Form W-2) Then correct your previous report by filing Form W-2c showing
to an employee is due to intentional disregard of the the employee’s SSN. If the employee needs to change his or
requirements to furnish a correct payee statement, the penalty her name from that shown on the card, the employee should
is at least $100 per Form W-2 with no maximum penalty. call the SSA at 1-800-772-1213.
Civil damages for fraudulent filing of Forms W-2. If you
willfully file a fraudulent Form W-2 for payments that you claim Boxes e and f — Employee’s name and address. Enter the
you made to another person, that person may be able to sue name as shown on your employee’s social security card (first,
you for damages. You may have to pay $5,000 or more. middle initial, last). Do not enter “Jr.,” “Sr.,” etc. on Copy A
even if such a suffix appears on the card. However, you can
include the suffix on all other copies of Form W-2. If the name
Specific Instructions for Form W-2 does not fit, you may show first name initial, middle initial, and
last name (and ignore the vertical line). If the name has
How to complete Form W-2. Form W-2 is a six-part form. changed, the employee must get a corrected card from any
Please ensure that all copies are legible. Send Copy A to SSA office. Use the name on the original card until you see the
the SSA; Copy 1 to your state, city, or local tax department; and corrected one. Do not show titles or academic degrees,
Copies B, C, and 2 to your employee. Keep Copy D, and a such as “Dr.,” “RN,” or “Esq.,” at the beginning or end of
copy of Form W-3, with your records for 4 years. the employee’s name.
Type the entries on Form W-2 using black ink in 12-point
Courier font, if possible. Because Copy A is read by machine, Include in the address the number, street, apartment or
handwritten entries or the use of inks other than black to make suite number (or P.O. box number if mail is not delivered to a
entries on the form hinder processing by the SSA. Do not use street address). For a foreign address, give the information in
script type, inverted font, italics, or dual case alpha characters. the following order: city, province or state, and country. Follow
It is important that entries in the boxes do not cross one or more the country’s practice for entering the postal code. Do not
of the vertical or horizontal lines that separate the boxes. abbreviate the country name.
Please do not erase, whiteout, or strike over an entry. Make all Third-party payers of sick pay filing third-party sick pay recap
dollar entries without the dollar sign and comma but with Forms W-2 and W-3 must enter “Third-Party Sick Pay Recap” in
the decimal point (00000.00). Show the cents portion of the place of the employee’s name in box e. Also, do not enter the
money amounts. If a box does not apply, leave it blank. employee’s SSN in box d. See Sick Pay Reporting in section 6
Send the whole Copy A page of Form W-2 with Form of Pub. 15-A.
W-3 to the SSA even if one of the Forms W-2 on the page is Box 1 — Wages, tips, other compensation. Show the total
blank or void. Do not staple Forms W-2 together or to Form wages, tips, and other compensation, before any payroll
W-3. Also, if possible, please file Forms W-2 either deductions, that you paid to your employee during the year. Do
alphabetically by employees’ last names or numerically by not include elective deferrals, except section 501(c)(18)
employees’ SSNs. This will help the SSA locate specific forms. contributions. Include the following:
Calendar year basis. The entries on Form W-2 must be based 1. Total wages, bonuses, prizes, and awards paid to
on wages paid during the calendar year. Use Form W-2 for the employees during the year. See Calendar year basis on this
correct tax year. For example, if the employee worked from page.
December 21, 2004, through January 3, 2005, and the wages 2. Total noncash payments, including certain fringe benefits.
for that period were paid on January 5, 2005, include those See Fringe benefits on page 5.
wages on the 2005 Form W-2. 3. Total tips reported by the employee to the employer (not
Multiple forms. If necessary, you can issue more than one allocated tips).
Form W-2 to an employee. For example, you may need to 4. Certain employee business expense reimbursements
report more than four coded items in box 12 or you may want to (see Employee business expense reimbursements on
report other compensation on a second form. If you issue a page 4).
second Form W-2, complete boxes b, c, d, e, and f with the 5. The cost of accident and health insurance premiums
same information as on the first Form W-2. Show any items that for 2% or more shareholder-employees paid by an S
were not included on the first Form W-2 in the appropriate corporation.
boxes. Also, see the TIP under Box 12 — Codes on page 9. 6. Taxable benefits from a section 125 (cafeteria) plan
Do not report the same Federal tax data to the SSA on more (i.e., employee chooses cash).
than one Copy A. 7. Employee contributions to an Archer MSA.
Box a — Control number. You may use this box to identify 8. Employer contributions to an Archer MSA if includible in
individual Forms W-2. Make certain that entries do not cross the income of the employee. See Archer MSA on page 3.
over into the form identification box (22222). You do not 9. Employer contributions for qualified long-term care
have to use this box. services to the extent that such coverage is provided through a
Void. Check this box when an error is made on Form W-2 and flexible spending or similar arrangement.
you are voiding it because you are going to complete a new 10. Taxable cost of group-term life insurance in excess of
Form W-2. Be careful not to include any amounts shown on $50,000. See Group-term life insurance on page 5.
“Void” forms in the totals that you enter on Form W-3. See 11. Unless excludable under Educational assistance
Corrections on page 4. programs (see page 4), payments for non-job-related
education expenses or for payments under a nonaccountable
Box b — Employer identification number. Show the plan. See Pub. 970.
employer identification number (EIN) assigned to you by the 12. The amount includible as wages because you paid your
IRS (00-0000000). This should be the same number that you employee’s share of taxes. See Employee’s taxes paid by
used on your Federal employment tax returns (Form 941, Form employer on page 4.
943, or Form CT-1). Do not use a prior owner’s EIN. If you do 13. All other compensation, including certain scholarship and
not have an EIN when filing Forms W-2, enter “Applied For” in fellowship grants (see page 5). Other compensation includes
box b; do not use your SSN. You can get an EIN by filing Form amounts that you paid to your employee from which Federal
SS-4, Application for Employer Identification Number. Also see income tax was not withheld. You may show other
Agent reporting on page 3. compensation on a separate Form W-2. See Multiple forms on
Box c — Employer’s name, address, and ZIP code. This this page.
entry should be the same as shown on your Form 941, Form 14. Distributions to an employee or former employee from a
943, or Form CT-1. Also see Agent reporting on page 3. nonqualified deferred compensation plan (including a rabbi
Box d — Employee’s social security number. Enter the trust) or a nongovernmental section 457(b) plan.
number shown on the employee’s social security card. If the 15. Amounts includible in income under section 457(f)
employee does not have a card, he or she should apply for one because the amounts are no longer subject to a substantial risk
by completing Form SS-5, Application for a Social Security of forfeiture.
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16. Payments to statutory employees who are subject to your employee’s share of the taxes, see Employee’s taxes
social security and Medicare taxes but not subject to Federal paid by employer on page 4.
income tax withholding must be shown in box 1 as other Box 7 — Social security tips. Show the tips that the
compensation. See Statutory employee on page 10. employee reported to you even if you did not have enough
17. Cost of current insurance protection under a employee funds to collect the social security tax for the tips.
compensatory split-dollar life insurance arrangement. The total of boxes 3 and 7 should not be more than $87,900
18. Employee contributions to a Health Savings Account. (the maximum social security wage base for 2004). Report all
19. Employer contributions to a Health Savings Account if tips in box 1 along with wages and other compensation.
includible in the income of the employee. See Health Savings Box 8 — Allocated tips. If you are a large food or beverage
Account on page 5. establishment, show the tips allocated to the employee. See the
Box 2 — Federal income tax withheld. Show the total Federal Instructions for Form 8027, Employer’s Annual Information
income tax withheld from the employee’s wages for the year (do Return of Tip Income and Allocated Tips. Do not include this
not reduce the wages by any advance EIC payments made to amount in boxes 1, 3, 5, or 7.
the employee). Also include the 20% excise tax withheld on Box 9 — Advance EIC payment. Show the total paid to the
excess parachute payments. See Golden parachute employee as advance earned income credit (EIC) payments.
payments on page 5. Box 10 — Dependent care benefits. Show the total dependent
Box 3 — Social security wages. Show the total wages paid care benefits under a dependent care assistance program
(before payroll deductions) subject to employee social security (section 129) paid or incurred by you for your employee.
tax but not including social security tips and allocated tips. Include the fair market value (FMV) of employer-provided or
(See Box 7 and Box 8 below.) Generally, noncash payments employer-sponsored day-care facilities and amounts paid or
are considered to be wages. Include employee business incurred for dependent care assistance in a section 125
expense reimbursements reported in box 1. If you paid the (cafeteria) plan. Report all amounts paid or incurred (regardless
employee’s share of social security and Medicare taxes rather of any employee forfeitures), including those in excess of the
than deducting them from wages, see Employee’s taxes paid $5,000 exclusion. This may include (a) the FMV of benefits
by employer on page 4. The total of boxes 3 and 7 cannot provided in kind by the employer, (b) an amount paid directly to
exceed $87,900 (2004 maximum social security wage base). a day-care facility by the employer or reimbursed to the
employee to subsidize the benefit, or (c) benefits from the
Report in box 3 elective deferrals to certain qualified cash or pre-tax contributions made by the employee to a section 125
deferred compensation arrangements and to retirement dependent care flexible spending account. Include any amounts
arrangements described in box 12 (codes D, E, F, G, and S) over $5,000 in boxes 1, 3, and 5. For more information, see
even though the deferrals are not includible in box 1. Amounts Pub. 15-B.
deferred under a nonqualified or section 457(b) plan must be
included in boxes 3 and/or 5 as social security and/or Medicare Box 11 — Nonqualified plans. The purpose of box 11 is for
wages as of the later of when the services giving rise to the the SSA to determine if any part of the amount reported in box
deferral are performed or when there is no substantial forfeiture 1 or boxes 3 and/or 5 was earned in a prior year. The SSA uses
risk of the rights to the deferred amount. Include elective and this information to verify that they have properly applied the
nonelective deferrals for purposes of section 457(b) plans. social security earnings test and paid the correct amount of
Also include in box 3: benefits.
• Taxable cost of group-term life insurance over $50,000 Show distributions to an employee from a nonqualified plan
included in box 1. See Group-term life insurance on page 5. or a nongovernmental section 457(b) plan. Also report these
• Cost of accident and health insurance premiums for 2% or distributions in box 1. Make only one entry in this box.
more shareholder-employees paid by an S corporation, but only Distributions from governmental section 457(b) plans must be
if not excludable under section 3121(a)(2)(B). reported on Form 1099-R, Distributions From Pensions,
• Employee and nonexcludable employer contributions to an Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance
MSA. See Archer MSA on page 3. Contracts, etc., not in box 1 of Form W-2.
• Employee contributions to a SIMPLE retirement account. If you did not make distributions this year, show
See SIMPLE retirement account on page 6. deferrals (plus earnings) under a nonqualified or any
• Adoption benefits. See Adoption benefits on page 3. section 457(b) plan that became taxable for social security
Box 4 — Social security tax withheld. Show the total and Medicare taxes during the year (but were for prior year
employee social security tax (not your share) withheld, including services) because the deferred amounts were no longer
social security tax on tips. Do not reduce this amount by any subject to a substantial risk of forfeiture. Also report these
advance EIC payments made to the employee. For 2004, the amounts in boxes 3 (up to the social security wage base) and
amount should not exceed $5,449.80 ($87,900 × 6.2%). Include box 5. Do not report in box 11 deferrals that are included in
only taxes withheld (or paid by you for the employee) for 2004 boxes 3 and/or 5 and that are for current year services (i.e.,
wages and tips. If you paid your employee’s share, see those that have no risk of forfeiture).
Employee’s taxes paid by employer on page 4. If you made distributions and are also reporting prior
Box 5 — Medicare wages and tips. The wages and tips
subject to Medicare tax are the same as those subject to social
! year deferrals in box 3 and/or 5, do not complete box
CAUTION 11. See Pub. 957, Reporting Back Pay and Special
security tax (boxes 3 and 7) except that there is no wage base Wage Payments to the Social Security Administration, and
limit for Medicare tax. Enter the total Medicare wages and tips Form SSA-131, Employer Report of Special Wage Payments,
in box 5. Be sure to enter tips that the employee reported even for instructions on reporting these and other kinds of
if you did not have enough employee funds to collect the compensation earned in prior years. However, do not file Form
Medicare tax for those tips. See Box 3 above for payments to SSA-131 if this situation applies but the employee will not
report in this box. If you paid your employee’s share of taxes, be age 62 or older by the end of that year.
see Employee’s taxes paid by employer on page 4. Unlike qualified plans, nonqualified deferred compensation
If you are a Federal, state, or local agency with employees plans do not meet the qualification requirements for tax-favored
paying only the 1.45% Medicare tax, enter the Medicare wages status. Nonqualified plans include those arrangements
in this box. See Government employers on page 5. traditionally viewed as deferring the receipt of current
Example of how to report social security and Medicare compensation. Accordingly, welfare benefit plans, stock option
wages. You paid your employee $140,000 in wages. Enter in plans, and plans providing dismissal pay, termination pay, or
box 3 (social security wages) 87900.00 but enter in box 5 early retirement pay are not nonqualified plans.
(Medicare wages and tips) 140000.00. There is no limit on the Report distributions from nonqualified or section 457 plans to
amount reported in box 5. If the amount of wages paid was beneficiaries of deceased employees on Form 1099-R, not on
$87,900 or less, the amounts entered in boxes 3 and 5 would Form W-2.
be the same. Military employers must report military retirement payments
Box 6 — Medicare tax withheld. Enter the total employee on Form 1099-R.
Medicare tax (not your share) withheld. Include only tax Box 12 — Codes. Complete and code this box for all items
withheld for 2004 wages and tips. Do not reduce this amount by described below. Do not report in box 12 any items that are not
any advance EIC payments made to the employee. If you paid listed as codes A – W. Also, do not report in box 12 section
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414(h)(2) contributions (relating to certain state or local • Required employee contributions.
government plans). Instead, use box 14 for these items and any • Employer matching contributions.
other information that you wish to give to your employee. For Code D — Elective deferrals to a section 401(k) cash or
example, union dues and uniform payments may be reported in deferred arrangement. Also show deferrals under a SIMPLE
box 14. retirement account that is part of a section 401(k)
On Copy A (Form W-2), do not enter more than four arrangement.
TIP items in box 12. If more than four items need to be Example of reporting elective deferrals to a section
reported in box 12, use a separate Form W-2 to report 401(k) plan. For 2004, Employee A (age 45) elected to defer
the additional items (but enter no more than four items on each $13,300 to a section 401(k) plan and made a voluntary after-tax
Copy A (Form W-2)). On all other copies of Form W-2 contribution of $600. In addition, the employer, on A’s behalf,
(Copies B, C, etc.), you may enter more than four items in made a qualified nonelective contribution of $1,000 to the plan
box 12. See also Multiple forms on page 7. and a nonelective profit-sharing employer contribution of
Use the IRS code designated below for the item that you $2,000.
are entering, followed by the dollar amount for that item.
Even if only one item is entered, you must use the IRS code The total elective deferral of $13,300 is reported in box 12
designated for that item. Enter the code using a capital letter. with code D (D 13300.00). Even though the 2004 limit for
Leave at least one space blank after the code, and enter the elective deferrals is $13,000, the employer must report the total
dollar amount on the same line. Use decimal points but not amount of $13,300 in box 12. The excess is not reported in box
dollar signs or commas. For example, if you are reporting 1. Report the excess deferrals and earnings on Form 1099-R.
$5,300.00 in elective deferrals to a section 401(k) plan, the The $600 voluntary after-tax contribution may be reported in
entry would be D 5300.00 (not A 5300.00 even though it is the box 14 (this is optional) but not in box 12. The $1,000
first or only entry in this box). Report the IRS code to the left nonelective contribution and the $2,000 nonelective
of the vertical line in boxes 12a-d and money amount to the profit-sharing employer contribution are not required to be
right of the vertical line. reported on Form W-2, but may be reported in box 14.
See the Form W-2 Reference Guide for Box 12 Codes on Check the “Retirement plan” box in box 13.
page 12. See also the detailed instructions below for each Code E — Elective deferrals under a section 403(b)
code. salary reduction agreement.
Code A — Uncollected social security or RRTA tax on
tips. Show the employee social security or Railroad Code F — Elective deferrals under a section 408(k)(6)
Retirement Tax Act (RRTA) tax on all of the employee’s tips salary reduction SEP.
that you could not collect because the employee did not have Code G — Elective deferrals and employer contributions
enough funds from which to deduct it. Do not include this (including nonelective deferrals) to any governmental or
amount in box 4. nongovernmental section 457(b) deferred compensation
Code B — Uncollected Medicare tax on tips. Show the plan. Do not report either section 457(b) or section 457(f)
employee Medicare tax or RRTA Medicare tax on tips that you amounts that are subject to a substantial risk of forfeiture.
could not collect because the employee did not have enough Code H — Elective deferrals to a section 501(c)(18)(D)
funds from which to deduct it. Do not include this amount in tax-exempt organization plan. Be sure to include this amount
box 6. in box 1 as wages. The employee will deduct the amount on his
Code C — Taxable cost of group-term life insurance over or her Form 1040.
$50,000. Show the taxable cost of group-term life insurance Code J — Nontaxable sick pay. Show any sick pay that
coverage over $50,000 provided to your employee (including a was paid by a third-party insurer and was not includible in
former employee). See Group-term life insurance on page 5. income (and not shown in boxes 1, 3, and 5) because the
Also include this amount in boxes 1, 3 (up to the social security employee contributed to the sick pay plan.
wage base), and 5.
Code K — 20% excise tax on excess golden parachute
Codes D through H and S. Use these codes to show payments. If you made excess “golden parachute” payments
deferrals made to the plans listed. Do not report amounts for to certain key corporate employees, report the 20% excise tax
other types of plans. See below for an example of reporting on these payments. If the excess payments are considered to
elective deferrals to a section 401(k) plan. be wages, report the 20% excise tax withheld as income tax
The amount reported as elective deferrals is only the part of withheld in box 2.
the employee’s salary (or other compensation) that he or she Code L — Substantiated employee business expense
did not receive because of the deferrals. Only elective deferrals reimbursements. Use this code only if you reimbursed your
should be reported in box 12 for all coded plans, except, when employee for employee business expenses using a per diem or
using code G for section 457(b) plans, include both elective and mileage allowance and the amount that you reimbursed
nonelective deferrals. exceeds the amount treated as substantiated under IRS rules.
For employees who were 50 years of age or older at any See Employee business expense reimbursements on
time during the year and made “catch-up” contributions, report page 4.
the elective deferrals and the “catch-up” contributions as a Report in box 12 only the amount treated as substantiated
single sum in box 12 using the appropriate code. (i.e., the nontaxable part). In boxes 1, 3 (up to the social
If any elective deferrals, salary reduction amounts, or security wage base), and 5, include the part of the
TIP nonelective contributions to a section 457(b) plan during reimbursement that is more than the amount treated as
the year are makeup amounts under the Uniformed substantiated.
Services Employment and Reemployment Rights Act of Code M — Uncollected social security or RRTA tax on
1994 (USERRA) for a prior year, you must enter the prior year taxable cost of group-term life insurance over $50,000 (for
contributions separately. Beginning with the earliest year, enter former employees). If you provided your former employees
the code, the year, and the amount. For example, elective (including retirees) more than $50,000 of group-term life
deferrals under USERRA to a section 401(k) plan are reported insurance coverage for periods during which an employment
in box 12 as follows: relationship no longer exists, enter the amount of uncollected
D 02 2250.00, D 03 1250.00. The 2004 contribution does social security or RRTA tax on the coverage in box 12. Also see
not require a year designation; enter it as D 7000.00. Report the Group-term life insurance on page 5.
code (and year for prior year USERRA contributions) to the left Code N — Uncollected Medicare tax on taxable cost of
of the vertical line in boxes 12a-d. group-term life insurance over $50,000 (for former
The following are not elective deferrals and may be employees). If you provided your former employees (including
reported in box 14, but not in box 12: retirees) more than $50,000 of group-term life insurance
• Nonelective employer contributions made on behalf of an coverage for periods during which an employment relationship
employee. no longer exists, enter the amount of uncollected Medicare tax
• After-tax contributions, such as voluntary contributions to a or RRTA Medicare tax on the coverage in box 12. Also see
pension plan that are deducted from an employee’s pay. Group-term life insurance on page 5.
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Code P — Excludable moving expense reimbursements 7. A plan for Federal, state, or local government employees
paid directly to employee. Show the total moving expense or by an agency or instrumentality thereof (other than a section
reimbursements that you paid directly to your employee for 457(b) plan).
qualified (deductible) moving expenses. See Moving expenses Generally, an employee is an active participant if covered by
on page 5. a defined benefit plan for any tax year that he or she is eligible
Code R — Employer contributions to an Archer MSA. to participate or a defined contribution plan (e.g., a section
Show any employer contributions to an Archer MSA. See 401(k) plan) for any tax year that employer or employee
Archer MSA on page 3. contributions (or forfeitures) are added to his or her account.
For details on the active participant rules, see Notice 87-16,
Code S — Employee salary reduction contributions 1987-1 C.B. 446, Notice 98-49, 1998-2 C.B. 365, section
under a section 408(p) SIMPLE. Show deferrals under a 219(g)(5), and Pub. 590, Individual Retirement Arrangements
section 408(p) salary reduction SIMPLE retirement account. (IRAs). You can find Notice 98-49 on page 5 of Internal
However, if the SIMPLE is part of a section 401(k) Revenue Bulletin 1998-38 at www.irs.gov/pub/irs-irbs/
arrangement, use code D. If you are reporting prior year irb98-38.pdf.
contributions under USERRA, see the TIP above Code D on
page 9. Do not check this box for contributions made to a
TIP nonqualified or section 457(b) plan.
Code T — Adoption benefits. Show the total that you paid
or reimbursed for qualified adoption expenses furnished to your
employee under an adoption assistance program. Also include • Third-party sick pay. Check this box only if you are a
adoption benefits paid or reimbursed from the pre-tax third-party sick pay payer filing a Form W-2 for an insured’s
contributions made by the employee to a section 125 (cafeteria) employee or are an employer reporting sick pay payments
plan. However, do not include adoption benefits forfeited from a made by a third party. See Sick Pay Reporting in section 6 of
section 125 (cafeteria) plan. Report all amounts including those Pub. 15-A.
in excess of the $10,390 exclusion. Box 14 — Other. The lease value of a vehicle provided to your
Code V — Income from the exercise of nonstatutory employee and reported in box 1 must be reported here or on a
stock option(s). Show the spread (i.e., fair market value of separate statement to your employee. You may also use this
stock over the exercise price of option(s) granted to your box for any other information that you want to give to your
employee with respect to that stock) from your employee’s (or employee. Please label each item. Examples include state
former employee’s) exercise of nonstatutory stock option(s). disability insurance taxes withheld, union dues, uniform
Include this amount in boxes 1, 3 (up to the social security payments, health insurance premiums deducted, nontaxable
wage base), and 5. income, educational assistance payments, or a member of the
clergy’s parsonage allowance and utilities. In addition, you may
This reporting requirement does not apply to the exercise of enter the following contributions to a pension plan: (a)
a statutory stock option, or the sale or disposition of stock nonelective employer contributions made on behalf of an
acquired pursuant to the exercise of a statutory stock option. employee, (b) voluntary after-tax contributions that are
For more information concerning stock options, see Pub. 15-B. deducted from an employee’s pay, (c) required employee
Code W — Employer contributions to a Health Savings contributions, and (d) employer matching contributions.
Account. Show any employer contributions to a Health If you are reporting prior year contributions under USERRA
Savings Account. See Health Savings Account on page 5. (see the TIP above Code D on page 9 and USERRA makeup
Box 13 — Checkboxes. Check all boxes that apply. amounts to a pension plan on page 6), you may report in box
• Statutory employee. Check this box for statutory employees 14 makeup amounts for nonelective employer contributions,
whose earnings are subject to social security and Medicare voluntary after-tax contributions, required employee
taxes but not subject to Federal income tax withholding. Do contributions, and employer matching contributions. Report
not check this box for common-law employees. There are such amounts separately for each year.
workers who are independent contractors under the Railroad employers, see Railroad employers on page 5.
common-law rules but are treated by statute as employees.
They are called statutory employees. Boxes 15 through 20 — State and local income tax
information. Use these boxes to report state and local income
1. A driver who distributes beverages (other than milk), or tax information. Enter the two-letter abbreviation for the name of
meat, vegetable, fruit, or bakery products; or who picks up and the state. The employer’s state I.D. numbers are assigned by
delivers laundry or dry cleaning if the driver is your agent or is the individual states. The state and local information boxes can
paid on commission. be used to report wages and taxes for two states and two
2. A full-time life insurance sales agent whose principal localities. Keep each state’s and locality’s information separated
business activity is selling life insurance or annuity contracts, or by the broken line. If you need to report information for more
both, primarily for one life insurance company. than two states or localities, prepare a second Form W-2. See
3. An individual who works at home on materials or goods Multiple forms on page 7. Contact your state or locality for
that you supply and that must be returned to you or to a person specific reporting information.
you name if you also furnish specifications for the work to be
done.
4. A full-time traveling or city salesperson who works on Specific Instructions for Form W-3
your behalf and turns in orders to you from wholesalers,
retailers, contractors, or operators of hotels, restaurants, or How to complete Form W-3. The instructions under How to
other similar establishments. The goods sold must be complete Form W-2 on page 7 generally apply to Form W-3.
merchandise for resale or supplies for use in the buyer’s See those instructions. Darkly type all entries, if possible.
business operation. The work performed for you must be the
salesperson’s principal business activity. Amounts reported on related employment tax forms
See section 1 in Pub. 15-A for details on statutory TIP (e.g., Form W-2, Form 941, or Form 943) should agree
employees and common-law employees. with the amounts reported on Form W-3. If there are
• Retirement plan. Check this box if the employee was an differences, you may be contacted by the IRS and SSA. You
“active participant” (for any part of the year) in any of the should retain a reconciliation for future reference. See
following: Reconciling Forms W-2, W-3, 941, and 943 on page 11.
1. A qualified pension, profit-sharing, or stock-bonus plan Box a — Control number. This is an optional box that you may
described in section 401(a) (including a 401(k) plan). use for numbering the whole transmittal. Make certain that
2. An annuity plan described in section 403(a). entries do not cross over into the form identification
3. An annuity contract or custodial account described in number box (33333).
section 403(b). Box b — Kind of Payer. Check the box that applies to you.
4. A simplified employee pension (SEP) plan described in Check only one box unless the second, checked box is
section 408(k). “Third-party sick pay.” If you have more than one type of
5. A SIMPLE retirement account described in section Form W-2, send each type (except “Third-party sick pay”) with
408(p). a separate Form W-3. (The “Third-party sick pay” indicator box
6. A trust described in section 501(c)(18). does not designate a separate kind of payer.)
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A–12
941. Check this box if you file Form 941, Employer’s Box 11 — Nonqualified plans. Enter the total reported in box
Quarterly Federal Tax Return, and no other category (except 11 on Forms W-2.
“Third-party sick pay”) applies. A church or church organization Box 12 — Deferred compensation. Enter one total of all
should check this box even if it is not required to file Form 941. amounts reported with codes D – H and S in box 12 on Forms
Military. Check this box if you are a military employer W-2. Do not enter a code.
sending Forms W-2 for members of the uniformed services. Box 13 — For third-party sick pay use only. Third-party
943. Check this box if you are an agricultural employer payers of sick pay (or employers using the optional rule for
and file Form 943, Employer’s Annual Federal Tax Return for Form W-2 described in section 6 of Pub. 15-A) filing third-party
Agricultural Employees, and you are sending Forms W-2 for sick pay recap Forms W-2 and W-3 must enter “Third-Party
agricultural employees. For nonagricultural employees, send Sick Pay Recap” in this box.
their Forms W-2 with a separate Form W-3, checking the Box 14 — Income tax withheld by payer of third-party sick
appropriate box. pay. Complete this box only if you are the employer and have
CT-1. Check this box if you are a railroad employer employees who had income tax withheld on third-party
sending Forms W-2 for employees covered under the Railroad payments of sick pay. Show the total income tax withheld by
Retirement Tax Act (RRTA). Do not show employee RRTA third-party payers on payments to all of your employees.
tax in boxes 3 through 7. These boxes are only for social Although this tax is included in the box 2 total, it must be
security and Medicare information. If you also have employees separately shown here.
who are subject to social security and Medicare taxes, send Box 15 — State/Employer’s state ID number. Enter the
that group’s Forms W-2 with a separate Form W-3 and check two-letter abbreviation for the name of the state being reported
the “941” box on that Form W-3. on Form(s) W-2. Also enter your state-assigned ID number. If
Hshld. emp. Check this box if you are a household the Forms W-2 being submitted with this Form W-3 contain
employer sending Forms W-2 for household employees and wage and income tax information from more than one state,
you did not include the household employee’s taxes on enter an “X” under “State” and do not enter any state ID
Form 941 or Form 943. number.
Medicare govt. emp. Check this box if you are a U.S., Boxes 16 – 19. Enter the total of state/local wages and income
state, or local agency filing Forms W-2 for employees subject tax shown in their corresponding boxes on the Forms W-2
only to the 1.45% Medicare tax. See Government employers included with this Form W-3. If the Forms W-2 show amounts
on page 5. from more than one state or locality, report them as one sum in
Third-party sick pay. Check this box and another box such the appropriate box on Form W-3. Please verify that the
as the “941” box if you are a third-party sick pay payer (or are amount reported in each box is an accurate total of the
reporting sick pay payments made by a third party) filing Forms Forms W-2.
W-2 with the “Third-party sick pay” box in box 13 checked. File Reconciling Forms W-2, W-3, 941, and 943
a single Form W-3 for the regular and “Third-party sick
pay” Forms W-2. See also 941 above. Reconcile the amounts shown in boxes 2, 3, 5, 7, and 9 from all
2004 Forms W-3 with their respective amounts from the 2004
Box c — Total number of Forms W-2. Show the number of yearly totals from the quarterly Forms 941, or Form 943. When
completed individual Forms W-2 that you are transmitting with there are discrepancies between amounts reported on Forms
this Form W-3. Do not count “Void” Forms W-2. W-2 and W-3 filed with the SSA and on Forms 941 or 943 filed
Box d — Establishment number. You may use this box to with the IRS, we must contact you to resolve the discrepancies.
identify separate establishments in your business. You may file To help reduce discrepancies on Forms W-2:
a separate Form W-3, with Forms W-2, for each establishment • Report bonuses as wages and as social security and
even if they all have the same EIN; or you may use a single Medicare wages on Forms W-2 and 941/943.
Form W-3 for all Forms W-2 of the same type. • Report both social security and Medicare wages and taxes
Box e — Employer identification number. If you received a separately on Forms W-2, W-3, and 941/943.
preprinted Form W-3 from the IRS with Pub. 393, Federal • Report social security taxes withheld on Form W-2 in
Employment Tax Forms, or Pub. 2184, Alternative Ways To box 4, not in box 3.
Get Employment Tax Forms and Instructions, verify that your • Report Medicare taxes withheld on Form W-2 in box 6, not in
employer identification number (EIN) is correct. Make any box 5.
necessary corrections on the form. • Make sure that the social security wage amount for each
If you did not receive a form with a preprinted EIN, enter the employee does not exceed the annual social security wage
nine-digit EIN assigned to you by the IRS. The number should base limit ($87,900 for 2004).
be the same as shown on your Form 941, Form 943, or Form • Do not report noncash wages that are not subject to social
CT-1 and in the following format: 00-0000000. Do not use a security or Medicare taxes as social security or Medicare
prior owner’s EIN. See Box h below. wages.
If you do not have an EIN when filing your Form W-3, enter • If you use an EIN on any quarterly Form 941 for the year (or
“Applied For” in box e, not your social security number, and see annual Form 943) that is different from the EIN reported in
the Box b instructions for Form W-2 on page 7. box e on Form W-3, enter the other EIN in box h on Form W-3.
Box f — Employer’s name. If you are not using a preprinted To reduce the discrepancies between amounts reported
Form W-3, enter the same name as shown on your Form 941, on Forms W-2, W-3, and Form 941/943:
Form 943, or Form CT-1. Make any necessary corrections on • Be sure that the amounts on Form W-3 are the total amounts
your preprinted Form W-3. from Forms W-2.
• Reconcile Form W-3 with your four quarterly Forms 941 (or
Box g — Employer’s address and ZIP code. If you are not annual Form 943) by comparing amounts reported for —
using a preprinted Form W-3, enter your address. Make any
necessary corrections on your preprinted Form W-3. 1. Income tax withholding (box 2).
2. Social security wages, Medicare wages and tips, and
Box h — Other EIN used this year. If you have used an EIN social security tips (boxes 3, 5, and 7). Form W-3 should
(including a prior owner’s EIN) on Form 941, Form 943, or Form include Form 941 or Form 943 adjustments only for the current
CT-1 submitted for 2004 that is different from the EIN reported year. If the Form 941 or Form 943 adjustments include amounts
on Form W-3 in box e, enter the other EIN used. Agents for a prior year, do not report those prior year adjustments on
generally report the employer’s EIN in box h. See Agent the current year Forms W-2 and W-3.
reporting on page 3. 3. Social security and Medicare taxes (boxes 4 and 6). The
Contact person, telephone number, fax number, and email amounts shown on the four quarterly Forms 941 (or annual
address. Please enter this information for use by the SSA if Form 943), including current year adjustments, should be
any questions arise during processing. approximately twice the amounts shown on Form W-3.
The amounts to enter in boxes 1 through 19, described 4. Advance EIC payment (box 9)
TIP below, are totals from only the Forms W-2 that you are
Amounts reported on Forms W-2, W-3, and 941/943 may not
sending with this Form W-3. match for valid reasons. If they do not match, you should
Boxes 1 through 10. Enter the totals reported in boxes 1 determine that the reasons are valid. Keep your reconciliation
through 10 on the Forms W-2. in case there are inquiries from the IRS or the SSA.
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A–13
Form W-2 Reference Guide for Box 12 Codes (See box 12 instructions for information.)
A Uncollected social security or RRTA tax G Elective deferrals and employer N Uncollected Medicare tax on taxable cost of
on tips contributions (including nonelective group-term life insurance over $50,000
B Uncollected Medicare tax on tips deferrals) to a section 457(b) deferred (for former employees)
C Taxable cost of group-term life insurance compensation plan (state and local P Excludable moving expense
over $50,000 government and tax-exempt employers) reimbursements paid directly to employee
D Elective deferrals to a section 401(k) cash H Elective deferrals to a section R Employer contributions to an Archer MSA
or deferred arrangement (including a 501(c)(18)(D) tax-exempt S Employee salary reduction contributions
SIMPLE 401(k) arrangement) organization plan under a section 408(p) SIMPLE
E Elective deferrals under a section 403(b) J Nontaxable sick pay T Adoption benefits
salary reduction agreement K 20% excise tax on excess golden V Income from exercise of nonstatutory
F Elective deferrals under a section parachute payments stock option(s)
408(k)(6) salary reduction SEP L Substantiated employee business W Employer contributions to an employee’s
Health Savings Account (HSA)
expense reimbursements
(Federal rate)
M Uncollected social security or RRTA tax
on taxable cost of group-term life
insurance over $50,000 (for former
employees)
Index
A G Religious workers . . . . . . . . . . . . . . . . . . . . . 3
Address correction . . . . . . . . . . . . . . . . . . . . .4 Getting forms, publications, and help . . . . . . . 1, 2 Repayments, wages received in error . . . . . . . . . 5
Adoption benefits . . . . . . . . . . . . . . . . . 3, 8, 10 Golden parachute payments . . . . . . . . . . . . . 5, 9
Advance EIC payment . . . . . . . . . . . . . . . . . .8 Government employers . . . . . . . . . . . . . . . 5, 11
S
Agent reporting . . . . . . . . . . . . . . . . . . . . . . .3 Group-term life insurance . . . . . . . . . . . . 5, 8, 9
Scholarships . . . . . . . . . . . . . . . . . . . . . . . .5
Agricultural employers . . . . . . . . . . . . . . . 5, 11
Shipping and mailing . . . . . . . . . . . . . . . . . . .2
Allocated tips . . . . . . . . . . . . . . . . . . . . . . . .8
H Sick pay . . . . . . . . . . . . . . . . . . . . . . . 5, 9, 11
Archer MSA . . . . . . . . . . . . . . . . . . . 3, 7, 8, 10
Health savings account . . . . . . . . . . . . . . . 5, 10 SIMPLE retirement account . . . . . . . . . 6, 8, 9, 10
Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Social security number . . . . . . . . . . . . . . . . 3, 7
C Household employers . . . . . . . . . . . . . . . 2, 5, 11 Social security tax withheld . . . . . . . . . . . . . . .8
Calendar year basis . . . . . . . . . . . . . . . . . . . .7 How to complete Form W-2 . . . . . . . . . . . . . . .7 Social security wages/tips . . . . . . . . . . . . . . . .8
Clergy . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 How to complete Form W-3 . . . . . . . . . . . . . . 10 State and local tax information . . . . . . . . . . . . 10
Codes for box 12, Form W-2 . . . . . . . . . . . . . . .8 How to get forms and publications . . . . . . . . . . .1 Statutory employee . . . . . . . . . . . . . . . . . 8, 10
Corrections and void Forms W-2 . . . . . . . . . . 4, 7 Substitute forms . . . . . . . . . . . . . . . . . . . . . .1
Successor/predecessor employers . . . . . . . . . . .6
I
D Income tax withheld . . . . . . . . . . . . . . . . . 8, 11
Deceased employee’s wages . . . . . . . . . . . . . .4 T
Deferred compensation . . . . . . . . . . . . . . . 8, 11 Taxpayer identification numbers . . . . . . . . . . . . 3
L
Dependent care benefits . . . . . . . . . . . . . . . . .8 Terminating a business . . . . . . . . . . . . . . . . . . 6
Lost Form W-2 . . . . . . . . . . . . . . . . . . . . . . . 5
Due date(s) . . . . . . . . . . . . . . . . . . . . . . . 1, 2 Tips . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8, 9
M
E U
Magnetic media/electronic reporting . . . . . . . . . .2
Earned income credit notification . . . . . . . . . . . .2 Uncollected taxes on group-term life insurance . . . 9
Medicare tax withheld . . . . . . . . . . . . . . . . . . .8
Educational assistance programs . . . . . . . . . . 4, 7 Uncollected taxes on tips . . . . . . . . . . . . . . . . . 9
Medicare wages and tips . . . . . . . . . . . . . . . . .8
Election workers . . . . . . . . . . . . . . . . . . . . . .4 Undeliverable Forms W-2 . . . . . . . . . . . . . . . . 3
Military employers . . . . . . . . . . . . . . . . . . 8, 11
Elective deferrals . . . . . . . . . . . . . . . . . . . . . .9 USERRA contributions . . . . . . . . . . . . . . 6, 9, 10
Moving expenses . . . . . . . . . . . . . . . . . . 5, 10
Electronic reporting . . . . . . . . . . . . . . . . . . 1, 2
Multiple Forms W-2 issued to employee . . . . . . . .7
Employee business expense
reimbursements . . . . . . . . . . . . . . . . . 4, 7, 9 V
Employee’s taxes paid by employer . . . . . . 4, 7, 8 Void Forms W-2 . . . . . . . . . . . . . . . . . . . . 4, 7
N
Employer identification number (EIN) . . . . . 3, 7, 11 Nonqualified plans . . . . . . . . . . . . . . . . . . 8, 11
Errors, common . . . . . . . . . . . . . . . . . . . . . .2 Nonstatutory stock option(s) . . . . . . . . . . . . . . 10 W
Extension to file/furnish Form(s) W-2 . . . . . . . 2, 3 Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
When and where to file . . . . . . . . . . . . . . . . . . 2
P
F When to furnish Forms W-2 to employees . . . . . . 3
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fellowship grants . . . . . . . . . . . . . . . . . . . . . 5 Who must file Forms W-2 and W-3 . . . . . . . . . . . 2
Fringe benefits . . . . . . . . . . . . . . . . . . . . . 5, 7
Furnishing Forms W-2 to employees . . . . . . . . . . 3 R ■
Railroad employers . . . . . . . . . . . . . . . . . 5, 11
Reconciling Forms W-2, W-3, and 941/943 . . . . . 11
Reissued Form W-2 . . . . . . . . . . . . . . . . . . 4, 5
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A–14
DO NOT CUT, FOLD, OR STAPLE THIS FORM
a Tax year/Form corrected For Official Use Only 䊳
44444
/ W-2 OMB No. 1545-0008
b Employee’s correct SSN c Corrected name d Employer’s Federal EIN
(if checked enter
correct name in box e
and complete box i)
e Employee’s first name and initial Last name g Employer’s name, address, and ZIP code
f Employee’s address and ZIP code

Complete boxes h and/or i only h Employee’s incorrect SSN i Employee’s name (as incorrectly shown on previous form)
if incorrect on last form filed. 䊳
Note: Only complete money fields that are being corrected (except MQGE).
Previously reported Correct information Previously reported Correct information
1 Wages, tips, other compensation 1 Wages, tips, other compensation 2 Federal income tax withheld 2 Federal income tax withheld
3 Social security wages 3 Social security wages 4 Social security tax withheld 4 Social security tax withheld
5 Medicare wages and tips 5 Medicare wages and tips 6 Medicare tax withheld 6 Medicare tax withheld
7 Social security tips 7 Social security tips 8 Allocated tips 8 Allocated tips
9 Advance EIC payment 9 Advance EIC payment 10 Dependent care benefits 10 Dependent care benefits
11 Nonqualified plans 11 Nonqualified plans 12a See instructions for box 12 12a See instructions for box 12
C C
o o
d d
e e
13 Statutory Retirement Third-party 13 Statutory Retirement Third-party
12b 12b
employee plan sick pay employee plan sick pay C C
o o
d d
e e
14 Other (see instructions) 14 Other (see instructions) 12c 12c

C C
o o
d d
e e
12d 12d
C C
o o
d d
e e
State Correction Information

Previously reported Correct information Previously reported Correct information
15 State 15 State 15 State 15 State
Employer’s state ID number Employer’s state ID number Employer’s state ID number Employer’s state ID number
16 State wages, tips, etc. 16 State wages, tips, etc. 16 State wages, tips, etc. 16 State wages, tips, etc.
17 State income tax 17 State income tax 17 State income tax 17 State income tax
Locality Correction Information

18 Local wages, tips, etc. 18 Local wages, tips, etc. 18 Local wages, tips, etc. 18 Local wages, tips, etc.
19 Local income tax 19 Local income tax 19 Local income tax 19 Local income tax
20 Locality name 20 Locality name 20 Locality name 20 Locality name
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. Copy A—For Social Security Administration
Department of the Treasury
Form W-2c (Rev. 12-2002) Corrected Wage and Tax Statement Cat. No. 61437D Internal Revenue Service
A–15
DO NOT CUT, FOLD OR STAPLE
a Tax year/Form corrected For Official Use Only 䊳
55555
/ W- OMB No. 1545-0008
b Employer’s name, address, and ZIP code c 941/941-SS Military 943 Sec. 218
Kind
of
Payer 䊳 CT-1
Hshld.
emp.
Medicare
govt. emp.
Third-party
sick pay
d Number of Forms W-2c e Employer’s Federal EIN f Establishment number g Employer’s state ID number
Complete boxes h, i, or j only if h Employer’s incorrect Federal EIN i Incorrect establishment number j Employer’s incorrect state ID number
incorrect on last form filed.
Total of amounts previously reported Total of corrected amounts as Total of amounts previously reported Total of corrected amounts as
as shown on enclosed Forms W-2c. shown on enclosed Forms W-2c. as shown on enclosed Forms W-2c. shown on enclosed Forms W-2c.
1 Wages, tips, other compensation 1 Wages, tips, other compensation 2 Federal income tax withheld 2 Federal income tax withheld
3 Social security wages 3 Social security wages 4 Social security tax withheld 4 Social security tax withheld
5 Medicare wages and tips 5 Medicare wages and tips 6 Medicare tax withheld 6 Medicare tax withheld
7 Social security tips 7 Social security tips 8 Allocated tips 8 Allocated tips
9 Advance EIC payments 9 Advance EIC payments 10 Dependent care benefits 10 Dependent care benefits
11 Nonqualified plans 11 Nonqualified plans 12a-d (Coded items) 12a-d (Coded items)
14 Inc. tax W/H by 3rd party sick pay payer 14 Inc. tax W/H by 3rd party sick pay payer
16 State wages, tips, etc. 16 State wages, tips, etc. 17 State income tax 17 State income tax
18 Local wages, tips, etc. 18 Local wages, tips, etc. 19 Local income tax 19 Local income tax
Explain decreases here:
Has an adjustment been made on an employment tax return filed with the Internal Revenue Service? Yes No
If “Yes,” give date the return was filed 䊳
Under penalties of perjury, I declare that I have examined this return, including accompanying documents, and, to the best of m y knowledge and belief, it is true,
correct, and complete.
Contact person Telephone number For Official Use Only

( )
E-mail address Fax number
( )
Purpose of Form Where To File

Use this form to transmit Copy A of Form(s) W-2c, Corrected Wage If you use the U.S. Postal Service, send Forms W-2c and W-3c to the
and Tax Statement (Rev. 12-2002). Make a copy of Form W-3c and following address:
keep it with Copy D (For Employer) of Forms W-2c for your records. Social Security Administration
File Form W-3c even if only one Form W-2c is being filed or if those Data Operations Center
Forms W-2c are being filed only to correct an employee’s name or P.O. Box 3333
social security number (SSN). See the separate Instructions for Wilkes-Barre, PA 18767-3333
Forms W-2c and W-3c (Rev. December 2002) for information on
completing this form. If you use a carrier other than the U.S. Postal Service, send Forms
W-2c and W-3c to the following address:
When To File Social Security Administration
File this form and Copy A of Form(s) W-2c with the Social Security Data Operations Center
Administration as soon as possible after you discover an error on Attn: W-2c Process
Forms W-2, W-2AS, W-2GU, W-2CM, or W-2VI. Also provide Copies 1150 E. Mountain Drive
B, C, and 2 of Form W-2c to your employees as soon as possible. Wilkes-Barre, PA 18702-7997
Form W-3c (Rev. 12-2002) Transmittal of Corrected Wage and Tax Statements Department of the Treasury
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 10164R Internal Revenue Service
A–16
Instructions for Forms Department of the Treasury
W-2c and W-3c

(Rev. December 2002)
Do not use Form W-2c to correct Form W-2G, Certain
Items To Note Gambling Winnings. Instead, see the Instructions for Forms
New magnetic/electronic reporting requirement. If you 1099, 1098, 5498, and W-2G.
are required to file 250 or more Forms W-2c during a Use Form W-3c to send Copy A of Form W-2c to the
calendar year, you must now file them on magnetic media Social Security Administration (SSA). Form W-3c is required
(or electronically) unless the IRS granted you a waiver. You to be filed with a single Form W-2c as well as with multiple
may be charged a penalty if you fail to file on magnetic Forms W-2c. You may file Form W-3c separately if you are
media (or electronically) when required. See also Magnetic simply correcting your EIN on a previously filed Form W-3 or
media/electronic reporting below. W-3SS, Transmittal of Wage and Tax Statements (for Forms
W-2AS, W-2GU, W-2CM, and W-2VI).
For purposes of the magnetic media/electronic
requirement, only Forms W-2 for the immediate prior year Where to file Forms W-2c and W-3c. If you use the U.S.
are taken into account. Also, if an employer must file 200 Postal Service, send Forms W-2c and W-3c to:
Forms W-2c for the immediate prior year in March and then Social Security Administration
discovers that another 100 Forms W-2c for the same year Data Operations Center
must be filed in August, only the 100 Forms W-2c that are P.O. Box 3333
filed in August must be filed on magnetic media or Wilkes-Barre, PA 18767-3333.
electronically. If you use a carrier other than the U.S. Postal
Service, send Forms W-2c and W-3c to:
You may request a waiver on Form 8508, Request for Social Security Administration
Waiver From Filing Information Returns Magnetically. Data Operations Center
Submit Form 8508 to the IRS at least 45 days before you file Attn: W-2c Process
Forms W-2c. See Form 8508 for filing information. 1150 E. Mountain Drive
Revised Forms W-2c and W-3c. We revised Form W-2c, Wilkes-Barre, PA 18702-7997.
Corrected Wage and Tax Statement, to provide boxes for Do not send Form W-2, to either of these addresses.
the correction of state and local tax information. We also TIP Instead, see the Instructions for Forms W-2 and
added other Federal boxes that appear on Form W-2, Wage W-3.
and Tax Statement. As a result, Form W-2c is now printed
one per page. When to file. File Forms W-2c and W-3c as soon as
possible after you discover an error. Also provide Form
We revised Form W-3c, Transmittal of Corrected Wage W-2c to employees as soon as possible.
and Tax Statements, by adding a new box (box 14) “Inc. tax How to file. You may file Forms W-2c and W-3c on paper.
W/H by 3rd party sick pay payer.” Use box 14 to correct the Please type all entries using dark or black ink in 12-point
amount reported in box 14 of Form W-3, Transmittal of Courier font, if possible, and make sure all copies are
Wage and Tax Statements. legible. See the Instructions for Forms W-2 and W-3 for
Copy A of Form W-2c and Form W-3c are now printed in more information.
red dropout ink to enhance their scanning capabilities. After If any item shows a dollar change and one of the
June 30, 2003 do not use prior versions of Forms W-2c and amounts is zero, enter “-0-.” Do not leave the box blank.
W-3c. Magnetic media or electronic reporting. If you are
Substitute forms. If you are not using the official IRS form required to file 250 or more Forms W-2c during a calendar
to furnish Form W-2c to employees or to file with the SSA, year, you must file them on magnetic media or electronically
you may use an acceptable substitute form that complies unless the IRS granted you a waiver. See New magnetic/
with the rules in Pub. 1223, General Rules and electronic reporting requirement above.
Specifications for Substitute Forms W-2c and W-3c. Pub. To submit Forms W-2c on magnetic media or
1223 is a revenue procedure that explains the requirements electronically, contact the Employer Service Liaison Officer
for format and content of substitute Forms W-2c and W-3c. (ESLO) for your state. Call 1-800-772-6270 for your ESLO’s
Your substitute forms must comply with the require- phone number. Employers in the U.S. Virgin Islands may
ments in Pub. 1223. call 787-766-5574. Employers in American Samoa and
Guam may call 510-970-8247.
General Instructions Specifications for filing Form W-2c on magnetic media or
electronically are contained in SSA’s MMREF-2, Magnetic
Purpose of forms. Use Form W-2c to correct errors on Media Reporting and Electronic Filing of W-2c Information.
Forms W-2, W-2c, W-2AS, W-2GU, W-2CM, or W-2VI filed You can download MMREF-2 by visiting the SSA Web Site
with the SSA. Also use Form W-2c to provide corrected at www.ssa/employer. You can also order a copy of
Forms W-2, W-2AS, W-2GU, W-2CM, or W-2VI to MMREF-2 by calling SSA’s Employer Reporting Branch at
employees. 1-800-772-6270.
Do not use Form W-2c to report back pay. Instead, see If you file fewer than 250 forms W-2c, they are not
Pub. 957, Reporting Back Pay and Special Wage Payments required to be filed on magnetic media or electronically;
to the Social Security Administration, and Form SSA-131, however, doing so will enhance the timeliness and accuracy
Employer Report of Special Wage Payments. of forms processing.
Cat. No. 25978H
A–17
Shipping and mailing. If you have a large number of • Issue a new, corrected Form W-2 to the employee
forms, you may send them in separate packages. Show including the new address. Indicate “REISSUED
your name and employer identification number (EIN) on STATEMENT” on the new copies. Do not send Copy A to
each package. Number them in order (1 of 4, 2 of 4, etc.), the SSA.
and place Form W-3c in package 1. Show the number of • Issue a Form W-2c to the employee showing the correct
packages at the bottom of Form W-3c below the title. You address in box f and all other correct information. Do not
must send Forms W-2c and W-3c by First-Class Mail. send Copy A to the SSA.
Who may sign Form W-3c. Generally, employers must • Mail the Form W-2 with the incorrect address to the
sign Form W-3c. However, the transmitter or sender employee in an envelope showing the correct address or
(including a service bureau, paying agent, or disbursing otherwise deliver it to the employee.
agent) may sign Form W-3c for the employer or payer only if Correcting more than one Form W-2 for an employee.
the sender: There are two ways to prepare a correction for an employee
• Is authorized to sign by an agency agreement (either oral, who received more than one Form W-2 under the same
written, or implied) that is valid under state law and employer identification number (EIN) for the tax year. You
• Writes “For (name of payer)” next to the signature. can: (a) consider all the Forms W-2 when determining the
Even though an authorized sender signs for the payer, amounts to enter on Form W-2c as shown in Example 1
the payer still has the responsibility for making sure the below, or (b) file a single Form W-2c to correct only the
Form W-3c and attachments are filed correctly and timely. incorrect Form W-2 (see Example 2). However, state, local,
The payer is subject to any penalties that result from not and Federal government employers who are preparing
complying with these requirements. corrections for Medicare Qualified Government Employment
(MQGE) employees must also follow the instructions in the
Online Wage Reporting. Using a personal computer and a CAUTION under Boxes 5 and 6 on page 3.
modem, you can access SSA’s Business Services Online
Example 1. Mary Smith received two Forms W-2 for tax
(BSO) to electronically report wage data. To obtain
year 2002 under the same EIN. One form incorrectly
information regarding filing wage data electronically with
reported social security wages of $30,000 and the second
SSA or to access BSO, visit the SSA Web Site at
correctly reported social security wages of $20,000. A single
www.ssa.gov/employer. Call the SSA at 1-888-772-2970 if
Form W-2c filed to change the $30,000 to $25,000 (correct
you experience problems using any of the services within
amount) would show $50,000 in box 3 under “Previously
BSO.
reported” and $45,000 in box 3 under “Correct information.”
Information available includes magnetic media filing Example 2. The facts are the same as in the first
information, some IRS and SSA publications, information on example. However, you may choose to correct only the
electronic filing, and general topics of interest about annual incorrect Form W-2 by filing a Form W-2c that shows
wage reporting. You can also use BSO to ask questions $30,000 in box 3 under “Previously reported” and $25,000 in
about wage reporting. box 3 under “Correct information.”
Repayments. If an employee repays you for wages
Special Situations received in error in a prior year, file Form W-2c to correct
Correcting more than one kind of form. You must use a only social security and Medicare wages and tax. Do not
separate Form W-3c for each type of Form W-2 (i.e., W-2, correct wages reported in box 1 for the amount paid in error.
W-2c, W-2AS, W-2GU, W-2CM, or W-2VI) being corrected. Report an adjustment on Form 941, Employer’s Quarterly
You must also use a separate Form W-3c for each kind of Federal Tax Return (or 941-SS, 943, or CT-1) for the period
payer in box c (unless the second, checked box is the during which the repayment was made to recover the social
“Third-party sick pay” indicator). If you are correcting more security and Medicare taxes. Instead of making an
than one kind of form, please group forms of the same kind, adjustment on Form 941 (or 941-SS, 943, or CT-1) you may
and send them in separate groups. file a claim for these taxes using Form 843, Claim for
Refund and Request for Abatement. You may not make an
Correcting an employee’s name and/or SSN only. If you adjustment for income tax withholding because the wages
are correcting only an employee’s name and/or SSN, were paid in a prior year.
complete Form W-2c through box g, as appropriate. Do not
complete boxes 1 through 20. Advise your employee to Please tell your employee that the wages paid in
correct the SSN and/or name on his or her original Form TIP error in a prior year remain taxable to him or her for
W-2. that year. This is because the employee received
and had use of those funds during that year. The employee
If your employee is given a new social security card is not entitled to file an amended return (Form 1040X,
following an adjustment to his or her resident status that Amended, U.S. Individual Income Tax Return) to recover the
shows a different name or SSN, file a Form W-2c for the income tax on these wages. Instead, the employee is
most current year only. entitled to a deduction (or a credit, in some cases) for the
To correct an incorrect tax year or EIN on Form W-2, file repaid wages on his or her Form 1040 for the year of
one Form W-2c showing the incorrect tax year or EIN and repayment.
reducing the previously-reported money amounts to zero Undeliverable Forms W-2c. Keep for 4 years any
and a second Form W-2c reporting the money amounts employee copies of Forms W-2c that you tried to deliver but
(showing zeros in the “Previously reported” columns) in the could not. Do not send undeliverable Forms W-2c to the
correct year or with the correct EIN. SSA.
Employee’s incorrect address on Form W-2. If you filed a
Form W-2 with the SSA showing an incorrect address for
the employee but all other information on the Form W-2 is
correct, do not file Form W-2c with the SSA merely to Specific Instructions for Form W-2c
correct the address.
Box a — Tax year/Form corrected. If you are correcting
However, if the address was incorrect on the Form W-2 Form W-2, enter all four digits of the year of the form you
furnished to the employee, you must do are correcting. If you are correcting Form W-2c, W-2AS,
one of the following: W-2GU, W-2CM, or W-2VI, enter all four digits of the year
-2-
A–18
you are correcting, and also enter “c,” “AS,” “GU,” “CM,” or and W-3 for the proper format to use in reporting coded
“VI” to designate the form you are correcting. For example, items from box 12.
“2001” and “GU” shows that you are correcting a 2001 Form If a single Form W-2c does not provide enough blank
W-2GU. spaces for corrections, use additional Forms W-2c.
Box b — Employee’s correct SSN. You must enter the Box 13. Check the boxes in box 13, under “Previously
employee’s correct SSN even if it was correct on the original reported,” as they were checked on the original Form W-2;
Form W-2. under “Correct information,” check them as they should
Box c — Corrected name. Check this box only if the have been checked. For example, if you checked the
employee’s name on Form W-2 (or on a prior Form W-2c) “Retirement plan” box on the original Form W-2 by mistake,
was incorrect. If you check this box, you must also enter the check the “Retirement plan” box in box 13 under “Previously
employee’s correct name in box e and show his or her reported,” but do not check the “Retirement plan” box in box
previously reported, incorrect name in box i. 13 under “Correct information.”
Box d — Employer’s Federal EIN. Show the correct EIN Box 14. Use this box to correct items reported in box 14 of
assigned to you by the IRS in the format 00-0000000. the original Form W-2 or on a prior Form W-2c. If possible,
Boxes e and f — Employee’s name, address, and ZIP complete box 14 on Copies B, C, 1, and 2 of Form W-2c
code. Enter the employee’s correct name and address. See only, not on Copy A.
the Instructions for Forms W-2 and W-3 for name Boxes 15-20 — State/local taxes. If your only changes to
formatting information. If you are correcting the name, check the original Form W-2 are to state or local data, do not
the “Corrected name” box in box c and also complete box i. send Copy A of Form W-2c to the SSA. Just send Form
Box g — Employer’s name, address, and ZIP code. This W-2c to the appropriate state or local agency and furnish
entry should be the same as shown on your Form 941, 943, copies to your employees.
Employer’s Annual Return for Agricultural Employees, CT-1, Correcting state information. Contact your state or
Employer’s Annual Railroad Retirement Tax Return, or locality for specific reporting information.
Schedule H (Form 1040), Household Employment Taxes.
The IRS will not use Form W-2c to update your address
of record. To change your address, file Form 8822, Change Specific Instructions for Form W-3c
of Address. To get Form 8822, or any other IRS form, call
Please do not staple or tape the Forms W-2c to Form W-3c
1-800-TAX-FORM (1-800-829-3676) or visit the IRS Web
or to each other. File a separate Form W-3c for each tax
Site at www.irs.gov.
year, for each type of form, and for each kind of payer
Boxes h and i. Complete these boxes only if you are except “Third-party sick pay.” (The “Third-party sick pay”
correcting an employee’s SSN or name. indicator box does not designate a separate kind of payer.)
Boxes 1 – 20. For the items you are changing, enter under Make a copy of Form W-3c for your records.
“Previously reported” the amount reported on the original Form W-3c can be filed alone (without Forms W-2c) to
Form W-2 or on a prior Form W-2c. Enter under “Correct correct your EIN on a previously filed Form W-3. If the EIN is
information” the correct amount. the only change you need to make, complete only boxes a,
Do not make an entry in any of these boxes on Copy A b, e, f, and h, and sign the form.
unless you are making a change. However, see CAUTION In the money boxes (except box 12- see Boxes 1 – 12
below. and 14 on page 4) of Form W-3c, total the amounts from
Box 2 — Federal income tax withheld. Use this box only each box and column on the Forms W-2c you are sending.
to make corrections because of an administrative error.
Box a — Tax year/Form corrected. Enter all four digits of
(An administrative error occurs only if the amount you
the year of the form you are correcting and the type of form
entered in box 2 of the incorrect Form W-2 was not the
you are correcting. For the type of form, enter “2,” “2c,”
amount you actually withheld.) If correcting Forms W-2AS,
“2AS,” “2GU,” “2CM,” “2VI,” “3,” “3c,” or “3SS.” For example,
W-2GU, W-2CM, or W-2VI, box 2 is for income tax withheld
entering “2001” and “2” indicates that all the forms being
for the applicable possession.
corrected are 2001 Forms W-2.
Boxes 5 and 6. Complete these boxes to correct Medicare
wages and tips and Medicare tax withheld. State, local, or Box b — Employer’s name, address, and ZIP code. This
Federal government employers should also use these boxes should be the same as shown on your Form 941, 943, CT-1,
to correct MQGE wages. Box 5 must equal or exceed the or Schedule H (Form 1040). Include the suite, room, or other
sum of boxes 3 and 7 for 1991 and later years. unit number after the street address. If the Post Office does
not deliver mail to the street address and you use a P.O.
A state, local, or Federal government employer box, show the P.O. box number instead of the street
! correcting only social security wages and/or social
CAUTION security tips (boxes 3 and/or 7) for an MQGE
address.
employee for 1991 and later years must also complete The IRS will not use Form W-3c to update your
Medicare wages and tips in box 5. Enter the total Medicare TIP address of record. If you wish to change your
wages and tips, including MQGE-only wages, even if there address, file Form 8822. To get this or any other IRS
is no change to the total Medicare wages and tips previously form, call 1-800-TAX-FORM (1-800-829-3676) or visit the
reported. IRS Web Site at www.irs.gov.
Boxes 8 – 11. Use these boxes to correct allocated tips, an Box c — Kind of Payer. Check the applicable box. If your
advance EIC payment, dependent care benefits, or deferrals previous Form W-3 or W-3SS was checked incorrectly,
and distributions relating to nonqualified plans. report your prior, incorrect payer type in the “Explain
decreases here:” area below box 19.
Box 12 – Codes. Complete these boxes to correct any of
the coded items shown on Form W-2. Examples include 941/941-SS. Check this box if you file Form 941 or
uncollected social security and/or Medicare taxes on tips, 941-SS and no other category (except “Third-party sick
taxable cost of group-term life insurance coverage over pay,” if applicable) applies.
$50,000, elective deferrals (codes D through H and S, box Military. Check this box if you are a military employer
12), sick pay not includible as income, and employee correcting Forms W-2 for members of the uniformed
business expenses. See the Instructions for Form W-2 services.
-3-
A–19
943. Check this box if you file Form 943 and you are Boxes 1 – 12 and 14. Enter the totals of each box and each
correcting Forms W-2 for agricultural employees. For column from Forms W-2c. For box 12, enter only the total of
nonagricultural employees, send Forms W-2c with a codes D through H and S.
separate Form W-3c, generally with the 941/941-SS box Boxes 16 – 19. If your only changes to the Forms W-2c and
checked. W-3c are to the state and local data, do not send either
Section 218. Check this box if you are a state or local Copy A of Form W-2c or Form W-3c to the SSA. Just send
government employer correcting 1986 or earlier Forms W-2 the forms to the appropriate state or local agency. Furnish
for employees covered under section 218 of the Social copies of Form W-2c to your employees.
Security Act. You must also enter your employer’s SSA Explain decreases here. Explain any decreases to
number (“69 – ”) in the shaded “corrected” box below box amounts “Previously reported.” Also report here your
12a-d (in box 14 on Form W-2c). previous, incorrect entry in box c, “Kind of Payer.” Enclose
CT-1. Check this box if you are a railroad employer (but do not attach) additional sheets explaining your
correcting Forms W-2 for employees covered under the decreases, if necessary.
Railroad Retirement Tax Act (RRTA). If you also have to Signature. Sign and date the form. Also enter your title,
correct forms of employees who are subject to social phone number, and the name of a person to contact. If you
security and Medicare taxes, complete a separate Form have a fax number and/or e-mail address, enter them. If you
W-3c with the 941/941-SS box checked instead. are not the employer, see Who may sign Form W-3c, on
Hshld. emp. Check this box if you are a household page 2.
employer correcting Forms W-2 for household employees
and you file Schedule H (Form 1040) (or Form 942 before
Privacy Act and Paperwork Reduction Act Notice. We
1995). If you also have to correct forms of employees who
ask for the information on Forms W-2c and W-3c to carry
are not household employees, complete a separate Form
out the Internal Revenue laws of the United States. We
W-3c.
need it to figure and collect the right amount of tax. Section
Medicare govt. emp. Check this box if you are a U.S., 6051 of the Internal Revenue Code and its regulations
state, or local agency filing corrections for employees require you to furnish wage and tax statements to
subject only to Medicare taxes. employees and to the Social Security Administration.
Third-party sick pay. Check this box and another box Section 6109 of the Code requires you to provide your
such as the “941/941-SS” box if you are a third-party sick employer identification number.
pay payer (or are an employer reporting sick pay payments You are not required to provide the information requested
made by a third party) correcting Forms W-2 and the on a form that is subject to the Paperwork Reduction Act
“Third-party sick pay” box in box 13 of Form W-2c under unless the form displays a valid OMB control number. Books
“Correct information” is checked. File a single Form W-3c or records relating to a form or its instructions must be
for the regular and “Third-party sick pay” Forms W-2c. retained as long as their contents may become material in
Box d — Number of Forms W-2c. Show the number of the administration of any Internal Revenue law.
individual Forms W-2c filed with this Form W-3c or enter Generally, tax returns and return information are
“-0-” if you are correcting only a previously filed Form W-3 or confidential, as required by section 6103. However, section
Form W-3SS. 6103 allows or requires the Internal Revenue Service to
Box e — Employer’s Federal EIN. Enter the correct disclose or give the information shown on your return to
number assigned to you by the IRS in the following format: others as described in the Code. For example, we may
00-0000000. If you are correcting your EIN, enter the disclose your tax information to the Department of Justice
incorrect EIN you used in box h. for civil and criminal litigation, and to cities, states, and the
Box f — Establishment number. You may use this box to District of Columbia for use in administrating their tax laws.
identify separate establishments in your business. You may We may also disclose this information to Federal and state
file a separate Form W-3c, with Forms W-2c, for each agencies to enforce Federal nontax criminal laws and to
establishment or you may use a single Form W-3c for all combat terrorism.
Forms W-2c. You do not have to complete this item; it is The time needed to complete and file these forms will
optional. vary depending on individual circumstances. The estimated
Box g — Employer’s state ID number. You are not average times are: Form W-2c — 40 minutes; Form W-3c —
required to complete this box. This number is assigned by 51 minutes. If you have comments concerning the accuracy
the individual state where your business is located. of these time estimates or suggestions for making these
However, you may want to complete this item if you use forms simpler, we would be happy to hear from you. You
copies of this form for your state returns. can write to the Tax Forms Committee, Western Area
Box h — Employer’s incorrect Federal EIN. Your correct Distribution Center, Rancho Cordova, CA 95743-0001. Do
number must appear in box e. Make an entry here only if not send these tax forms to this address. Instead, see
the number on the original form was incorrect. Where to file Forms W-2c and W-3c on page 1.
Box i — Incorrect establishment number. You may use
this box to correct an establishment number.
Box j — Employer’s incorrect state ID number. Use this
box to make any corrections to your previously reported
state ID number.
-4-
A–20
deductions, certain credits, adjustments to Form 1040-ES, Estimated Tax for Individuals.
Form W-4 (2004) income, or two-earner/two-job situations. Com-
plete all worksheets that apply. However, you
Otherwise, you may owe additional tax.
Two earners/two jobs. If you have a working
Purpose. Complete Form W-4 so that your may claim fewer (or zero) allowances. spouse or more than one job, figure the total
employer can withhold the correct Federal Head of household. Generally, you may claim number of allowances you are entitled to claim
income tax from your pay. Because your tax sit- head of household filing status on your tax on all jobs using worksheets from only one Form
uation may change, you may want to refigure return only if you are unmarried and pay more W-4. Your withholding usually will be most accu-
your withholding each year. than 50% of the costs of keeping up a home for rate when all allowances are claimed on the
Exemption from withholding. If you are yourself and your dependent(s) or other qualify- Form W-4 for the highest paying job and zero
exempt, complete only lines 1, 2, 3, 4, and 7 and ing individuals. See line E below. allowances are claimed on the others.
sign the form to validate it. Your exemption for Tax credits. You can take projected tax credits
2004 expires February 16, 2005. See Pub. 505, Nonresident alien. If you are a nonresident
into account in figuring your allowable number of alien, see the Instructions for Form 8233 before
Tax Withholding and Estimated Tax. withholding allowances. Credits for child or completing this Form W-4.
Note: You cannot claim exemption from with- dependent care expenses and the child tax
holding if: (a) your income exceeds $800 and Check your withholding. After your Form W-4
credit may be claimed using the Personal takes effect, use Pub. 919 to see how the dollar
includes more than $250 of unearned income Allowances Worksheet below. See Pub. 919,
(e.g., interest and dividends) and (b) another amount you are having withheld compares to
How Do I Adjust My Tax Withholding? for infor- your projected total tax for 2004. See Pub. 919,
person can claim you as a dependent on their mation on converting your other credits into
tax return. especially if your earnings exceed $125,000
withholding allowances. (Single) or $175,000 (Married).
Basic instructions. If you are not exempt, com- Nonwage income. If you have a large amount of
plete the Personal Allowances Worksheet Recent name change? If your name on line 1
nonwage income, such as interest or dividends, differs from that shown on your social security
below. The worksheets on page 2 adjust your consider making estimated tax payments using
withholding allowances based on itemized card, call 1-800-772-1213 to initiate a name
change and obtain a social security card show-
ing your correct name.
Personal Allowances Worksheet (Keep for your records.)

A Enter “1” for yourself if no one else can claim you as a dependent A
兵其
● You are single and have only one job; or
B Enter “1” if: ● You are married, have only one job, and your spouse does not work; or B
● Your wages from a second job or your spouse’s wages (or the total of both) are $1,000 or less.
C Enter “1” for your spouse. But, you may choose to enter “-0-” if you are married and have either a working spouse or
more than one job. (Entering “-0-” may help you avoid having too little tax withheld.) C
D Enter number of dependents (other than your spouse or yourself) you will claim on your tax return D
E Enter “1” if you will file as head of household on your tax return (see conditions under Head of household above) E
F Enter “1” if you have at least $1,500 of child or dependent care expenses for which you plan to claim a credit F
(Note: Do not include child support payments. See Pub. 503, Child and Dependent Care Expenses, for details.)
G Child Tax Credit (including additional child tax credit):
● If your total income will be less than $52,000 ($77,000 if married), enter “2” for each eligible child.
● If your total income will be between $52,000 and $84,000 ($77,000 and $119,000 if married), enter “1” for each eligible
child plus “1” additional if you have four or more eligible children. G
H Add lines A through G and enter total here. Note: This may be different from the number of exemptions you claim on your tax return. 䊳 H
兵
For accuracy, ● If you plan to itemize or claim adjustments to income and want to reduce your withholding, see the Deductions
complete all and Adjustments Worksheet on page 2.
worksheets ● If you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs
that apply. exceed $35,000 ($25,000 if married) see the Two-Earner/Two-Job Worksheet on page 2 to avoid having too little tax withheld.
● If neither of the above situations applies, stop here and enter the number from line H on line 5 of Form W-4 below.
Cut here and give Form W-4 to your employer. Keep the top part for your records.
Form W-4 Employee’s Withholding Allowance Certificate OMB No. 1545-0010

䊳 Your employer must send a copy of this form to the IRS if: (a) you claim more than
10 allowances or (b) you claim "Exempt" and your wages are normally more than $200 per week.
2004
1 Type or print your first name and middle initial Last name 2 Your social security number
Home address (number and street or rural route)

3 Single Married Married, but withhold at higher Single rate.
Note: If married, but legally separated, or spouse is a nonresident alien, check the “Single” box.
City or town, state, and ZIP code 4 If your last name differs from that shown on your social security
card, check here. You must call 1-800-772-1213 for a new card. 䊳
5 Total number of allowances you are claiming (from line H above or from the applicable worksheet on page 2) 5
6 Additional amount, if any, you want withheld from each paycheck 6 $
7 I claim exemption from withholding for 2004, and I certify that I meet both of the following conditions for exemption:
● Last year I had a right to a refund of all Federal income tax withheld because I had no tax liability and
● This year I expect a refund of all Federal income tax withheld because I expect to have no tax liability.
If you meet both conditions, write “Exempt” here 䊳 7
Under penalties of perjury, I certify that I am entitled to the number of withholding allowances claimed on this certificate, o r I am entitled to claim exempt status.
Employee’s signature
(Form is not valid
unless you sign it.) 䊳 Date 䊳
8 Employer’s name and address (Employer: Complete lines 8 and 10 only if sending to the IRS.) 9 Office code 10 Employer identification number (EIN)
(optional)
For Privacy Act and Paperwork Reduction Act Notice, see page 2. Cat. No. 10220Q Form W-4 (2004)
A–21
Form W-4 (2004) Page 2
Deductions and Adjustments Worksheet
Note: Use this worksheet only if you plan to itemize deductions, claim certain credits, or claim adjustments to income on your 2004 tax return.
1 Enter an estimate of your 2004 itemized deductions. These include qualifying home mortgage interest,
charitable contributions, state and local taxes, medical expenses in excess of 7.5% of your income, and
miscellaneous deductions. (For 2004, you may have to reduce your itemized deductions if your income
is over $142,700 ($71,350 if married filing separately). See Worksheet 3 in Pub. 919 for details.) 1 $
兵其
$9,700 if married filing jointly or qualifying widow(er)
$7,150 if head of household 2 $
2 Enter:
$4,850 if single
$4,850 if married filing separately
3 Subtract line 2 from line 1. If line 2 is greater than line 1, enter “-0- ” 3 $
4 Enter an estimate of your 2004 adjustments to income, including alimony, deductible IRA contributions, and student loan interes t 4 $
5 Add lines 3 and 4 and enter the total. (Include any amount for credits from Worksheet 7 in Pub. 919) 5 $
6 Enter an estimate of your 2004 nonwage income (such as dividends or interest) 6 $
7 Subtract line 6 from line 5. Enter the result, but not less than “-0- ” 7 $
8 Divide the amount on line 7 by $3,000 and enter the result here. Drop any fraction 8
9 Enter the number from the Personal Allowances Worksheet, line H, page 1 9
10 Add lines 8 and 9 and enter the total here. If you plan to use the Two-Earner/Two-Job Worksheet, also
enter this total on line 1 below. Otherwise, stop here and enter this total on Form W-4, line 5, page 1 10
Two-Earner/Two-Job Worksheet (See Two earners/two jobs on page 1.)
Note: Use this worksheet only if the instructions under line H on page 1 direct you here.
1 Enter the number from line H, page 1 (or from line 10 above if you used the Deductions and Adjustments Worksheet ) 1
2 Find the number in Table 1 below that applies to the LOWEST paying job and enter it here 2
3 If line 1 is more than or equal to line 2, subtract line 2 from line 1. Enter the result here (if zero, enter
“-0- ”) and on Form W-4, line 5, page 1. Do not use the rest of this worksheet 3
Note: If line 1 is less than line 2, enter “-0- ” on Form W-4, line 5, page 1. Complete lines 4–9 below to
calculate the additional withholding amount necessary to avoid a year-end tax bill.
4 Enter the number from line 2 of this worksheet 4
6 Subtract line 5 from line 4 6
7 Find the amount in Table 2 below that applies to the HIGHEST paying job and enter it here 7 $
8 Multiply line 7 by line 6 and enter the result here. This is the additional annual withholding needed 8 $
9 Divide line 8 by the number of pay periods remaining in 2004. For example, divide by 26 if you are paid
every two weeks and you complete this form in December 2003. Enter the result here and on Form W-4,
line 6, page 1. This is the additional amount to be withheld from each paycheck 9 $
Table 1: Two-Earner/Two-Job Worksheet
Married Filing Jointly Married Filing Jointly All Others
If wages from HIGHEST AND, wages from Enter on If wages from HIGHEST AND, wages from Enter on If wages from LOWEST Enter on
paying job are— LOWEST paying job are— line 2 above paying job are— LOWEST paying job are— line 2 above paying job are— line 2 above
$0 - $40,000 $0 - $4,000 0 $40,001 and over 31,001 - 38,000 6 $0 - $6,000 0
4,001 - 8,000 1 38,001 - 44,000 7 6,001 - 11,000 1
8,001 - 17,000 2 44,001 - 50,000 8 11,001 - 18,000 2
17,001 and over 3 50,001 - 55,000 9 18,001 - 25,000 3
55,001 - 65,000 10 25,001 - 31,000 4
$40,001 and over $0 - $4,000 0 65,001 - 75,000 11 31,001 - 44,000 5
4,001 - 8,000 1 75,001 - 85,000 12 44,001 - 55,000 6
8,001 - 15,000 2 85,001 - 100,000 13 55,001 - 70,000 7
15,001 - 22,000 3 100,001 - 115,000 14 70,001 - 80,000 8
22,001 - 25,000 4 115,001 and over 15 80,001 - 100,000 9
25,001 - 31,000 5 100,001 and over 10
Table 2: Two-Earner/Two-Job Worksheet
Married Filing Jointly All Others
If wages from HIGHEST Enter on If wages from HIGHEST Enter on
paying job are— line 7 above paying job are— line 7 above
$0 - $60,000 $470 $0 - $30,000 $470
60,001 - 110,000 780 30,001 - 70,000 780
110,001 - 150,000 870 70,001 - 140,000 870
150,001 - 270,000 1,020 140,001 - 320,000 1,020
270,001 and over 1,090 320,001 and over 1,090
Privacy Act and Paperwork Reduction Act Notice. We ask for the information on control number. Books or records relating to a form or its instructions must be
this form to carry out the Internal Revenue laws of the United States. The Internal retained as long as their contents may become material in the administration of any
Revenue Code requires this information under sections 3402(f)(2)(A) and 6109 and Internal Revenue law. Generally, tax returns and return information are confidential,
their regulations. Failure to provide a properly completed form will result in your as required by Code section 6103.
being treated as a single person who claims no withholding allowances; The time needed to complete this form will vary depending on individual
providing fraudulent information may also subject you to penalties. Routine uses circumstances. The estimated average time is: Recordkeeping, 46 min.; Learning
of this information include giving it to the Department of Justice for civil and criminal about the law or the form, 13 min.; Preparing the form, 59 min. If you have
litigation, to cities, states, and the District of Columbia for use in administering their comments concerning the accuracy of these time estimates or suggestions for
tax laws, and using it in the National Directory of New Hires. We may also disclose making this form simpler, we would be happy to hear from you. You can write to the
this information to Federal and state agencies to enforce Federal nontax criminal Tax Products Coordinating Committee, Western Area Distribution Center, Rancho
laws and to combat terrorism. Cordova, CA 95743-0001. Do not send Form W-4 to this address. Instead, give it to
You are not required to provide the information requested on a form that is your employer.
subject to the Paperwork Reduction Act unless the form displays a valid OMB
A–22
Form W-4P Withholding Certificate for OMB No. 1545-0415

Pension or Annuity Payments 2004
Purpose. Form W-4P is for U.S. citizens, resident aliens, or their pages 3 and 4. Your previously filed Form W-4P will remain in
estates who are recipients of pensions, annuities, including effect if you do not file a Form W-4P for 2004.
commercial annuities, and certain other deferred compensation. What do I need to do? Complete lines A through G of the
Use Form W-4P to tell payers the correct amount of Federal Personal Allowances Worksheet. Use the additional
income tax to withhold from your payment(s). You also may use worksheets on page 2 to adjust your withholding allowances for
Form W-4P to choose (a) not to have any income tax withheld itemized deductions, adjustments to income, certain credits, or
from the payment (except for eligible rollover distributions or multiple pensions/more-than-one-income situations. If you do
payments to U.S. citizens delivered outside the United States or its not want any income tax withheld, you can skip the worksheets
possessions) or (b) to have an additional amount of tax withheld. and go directly to the Form W-4P below.
Your options depend on whether the payment is periodic,
nonperiodic, or an eligible rollover distribution as explained on Sign this form. Form W-4P is not valid unless you sign it.
Personal Allowances Worksheet (Keep for your records.)
A Enter “1” for yourself if no one else can claim you as a dependent A
兵其
● You are single and have only one pension; or
● You are married, have only one pension, and your
spouse has no income subject to withholding; or B
B Enter “1” if:
● Your income from a second pension or a job, or your spouse’s
pension or wages (or the total of all) is $1,000 or less.
C Enter “1” for your spouse . But, you may choose to enter “-0-” if you are married and have either a spouse who
has income subject to withholding or you have more than one source of income subject to withholding. (Entering
“-0-” may help you avoid having too little tax withheld.) C
D Enter number of dependents (other than your spouse or yourself) you will claim on your tax return D
E Enter “1” if you will file as head of household on your tax return E
F Child Tax Credit (including additional child tax credit):
● If your total income will be less than $52,000 ($77,000 if married), enter “2” for each eligible child.
● If your total income will be between $52,000 and $84,000 ($77,000 and $119,000 if married), enter “1” for each
eligible child plus “1” additional if you have four or more eligible children F
G Add lines A through F and enter total here. Note: This may be different from the number of exemptions you claim
兵
on your tax return 䊳 G
● If you plan to itemize or claim adjustments to income and want to reduce your withholding,
For see the Deductions and Adjustments Worksheet on page 2.
accuracy, ● If you have more than one source of income subject to withholding or a spouse with income
complete subject to withholding and your combined income from all sources exceeds $35,000 ($25,000 if
all married), see the Multiple Pensions/More-Than-One-Income Worksheet on page 2 to avoid
worksheets having too little tax withheld.
that apply. ● If neither of the above situations applies, stop here and enter the number from line G on line 2
of Form W-4P below.
Cut here and give Form W-4P to the payer of your pension or annuity. Keep the top part for your records.
Form W-4P Withholding Certificate for OMB No. 1545-0415
Pension or Annuity Payments

Internal Revenue Service 䊳 For Privacy Act and Paperwork Reduction Act Notice, see page 4.
2004
Type or print your full name Your social security number
Home address (number and street or rural route) Claim or identification number
(if any) of your pension or
annuity contract
City or town, state, and ZIP code
Complete the following applicable lines:

1 Check here if you do not want any Federal income tax withheld from your pension or annuity. (Do not complete lines 2 or 3.) 䊳
2 Total number of allowances and marital status you are claiming for withholding from each periodic pension or
annuity payment. (You may also designate an additional dollar amount on line 3.) 䊳
(Enter number
Marital status: Single Married Married, but withhold at higher “Single” rate of allowances.)
3 Additional amount, if any, you want withheld from each pension or annuity payment. Note: For per iodic payments,
you cannot enter an amount here without entering the number (including zero) of allowances on line 2 䊳 $
Your signature 䊳 Date 䊳
Cat. No. 10225T Form W-4P (2004)
A–23
Form W-4P (2004) Page 2
Deductions and Adjustments Worksheet
Note: Use this worksheet only if you plan to itemize deductions, claim certain credits, or claim adjustments to income on
your 2004 tax return.
1 Enter an estimate of your 2004 itemized deductions. These include qualifying home mortgage interest,
charitable contributions, state and local taxes, medical expenses in excess of 7.5% of your income, and
miscellaneous deductions. (For 2004, you may have to reduce your itemized deductions if your income
is over $142,700 ($71,350 if married filing separately). See Worksheet 3 in Pub. 919 for details.) 1 $
兵其
$9,700 if married filing jointly or qualifying widow(er)
$7,150 if head of household 2 $
2 Enter:
$4,850 if single
$4,850 if married filing separately
3 Subtract line 2 from line 1. If line 2 is greater than line 1, enter “-0- ” 3 $
4 Enter an estimate of your 2004 adjustments to income, including alimony, deductible IRA contributions,
and student loan interest 4 $
5 Add lines 3 and 4 and enter the total. (Include any credit amounts from Worksheet 7 in Pub. 919.) 5 $
6 Enter an estimate of your 2004 income not subject to withholding (such as dividends or interest) 6 $
7 Subtract line 6 from line 5. Enter the result, but not less than “-0- ” 7 $
8 Divide the amount on line 7 by $3,000 and enter the result here. Drop any fraction 8
9 Enter the number from the Personal Allowances Worksheet, line G, page 1 9
10 Add lines 8 and 9 and enter the total here. If you use the Multiple Pensions/More-Than-One-Income
Worksheet, also enter this total on line 1 below. Otherwise, stop here and enter this total on Form
W-4P, line 2, page 1 10
Multiple Pensions/More-Than-One-Income Worksheet
Note: Complete only if the instructions under line G, page 1, direct you here. This applies if you (and your spouse if married filing a joint return) have more
than one source of income subject to withholding (such as more than one pension, or a pension and a job, or you have a pension and your spouse works).
1 Enter the number from line G, page 1 (or from line 10 above if you used the Deductions and Adjustments Worksheet) 1
2 Find the number in Table 1 below that applies to the LOWEST paying pension or job and enter it here 2
3 If line 1 is more than or equal to line 2, subtract line 2 from line 1. Enter the result here (if zero, enter
“-0- ”) and on Form W-4P, line 2, page 1. Do not use the rest of this worksheet 3
Note: If line 1 is less than line 2, enter “-0-” on For m W-4P, line 2, page 1. Complete lines 4–9 below
to calculate the additional withholding amount necessary to avoid a year-end tax bill.
7 Find the amount in Table 2 below that applies to the HIGHEST paying pension or job and enter it here 7 $
8 Multiply line 7 by line 6 and enter the result here. This is the additional annual withholding needed 8 $
9 Divide line 8 by the number of pay periods remaining in 2004. For example, divide by 12 if you are paid
every month and you complete this form in December 2003. Enter the result here and on Form W-4P,
line 3, page 1. This is the additional amount to be withheld from each payment 9 $
Table 1: Multiple Pensions/More-Than-One Income Worksheet
Married Filing Jointly Married Filing Jointly All Others
If amount from highest AND, amount from LOWEST Enter on If amount from highest AND, amount from LOWEST Enter on If amount from LOWEST Enter on
paying pension or job is — paying pension or job is — line 2 above paying pension or job is — paying pension or job is — line 2 above paying pension or job is — line 2 above
$0 - $40,000 $0 - $4,000 0 $40,001 and over $31,001 - $38,000 6 $0 - $6,000 0
4,001 - 8,000 1 38,001 - 44,000 7 6,001 - 11,000 1
8,001 - 17,000 2 44,001 - 50,000 8 11,001 - 18,000 2
17,001 and over 3 50,001 - 55,000 9 18,001 - 25,000 3
55,001 - 65,000 10 25,001 - 31,000 4
$40,001 and over $0 - $4,000 0 65,001 - 75,000 11 31,001 - 44,000 5
4,001 - 8,000 1 75,001 - 85,000 12 44,001 - 55,000 6
8,001 - 15,000 2 85,001 - 100,000 13 55,001 - 70,000 7
15,001 - 22,000 3 100,001 - 115,000 14 70,001 - 80,000 8
22,001 - 25,000 4 115,001 and over 15 80,001 - 100,000 9
25,001 - 31,000 5 100,001 and over 10
Table 2: Multiple Pensions/More-Than-One Income Worksheet
Married Filing Jointly All Others
If amount from HIGHEST Enter on If amount from HIGHEST Enter on
paying pension or job is — line 7 above paying pension or job is — line 7 above
$0 - $60,000 $470 $0 - $30,000 $470
60,001 - 110,000 780 30,001 - 70,000 780
110,001 - 150,000 870 70,001 - 140,000 870
150,001 - 270,000 1,020 140,001 - 320,000 1,020
270,001 and over 1,090 320,001 and over 1,090
A–24
Form W-4S Request for Federal Income Tax
Withholding From Sick Pay
OMB No. 1545-0717

Internal Revenue Service 䊳 Give this form to the third-party payer of your sick pay.
2004
Type or print your full name Your social security number
Home address (number and street or rural route)
City or town, state, and ZIP code
Claim or identification number (if any)

I request income tax withholding from my sick pay payments. I want the following amount to be withheld from each
payment. (See Worksheet below.) $
Employee’s signature 䊳䊳
Date
Cut here and give the top part of this form to the payer. Keep the lower part for your records.
Worksheet (Keep for your records. Do not send to the Internal Revenue Service.)
1 Enter amount of adjusted gross income that you expect in 2004 1
2 If you plan to itemize deductions on Schedule A (Form 1040), enter the estimated total of your deductions.
For 2004, you may have to reduce your itemized deductions if your income is over $142,700
($71,350 if married filing separately). See Pub. 919, How Do I Adjust My Tax Withholding? for details. Call
1-800-829-3676 or visit the IRS Web Site at www.irs.gov to order forms and publications. If you do not
plan to itemize deductions, enter the standard deduction (see the instructions on page 2 for the standard
deduction amount, including additional amounts for age and blindness) 2
4 Exemptions. Multiply $3,100 by the number of personal exemptions. For 2004, your personal exemption(s)
amount is reduced if your income is over $142,700 if single, $214,050 if married filing jointly or qualifying
widow(er), $107,025 if married filing separately, or $178,350 if head of household. See Pub. 919 for details. 4
6 Tax. Figure your tax on line 5 by using the 2004 Tax Rate Schedule X, Y, or Z on page 2. Do not use the
Tax Table or Tax Rate Schedule X, Y, or Z in the 2003 Form 1040, 1040A, or 1040EZ instructions 6
7 Credits (child tax and higher education credits, credit for child and dependent care expenses, etc.) 7
9 Estimated income tax withheld and to be withheld from other sources (including amounts withheld due to
a prior Form W-4S) during 2004 or paid with Form 1040-ES 9
11 Enter the number of sick pay payments you expect to receive this year to which this Form W-4S will apply 11
12 Divide line 10 by line 11. Round to the nearest dollar. This is the amount that should be withheld from each
sick pay payment. Be sure it meets the requirements for the amount that should be withheld, as explained
under Amount to be withheld below. If it does, enter this amount on Form W-4S above 12
General Instructions ● Must be in whole dollars (for example, $35, not $34.50).
Purpose of form. Give this form to the third-party payer of your ● Must be at least $20 a week.
sick pay, such as an insurance company, if you want Federal income ● Must not reduce the net amount of each sick pay payment that
tax withheld from the payments. You are not required to have you receive to less than $10.
Federal income tax withheld from sick pay paid by a third party. For payments larger or smaller than a regular full payment of sick
However, if you choose to request such withholding, Internal pay, the amount withheld will be in the same proportion as your
Revenue Code sections 3402(o) and 6109 and their regulations regular withholding from sick pay. For example, if your regular full
require you to provide the information requested on this form. Do payment of $100 a week normally has $25 (25%) withheld, then $20
not use this form if your employer (or its agent) makes the payments (25%) will be withheld from a partial payment of $80.
because employers are already required to withhold income tax from Caution: Generally, you may be subject to a penalty if your tax
sick pay. payments during the year are not at least 90% of the tax shown on
Note: If you receive sick pay under a collective bargaining your tax return. For exceptions and details, see Pub. 505, Tax
agreement, see your union representative or employer. Withholding and Estimated Tax. You may pay tax during the year
Definition. Sick pay is a payment that you receive: through withholding or estimated tax payments or both. To avoid a
1. Under a plan your employer takes part in and penalty, make sure that you have enough tax withheld or make
estimated tax payments using Form 1040-ES, Estimated Tax for
2. In place of wages for any period when you are temporarily
Individuals. You may estimate your income tax liability by using the
absent from work because of sickness or injury.
worksheet above.
Amount to be withheld. Enter on this form the amount that you
want withheld from each payment. The amount that you enter: (continued on back)
For Paperwork Reduction Act Notice, see page 2. Cat. No. 10226E Form W-4S (2004)
A–25
Form W-4S (2004) Page 2
Sign this form. Form W-4S is not valid unless you sign it. *If you are age 65 or older or blind, add to the standard deduction
Statement of income tax withheld. After the end of the year, you amount the additional amount that applies to you as shown in the
will receive a Form W-2, Wage and Tax Statement, reporting the next paragraph. If you can be claimed as a dependent on another
taxable sick pay paid and income tax withheld during the year. person’s return, see Limited standard deduction for dependents
These amounts are reported to the Internal Revenue Service. below.
Changing your withholding. Form W-4S remains in effect until you Additional amount for the elderly or blind. An additional
change or revoke it. You may do this by giving a new Form W-4S or standard deduction of $950 is allowed for a married individual (filing
a written notice to the payer of your sick pay. To revoke your jointly or separately) or qualifying widow(er) who is 65 or older or
previous Form W-4S, complete a new Form W-4S and write blind, $1,900 if 65 or older and blind. If both spouses are 65 or older
“Revoked” in the money amount box, sign it, and give it to the or blind, an additional $1,900 is allowed on a joint return ($1,900 on
payer. a separate return if you can claim an exemption for your spouse). If
both spouses are 65 or older and blind, an additional $3,800 is
Specific Instructions for Worksheet allowed on a joint return ($3,800 on a separate return if you can
claim an exemption for your spouse). An additional $1,200 is allowed
You may use the worksheet on page 1 to estimate the amount of for an unmarried individual (single or head of household) who is 65
income tax that you want withheld from each sick pay payment. or older or blind, $2,400 if 65 or older and blind.
Use your tax return for last year and the worksheet as a basis for Limited standard deduction for dependents. If you can be
estimating your tax, tax credits, and withholding for this year. claimed as a dependent on another person ’s return, your standard
You may not want to use Form W-4S if you already have your deduction is the greater of: (a) $800 or (b) your earned income plus
total tax covered by estimated tax payments or other withholding. $250 (up to the regular standard deduction for your filing status). If
If you expect to file a joint return, be sure to include the income, you are 65 or older or blind, see Pub. 505 for additional amounts
deductions, credits, and payments of both yourself and your spouse that you may claim.
in figuring the amount you want withheld. Certain individuals not eligible for standard deduction. For the
Caution: If any of the amounts on the worksheet change after you following individuals, the standard deduction is zero:
give Form W-4S to the payer, you may use a new Form W-4S to ● A married individual filing a separate return if either spouse
request a change in the amount withheld. itemizes deductions.
● A nonresident alien individual.
Line 2 —Deductions ● An individual filing a return for a period of less than 12 months
Itemized deductions. You may have to reduce your itemized because of a change in his or her annual accounting period.
deductions if your income is over $142,700 ($71,350 if married filing
Line 7 —Credits
separately). See Pub. 919 for details.
Standard deduction, individuals (other than the elderly or blind). Include on this line any tax credits that you are entitled to claim,
For 2004, the amounts are: such as the child tax and higher education credits, credit for child
and dependent care expenses, earned income credit, or credit for
Standard the elderly or the disabled.
Filing Status Deduction
Married filing jointly or qualifying widow(er) $9,700* Line 9 —Tax Withholding and Estimated Tax
Head of household $7,150* Enter the income tax that you expect will be withheld this year on
Single $4,850* income other than sick pay and any payments that you made using
Form 1040-ES. Include income tax withheld from wages and
Married filing separately $4,850*
pensions.
2004 Tax Rate Schedules

Schedule X —Single Schedule Z —Head of household
If line 5 is: The tax is: of the If line 5 is: The tax is: of the
But not amount But not amount
Over— over— over— Over— over— over—
$0 $7,150 10% $0 $0 $10,200 10% $0
7,150 29,050 $715.00 + 15% 7,150 10,200 38,900 $1,020.00 + 15% 10,200
29,050 70,350 4,000.00 + 25% 29,050 38,900 100,500 5,325.00 + 25% 38,900
70,350 146,750 14,325.00 + 28% 70,350 100,500 162,700 20,725.00 + 28% 100,500
146,750 319,100 35,717.00 + 33% 146,750 162,700 319,100 38,141.00 + 33% 162,700
319,100 92,592.50 + 35% 319,100 319,100 89,753.00 + 35% 319,100
Schedule Y-1 —Married filing jointly or Qualifying widow(er) Schedule Y-2 —Married filing separately
If line 5 is: The tax is: of the If line 5 is: The tax is: of the
But not amount But not amount
Over— over— over— Over— over— over—
$0 $14,300 10% $0 $0 $7,150 10% $0
14,300 58,100 $1,430.00 + 15% 14,300 7,150 29,050 $715.00 + 15% 7,150
58,100 117,250 8,000.00 + 25% 58,100 29,050 58,625 4,000.00 + 25% 29,050
117,250 178,650 22,787.50 + 28% 117,250 58,625 89,325 11,393.75 + 28% 58,625
178,650 319,100 39,979.50 + 33% 178,650 89,325 159,550 19,989.75 + 33% 89,325
319,100 86,328.00 + 35% 319,100 159,550 43,164.00 + 35% 159,550
Paperwork Reduction Act Notice. We ask for the information on The time needed to complete this form will vary depending on
this form to carry out the Internal Revenue laws of the United States. individual circumstances. The estimated average time is:
You are not required to provide the information requested on a Recordkeeping —39 min.; Learning about the law or the form —10
form that is subject to the Paperwork Reduction Act unless the form min.; Preparing and sending the form —41 min.
displays a valid OMB control number. Books or records relating to a If you have comments concerning the accuracy of these time
form or its instructions must be retained as long as their contents estimates or suggestions for making this form simpler, we would be
may become material in the administration of any Internal Revenue happy to hear from you. You can write to the Tax Products
law. Generally, tax returns and return information are confidential, as Coordinating Committee, Western Area Distribution Center, Rancho
required by Code section 6103. Cordova, CA 95743-0001. Do not send Form W-4S to this address.
Instead, give it to your payer.
A–26
2004 Form W-5 Internal Revenue Service
Instructions penal institutions are paid for their work, amounts

received as a pension or annuity from a nonqualified
Purpose of Form deferred compensation plan or a nongovernmental
Use Form W-5 if you are eligible to get part of the EIC in section 457 plan, or nontaxable earned income.
advance with your pay and choose to do so. See Who Is 3. You expect to be able to claim the EIC for 2004. To
Eligible To Get Advance EIC Payments? below. The find out if you may be able to claim the EIC, answer the
amount you can get in advance generally depends on questions on page 2.
your wages. If you are married, the amount of your
advance EIC payments also depends on whether your How To Get Advance EIC Payments
spouse has filed a Form W-5 with his or her employer. If you are eligible to get advance EIC payments, fill in the
However, your employer cannot give you more than 2004 Form W-5 at the bottom of this page. Then, detach
$1,563 throughout 2004 with your pay. You will get the it and give it to your employer. If you get advance
rest of any EIC you are entitled to when you file your tax payments, you must file a 2004 Federal income tax
return and claim the EIC. return.
If you do not choose to get advance payments, you can You may have only one Form W-5 in effect at one time.
still claim the EIC on your 2004 tax return. If you and your spouse are both employed, you should file
separate Forms W-5.
What Is the EIC? This Form W-5 expires on December 31, 2004. If you
The EIC is a credit for certain workers. It reduces the tax are eligible to get advance EIC payments for 2005, you
you owe. It may give you a refund even if you do not owe must file a new Form W-5 next year.
any tax. You may be able to get a larger credit when you file
your 2004 return. For details, see Additional Credit
Who Is Eligible To Get Advance EIC on page 3.
Payments?
Who Is a Qualifying Child?
You are eligible to get advance EIC payments if all three
of the following apply. Any child who meets all three of the following conditions
1. You expect to have at least one qualifying child. If is a qualifying child.
you do not expect to have a qualifying child, you may still 1. The child is:
be eligible for the EIC, but you cannot receive advance ● Your son, daughter, adopted child, stepchild, or a
EIC payments. See Who Is a Qualifying Child? below. descendant of any of them (for example, your grandchild);
2. You expect that your 2004 earned income and AGI or
will each be less than $30,338 ($31,338 if you expect to ● Your brother, sister, stepbrother, stepsister, or a
file a joint return for 2004). Include your spouse’s income descendant of any of them (for example, your niece or
if you plan to file a joint return. As used on this form, nephew), whom you cared for as you would your own
earned income does not include amounts inmates in child; or
● A foster child (any child placed with you by an
authorized placement agency whom you cared for as you
would your own child).
(continued on page 3)
䊲 Give the bottom part to your employer; keep the top part for your records. 䊲
Detach here
Form W-5 Earned Income Credit Advance Payment Certificate OMB No. 1545-1342
䊳 Use the current year’s certificate only.

Internal Revenue Service 䊳
䊳 Give this certificate to your employer.
This certificate expires on December 31, 2004.

2004
Print or type your full name Your social security number
Note: If you get advance payments of the earned income credit for 2004, you must file a 2004 Federal income tax return. To get advance
payments, you must have a qualifying child and your filing status must be any status except married filing a separate return.
1 I expect to have a qualifying child and be able to claim the earned income credit for 2004, I do not have
another Form W-5 in effect with any other current employer, and I choose to get advance EIC payments Yes No
2 Check the box that shows your expected filing status for 2004:
Single, head of household, or qualifying widow(er) Married filing jointly
3 If you are married, does your spouse have a Form W-5 in effect for 2004 with any employer? Yes No
Under penalties of perjury, I declare that the information I have furnished above is, to the best of my knowledge, true, correc t, and complete.
Signature 䊳 Date 䊳
Cat. No. 10227P
A–27
Questions To See if You May Be Able To Claim the EIC for 2004
You cannot claim the EIC if you plan to file either Form 2555 or Form 2555-EZ (relating to foreign earned income) for
2004. You also cannot claim the EIC if you are a nonresident alien for any part of 2004 unless you are married to a U.S.
citizen or resident, file a joint return, and elect to be taxed as a resident alien for all of 2004.
1 Do you expect to have a qualifying child? Read Who Is a Qualifying Child? that starts on page 1 before you answer this
question. If the child is married, be sure you also read Married child on page 3.
STOP
No. You may be able to claim the EIC but you cannot get advance EIC payments.
Yes. Continue.
If the child meets the conditions to be a qualifying child for both you and another person, see Qualifying child of more
than one person on page 3.
2 Do you expect your 2004 filing status to be married filing a separate return?
STOP
Yes. You cannot claim the EIC.
No. Continue.
If you expect to file a joint return for 2004, include your spouse ’s income when answering questions 3 and 4.
3 Do you expect that your 2004 earned income and AGI will each be less than: $30,338 ($31,338 if married filing jointly) if you
expect to have 1 qualifying child; $34,458 ($35,458 if married filing jointly) if you expect to have 2 or more qualifying child ren?
STOP
No. You cannot claim the EIC.
Yes. Continue. But remember, you cannot get advance EIC payments if you expect your 2004 earned income or AGI will
be $30,338 ($31,338 or more if married filing jointly) or more.
4 Do you expect that your 2004 investment income will be more than $2,650? For most people, investment income is the total
of their taxable interest, ordinary dividends, capital gain distributions, and tax-exempt interest. However, if you plan to fil e a
2004 Form 1040, see the 2003 Form 1040 instructions to figure your investment income.
STOP
No. Continue.
5 Do you expect that you, or your spouse if filing a joint return, will be a qualifying child of another person for 2004?
No. You may be able to claim the EIC.
A–28
Note: An adopted child is always treated as your own ● You no longer expect to be able to claim the EIC for
child. An adopted child includes a child placed with you 2004. Check “ No” on line 1 of your new Form W-5.
by an authorized placement agency for legal adoption ● You no longer want advance payments. Check “ No” on
even if the adoption is not final. An authorized placement line 1 of your new Form W-5.
agency includes any person or court authorized by state ● Your spouse files Form W-5 with his or her employer.
law to place children for legal adoption. Check “ Yes” on line 3 of your new Form W-5.
2. At the end of 2004, the child is under age 19, or Note: If you get the EIC with your pay and find you are
under age 24 and a full-time student, or any age and not eligible, you must pay it back when you file your 2004
permanently and totally disabled. Federal income tax return.
3. The child lives with you in the United States for over
half of 2004. Additional Information
Exception to “ Time Lived With You ” Condition. The How To Claim the EIC
child does not have to live with you for over half of 2004
if either of the following applies. If you are eligible, claim the EIC on your 2004 tax return.
See your 2004 tax return instruction booklet.
1. The child was born or died during the year and your
home was this child ’s home for the entire time he or she Additional Credit
was alive in 2004. You may be able to claim a larger credit when you file
2. The child is presumed by law enforcement authorities your 2004 Form 1040 or Form 1040A because your
to have been kidnapped by someone who is not a family employer cannot give you more than $1,563 throughout
member and the child lived with you for over half of the the year with your pay. You may also be able to claim a
part of the year before he or she was kidnapped. larger credit if you have more than one qualifying child.
Note: Temporary absences, such as for school, vacation, But you must file your 2004 tax return to claim any
medical care, or detention in a juvenile facility, count as additional credit.
time lived at home. Members of the military on extended
active duty outside the United States are considered to be Privacy Act and Paperwork Reduction Act Notice. We
living in the United States. ask for the information on this form to carry out the
Married child. A child who is married at the end of 2004 Internal Revenue laws of the United States. Internal
is a qualifying child only if you may claim him or her as Revenue Code sections 3507 and 6109 and their
your dependent, or the following Exception applies to regulations require you to provide the information
you. requested on Form W-5 and to give it to your employer if
Exception. You are the custodial parent and would be you want advance payment of the EIC. As provided by
able to claim the child as your dependent, but the law, we may give the information to the Department of
noncustodial parent claims the child as a dependent Justice and other Federal agencies. In addition, we may
because— give it to cities, states, and the District of Columbia so
1. You signed Form 8332, Release of Claim to they may carry out their tax laws. We may also disclose
Exemption for Child of Divorced or Separated Parents, or this information to other countries under a tax treaty or to
a similar statement, agreeing not to claim the child for Federal and state agencies to enforce Federal nontax
2004 or criminal laws and to combat terrorism. Failure to provide
2. You have a pre-1985 divorce decree or separation the requested information may prevent your employer
agreement that allows the noncustodial parent to claim from processing this form; providing false information may
the child and he or she gives at least $600 for the child ’s subject you to penalties.
support in 2004. You are not required to provide the information
Other rules may apply. See Pub. 501, Exemptions, requested on a form that is subject to the Paperwork
Standard Deduction, and Filing Information, for more Reduction Act unless the form displays a valid OMB
information on children of divorced or separated parents. control number. Books or records relating to a form or its
instructions must be retained as long as their contents
Qualifying child of more than one person. If the child may become material in the administration of any Internal
meets the conditions to be a qualifying child of more than Revenue law. Generally, tax returns and return information
one person, only one person may treat that child as a are confidential, as required by Code section 6103.
qualifying child for 2004. If you and the other person(s)
cannot agree on who will treat that child as a qualifying The time needed to complete this form will vary
child for 2004, special rules apply to determine who may depending on individual circumstances. The estimated
do so. For details, see the 2003 revision of Pub. 596, average time is: Recordkeeping, 6 min.; Learning about
Earned Income Credit (EIC). However, these rules do not the law or the form, 12 min.; and Preparing the form,
apply if the only other person is your spouse and you 25 min.
plan to file a joint return for 2004. We welcome comments on forms. If you have
Reminder. A qualifying child must have a social security comments concerning the accuracy of these time
number unless he or she was born and died in 2004. estimates or suggestions for making this form simpler, we
would be happy to hear from you. You can write to the
What if My Situation Changes? Tax Products Coordinating Committee, Western Area
Distribution Center, Rancho Cordova, CA 95743-0001. Do
If your situation changes after you give Form W-5 to your not send Form W-5 to this address. Instead, give it to
employer, you will probably need to file a new Form W-5. your employer.
For example, you must file a new Form W-5 if any of the
following applies for 2004.
● You no longer expect to have a qualifying child. Check
“ No” on line 1 of your new Form W-5.
A–29
OMB No. 1545-0441 (SSA date of filing stamp)
Form 6559 Transmitter Report and
(Rev. January 2003) (Check one) Tax Year (19 or 20
Summary of Magnetic United
Media States
Other Page of
1. Name and address of transmitter (include street, city, state and ZIP code) 2. Employer identification number (EIN) of
transmitter
3. Number of reporting media this file
Magnetic tape(s)
Diskette(s)
Cartridge(s)
4. Name and address of person to contact about this magnetic media file (Include street, city, 5. Telephone number (Include area code)
state and ZIP code)
6. Your inventory number
7. Type of data being reported (Check only

one)
W-2 Original
W-2 Reconciliation
W-2 Resubmittal
W-2c for W-2
Affidavit
Under penalties of perjury, I declare that I have examined this return, including accompanying documents, and to the best of my knowledge and belief it is
true, correct and complete.
8. Signature 9. Title 10. Date
11. Employer Summary of Form W-2 Magnetic Media 11. Employer Summary of Form W-2 Magnetic Media
Wage and Tip Information Wage and Tip Information
Name of employer Check if Name of employer Check if

MQGE MQGE
Employer identification number Other EIN Employer identification number Other EIN
Total Amount of Form W-2 Fields Total Amount of Form W-2 Fields
Number of Forms W-2 Number of Forms W-2
Social security wages $ Social security wages $
Social security tips $ Social security tips $
Wages, tips, other compensation $ Wages, tips, other compensation $
Federal income tax withheld $ Federal income tax withheld $
Social security tax withheld $ Social security tax withheld $
Medicare wages and tips $ Medicare wages and tips $
Medicare tax withheld $ Medicare tax withheld $
Advance Earned Income Credit $ Advance Earned Income Credit $
Cat. No. 43444U Form 6559 (Rev. 1-2003)
A–30
Instructions for Forms 6559 and 6559-A
Form 6559 is used to identify the transmitter of a magnetic media file. For form W-2 magnetic media reporting, a FILE is a report that begins with a
Code A-Transmitter record and ends with a Code F-Final record. Prepare a Form 6559 for each separate magnetic media file being transmitted. Send
Form 6559 and the magnetic media file, ALL IN THE SAME PACKAGE, to:
Via the U S Postal Service Via carrier OTHER than the U S Postal Service
Tapes & Cartridges Diskettes Tapes & Cartridges Diskettes
-
Social Security Administration Social Security Administration Social Security Administration Social Security Administration
AWR Magnetic Media Processing AWR Magnetic Media AWR Magnetic Media Processing AWR Magnetic Media Processing
5-F-1 7, N B, Metro West P.O. Processing 5-F-1 7, N B, Metro 5-F-1 7, N B, Metro West 300 N. 5-F-1 7, N B, Metro West 300 N.
Box 33009 Baltimore, MD West P.O. Box 33014 Baltimore, Greene Street Baltimore, MD Greene Street Baltimore, MD
21290-3009 MD 21290-3014 21290 21290
If you want us to acknowledge receipt of your report, send the report by Return Receipt Requested.
Use Form 6559-A, Continuation Sheet for Form 6559, whenever your magnetic media report includes more than two employers, to complete the
required Item 11 blocks for additional employers.
Each Form 6559 can transmit only one type of data: W-2 Copy A or W-2c for W-2. Only one type of data can be reported on any one file and must be in
the same order as reported on the magnetic file.
Specific instructions for Form 6559

Indicate whether this file contains Form W-2 data for employees residing in the United States or in any of the U.S. territories or possessions (Puerto
Rico, Guam, American Samoa, Virgin Islands) or the Commonwealth of the Northern Mariana Islands (CNMI). Check the block marked ''Other'' to
indicate that the file contains Form W-2 data for employees residing in territories, possessions, or the CNMI Form W-2 data for territorial employees
must not be included in the same report with U.S. employees.
Item 2 - Enter the 9-digit EIN assigned by IRS to the transmitter.

Item 3 - Indicate if tapes, cartridges or diskettes are covered by this transmittal, e.g., ' 4 diskettes'' (SSA does not accept multi-volume tapes/cartridges),
Item 6 - Enter the inventory number of each tape or diskette in this file. The inventory number is any type of identification number assigned by the
transmitter to a tape, cartridge or diskette for the transmitter's own purposes. If this is a multi-volume diskette file, list the inventory number in order.
Item 7 - Indicate whether this file contains original or corrected W-2 data. If you are submitting a file that replaces a file that SSA originally could not
process, check the form type marked ''Resubmittal.'' If you are submitting a file to explain differences between IRS
and SSA records based on receipt of a letter from SSA, check the form type marked ''Reconciliation.'' Check only one box.
Item 11 - Complete an Employer
1 Summary of Form W-2 Magnetic Media Wage and Tip Information'' (Item 11) for each employer for which information is
being reported. If data for more
1 than two employers is being reported, use the additional Item 11 blocks on Form 6559-A.
MQGE (Medicare Qualified Government Employee) Box - Check this box if you are a U.S., State, Puerto Rico, Virgin Islands, or local agency
with employees subject only to the 1.45% hospital insurance benefits (Medicare) tax.
Other EIN box - If during the year you used an employer identification number (EIN) that is different from the one entered in the ''Employer
Identification Number'' box, enter the other EIN used. If you used more than one prior EIN, show only the latest prior EIN.
NOTE: Only the number of Forms W-2 filed for an employer and the eight money fields listed (Social security wages; Social security tips; Wages, tips
and other compensation; Federal income tax withheld; Social security tax withheld; Medicare wages and tips; Medicare tax withheld); and Advance
Earned Income Credit are required to be completed on line 11 of Forms 6559 and 6559-A. Even though the other money fields are not required on
Form 6559, they MUST be included on the magnetic media report. See the instructions for Forms W-2 and W-3 for information on the requirements
for reporting specific money field amounts.
Substitute Forms 6559 and 6559-A. Filers may use privately printed or computer-generated substitutes for Forms 6559 or 6559-A that closely follow the
government printed form. Approval is not required for the use of substitute Forms 6559 or 6559-A. However, the general layout and format of the official
form must be followed.
CAUTION: Penalties may be imposed for filing incorrect reports. The amounts entered on this form should match the totals on your magnetic media
report and the totals reported to IRS on Forms 941, or 943 for the tax year.
Paperwork Reduction Act Notice

We ask for the information on these forms to carry out the Internal Revenue laws of the United States. We need this information to ensure that taxpayers
are complying with these laws and to allow us to figure and collect the right amount of tax. You are required to give us this information.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration
of any Internal Revenue Law. Generally, tax returns and return information are confidential, as required by Code section 6103.
The time needed to complete and file these forms will vary depending on individual circumstances. The estimated average time for Form
6559 is 15 minutes and for Form 6559-A is 15 minutes.
If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would be happy to hear from
you. You can write to the Internal Revenue Service, Attention: Tax Forms Committee, Western Area Distribution Center Rancho Cordova, CA 95743-0001.
Please do not send Forms 6559 or 6559-A to this office. Instead, send them to the address shown at the top of this page.
Cat. No. 43444U Form 6559 (Rev. 1-2003)
A–31
A–32
Form 8508 Request for Waiver From Filing
Information Returns Magnetically OMB Number
(Rev. 8-2003)
Internal Revenue Service (Forms W-2, W-2G, 1042-S, 1098, 1099 Series, 5498, 5498-MSA, and 8027) 1545-0957
(Please type or print in black ink when completing this form - see instructions on back.)
Note: Only the person required to file on magnetic media can file Form 8508. A transmitter cannot file Form 8508 for the payer, unless he or she
has a power of attorney. If you have a power of attorney, attach a letter to the Form 8508 stating this fact.
1. Type of submission Original Reconsideration

2. Waiver requested 3. Payer name, complete address, and contact person. (A separate Form 8508 4. Taxpayer Identification Number
must be filed for each payer requesting a waiver.) (9-digit EIN/SSN)
for tax year (Enter
one year only)
Name
5. Telephone number
20 Address
City State ZIP

( )
Email Address
Contact Name
Enter the Number of Returns That: Enter the Number of Returns That:
6. Waiver Waiver
(a) You wish to file (b) You expect to (a) You wish to file (b) You expect to
Requested for Requested for
on paper file next tax year on paper file next tax year
1042-S 1099-OID
1098 1099- PATR
1098-E 1099- Q
1098-T 1099-R
1099-A 1099-S
1099-B 5498
1099-C 5498-ESA
1099-CAP 5498-MSA
1099-DIV 8027
1099-G W-2
1099-H W-2AS
1099-INT W-2G
1099-LTC W-2GU
1099-MISC W-2PR
1099-MSA W-2VI
7. Is this waiver requested for corrections ONLY? Yes No
8. Is this the first time you have requested a waiver from the magnetic media filing requirements for any of the forms listed in Block 6?
Yes (Skip to signature line) No (Complete Block 9 if your request is due to undue hardship)
9. Enter two current cost estimates given to you by third parties for software, software upgrades or programming
for your current system, or costs for preparing your files for you. $
Cost estimates for any reason other than the preparation of electronic/magnetic media files will not be acceptable
Attach these two written cost estimates to the Form 8508. Failure to provide current cost $
estimates and/or signature will result in denial of your waiver request.
Under penalties of perjury, I declare that I have examined this document, including any accompanying statements, and
the best of my knowledge and belief, it is true, correct, and complete.
10. Signature Title Date
For Paperwork Reduction Act Notice, see back of this form. Catalog Number 63499V Form 8508 (Rev. 8-2003)
A–33
General Instructions Block 6b. --Provide an estimate of the total number of information returns
you plan to file for the following tax year.
Paperwork Reduction Act Notice. We ask for the information on these
forms to carry out the Internal Revenue Laws of the United States. You Block 7. --Indicate whether or not this waiver is requested for corrections
are not required to provide the information requested on a form that is only. If you request a waiver for original documents and it is approved,
subject to the Paperwork Reduction Act unless the form displays a valid you will automatically receive a waiver for corrections. However, if you can
OMB control number. Books or records relating to a form must be retained submit your original returns magnetically, but not your corrections, a
as long as their contents may become material in the administration of any waiver must be requested for corrections only.
Internal Revenue law. Generally, tax returns and return information are
confidential, as required by Code section 6103. Block 8. --If this is the first time you have requested a waiver for any of the
The time needed to provide this information would vary forms listed in Block 6, for any tax year, check "YES" and skip to Block 10.
depending on individual circumstances. The estimated average time is: However, if you have requested a waiver in the past and check "NO,"
complete Block 9 to establish undue hardship. Waivers, after the first
Preparing Form 8508 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 min.
year, are granted only in case of undue hardship or catastrophic event.
Note: Under Regulations Section 301.6011-2(c)(2), "The principal factor in
If you have comments concerning the accuracy of these time estimates or determining hardship will be the amount, if any, by which the cost of filing
suggestions for making this form simpler, we would be happy to hear from the information returns in accordance with this section exceeds the cost of
you. You can write to the Tax Forms Committee, Western Area filing the returns on other media."
Distribution Center, Rancho Cordova, CA 95743-0001.
DO NOT SEND THE FORMS TO THIS OFFICE. Instead, see the Block 9. --Enter the cost estimates from two service bureaus or other third
instructions below on where to file. When completing this form, please parties. These cost estimates must reflect the total amount that each
type or print clearly in BLACK ink. service bureau will charge for software, software upgrades or
Purpose of Form. Use this form to request a waiver from filing Forms programming for your current system, or costs to produce your
W-2, W-2AS, W-2G, W-2GU, W-2PR, W-2VI, 1042-S, 1098, 1099 Series, electronic/magnetic media file only. If you do not provide two written
5498, 5498-MSA, or 8027 magnetically for the tax year indicated in Block 2 cost estimates from service bureaus or other third parties, we will
of this form. Complete a Form 8508 for each Taxpayer Identification automatically deny your request. Cost estimates from prior years wi
Number (TIN). You may use one Form 8508 for multiple types of forms. not be accepted. Note: If your request is not due to undue hardship,
After evaluating your request, IRS will notify you as to whether your as defined above, attach a detailed explanation of why you need a
request is approved or denied. The chart below contains volume waiver.
requirements and the acceptable media for each form.
Block 10. --The waiver request must be signed by the payer or a person
Specific Instructions duly authorized to sign a return or other document on his behalf.
Block 1. --Indicate the type of submission by checking the appropriate Filing Instructions
box. An original submission is your first request for a waiver for the current
year. A reconsideration indicates that you are submitting additional When to File. -- You should file Form 8508 at least 45 days before the due
information to IRS that you feel may reverse a denial of an originally date of the returns for which you are requesting a waiver. See Publication
submitted request. 1220, Part A for the due dates. Waiver requests will be processed
beginning January 1st of the calendar year the returns are due.
Block 2. --Enter the tax year for which you are requesting a waiver. Only
waiver requests for the current tax year can be processed. If this block is Where to File. --
not completed, the IRS will assume the request is for the current tax year. Internal Revenue Service
Martinsburg Computing Center
Block 3. --Enter the name and complete address of the payer and person Information Reporting Program
to contact if additional information is needed by IRS. 240 Murall Drive
Kearneysville, WV 25430
Block 4. --Enter the Taxpayer Identification Number (TIN) [Employer
Identification Number (EIN) or the Social Security Number (SSN)] of the For further information concerning the filing of information returns to IRS
payer. The number must contain 9-digits. ectronically/magnetically, contact the IRS Martinsburg Computing Center
at the address given above or by telephone toll-free at 866-455-7438
Block 5. --Enter the telephone number and Email address of the contact between 8:30 a.m. and 4:30 p.m. Eastern Standard Time.
person.
Penalty. --If you are required to file on magnetic media but fail to do so
Block 6. --Check the box(es) beside the form(s) for which the waiver is and you do not have an approved waiver on record, you may be subject to
being requested. a penalty of $50 per return unless you establish reasonable cause.
Block 6a. -For each type of information return checked, enter the total
number of forms you plan to file.
Filing Requirements and Acceptable Methods

If the total number of documents to be filed is below the 250 threshold, you are not required to file magnetically, and you do not need to submit
Form 8508 to IRS.
Type of Documents Acceptable Methods
Forms 1098-series, 1099-series, W-2G, 5498-series Electronic Filing, Cartridges, and 3-1/2'' Diskette
Forms W-2, W-2AS, W-2GU, W-2PR, W-2VI * Electronic Filing, Tape, Cartridges, and 3-1/2'' Diskette
Form 1042-S Electronic Filing, Cartridges, and 3-1/2'' Diskette
Form 8027 Electronic Filing, Cartridges, and 3-1/2'' Diskette
* To file these Forms electronically/magnetically, contact the Social Security Administration (SSA) at 1-800-772-6270. For all other forms listed,
contact IRS.
Catalog Number. 63499V Form 8508 (Rev. 8-2003)
A–34
Form 940-EZ Employer’s Annual Federal
Unemployment (FUTA) Tax Return
OMB No. 1545-1110

Internal Revenue Service (99) See separate Instructions for Form 940-EZ for information on completing this form.
2003
T
Name (as distinguished from trade name) Calendar year FF
FD

You must Trade name, if any Employer identification number (EIN) FP
complete
this section. I
Address (number and street) City, state, and ZIP code T
Answer the questions under Who May Use Form 940-EZ on page 2. If you cannot use Form 940-EZ, you must use Form 940.
A Enter the amount of contributions paid to your state unemployment fund (see separate instructions) $
B (1) Enter the name of the state where you have to pay contributions
(2) Enter your state reporting number as shown on your state unemployment tax return
If you will not have to file returns in the future, check here (see Who Must File in separate instructions) and complete and sign the return.
If this is an Amended Return, check here (see Amended Returns in the separate instructions)
Part I Taxable Wages and FUTA Tax

1 Total payments (including payments shown on lines 2 and 3) during the calendar year for services of employees 1
2 Exempt payments. (Explain all exempt payments, attaching additional sheets
if necessary.)
2
3 Payments of more than $7,000 for services. Enter only amounts over the first $7,000
paid to each employee (see separate instructions) 3
4 Add lines 2 and 3 4
5 Total taxable wages (subtract line 4 from line 1) 5
6 FUTA tax. Multiply the wages on line 5 by .008 and enter here. (If the result is over $100, also complete Part II.) 6
7 Total FUTA tax deposited for the year, including any overpayment applied from a prior year 7
8 Balance due (subtract line 7 from line 6). Pay to the “United States Treasury.” 8
If you owe more than $100, see Depositing FUTA tax in separate instructions.
9 Overpayment (subtract line 6 from line 7). Check if it is to be: Applied to next return or Refunded 9
Part II Record of Quarterly Federal Unemployment Tax Liability (Do not include state liability.) Complete only if line 6 is over $100.
Quarter First (Jan. 1 – Mar. 31) Second (Apr. 1 – June 30) Third (July 1 – Sept. 30) Fourth (Oct. 1 – Dec. 31) Total for year
Liability for quarter
Third Do you want to allow another person to discuss this return with the IRS (see separate instructions)? Yes. Complete the following. No
Party Designee’s Phone Personal identification
Designee name no. ( ) number (PIN)
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and, t o the best of my knowledge and belief, it is
true, correct, and complete, and that no part of any payment made to a state unemployment fund claimed as a credit was, or is t o be, deducted from the payments to employees.
Signature Title (Owner, etc.) Date
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. DETACH HERE Cat. No. 10983G Form 940-EZ (2003)
OMB No. 1545-1110

Form 940-EZ(V) Payment Voucher
Internal Revenue Service Use this voucher only when making a payment with your return. 2003
Complete boxes 1, 2, and 3. Do not send cash, and do not staple your payment to this voucher. Make your check or money order pa yable to the
“United States Treasury.” Be sure to enter your employer identification number (EIN), “Form 940-EZ,” and “2003” on your payment.
1 Enter your employer identification number (EIN). 2 Dollars Cents
Enter the amount of your payment.
3 Enter your business name (individual name for sole proprietors).
Enter your address.
Enter your city, state, and ZIP code.
A–35
Form 940-EZ (2003) Page 2
Who May Use Form 940-EZ
The following chart will lead you to the right form to use —
Did you pay unemployment

contributions to only one No
state?*
Yes

Did you pay all state

unemployment
No
contributions by
February 2, 2004?**
Yes

Were all wages that were

taxable for FUTA tax also
No
taxable for your state ’s
unemployment tax?
Yes

You may use You must use

Form 940-EZ. Form 940.
* Do not file Form 940-EZ if —

● You owe FUTA tax only for household work in a private home. See Schedule H (Form 1040).
● You are a successor employer claiming a credit for state unemployment contributions paid
by a prior employer. File Form 940.
**If you deposited all FUTA tax when due, you may answer “ Yes” if you paid all state
unemployment contributions by February 10, 2004.
A–36
Instructions for
Form 940-EZ
Employer’s Annual Federal Unemployment
(FUTA) Tax Return
General Instructions Items To Note

Electronic deposit requirement. You may be required
Who May Use Form 940-EZ to deposit Federal taxes, such as employment tax, excise
tax, and corporate income tax, using the Electronic
Federal Tax Payment System (EFTPS). See Electronic
The following chart will lead you to the right form deposit requirement on page 3.
to use—
Electronic filing option. File electronically using Form
Did you pay unemployment 940 and receive proof of filing acknowledgement.
contributions to only one No Electronic payment options may also be available. Visit
state?* the IRS website at www.irs.gov/efile for details.
Enhanced Third Party Designee authority. The
Yes authority given to a representative when a filer completes

the Third Party Designee section of Form 940-EZ has
Did you pay all state been enhanced and is now revocable. Third-party
unemployment contributions No designees will now be able to exchange information with
by February 2, 2004?** the IRS concerning Form 940-EZ. They may also request
and receive written tax information relating to Form
940-EZ including copies of specific notices,
Yes correspondence, and account transcripts. The named
third-party designee may now be any individual,
Were all wages that were corporation, firm, organization, or partnership. As a
taxable for FUTA tax also result, the enhanced Third Party Designee authorization
No will be substantially equivalent to Form 8821, Tax
taxable for your state’s Information Authorization. See Third Party Designee on
unemployment tax? page 5 for details.
Yes FUTA rate. The (net) FUTA rate of .8% (FUTA tax rate
of 6.2% less state credit of 5.4%) is shown as .008 on
line 6 of Form 940-EZ. If you qualify to file Form 940-EZ,
You may use You must use you are entitled to the full 5.4% state credit regardless of
Form 940-EZ. Form 940. your actual experience rate.
Mailing address change. You may need to mail the
return to a different address than in previous years
*Do not file Form 940-EZ if — because the IRS has changed the filing location for
• You owe FUTA tax only for household work in a private several areas. If an envelope was received with the tax
home. See Household employers on page 2. package, please use it. Otherwise, see Where To File
• You are a successor employer claiming a credit for on page 2.
state unemployment contributions paid by a prior
employer. File Form 940. Signature on Form 940-EZ. Only an authorized
**If you deposited all FUTA tax when due, you may individual may sign Form 940-EZ. See Signature on
answer “Yes” if you paid all state unemployment page 5.
contributions by February 10, 2004.
You can get Form 940 and the Instructions for Form State unemployment information. You must contact
940 by calling the IRS at 1-800-TAX-FORM your state unemployment tax office to receive your state
(1-800-829-3676) or by visiting the IRS website at reporting number, state experience rate, and details
www.irs.gov. about your state unemployment tax obligations.
Web-based application for an EIN. You may now apply
for an employer identification number (EIN) online by
visiting the IRS website at www.irs.gov/smallbiz. See
also Employer identification number (EIN) on page 4.
Cat. No. 25947I
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Photographs of Missing Children file Schedule H (Form 1040), Household Employment
Taxes, instead of Form 940 or Form 940-EZ. See the
The Internal Revenue Service is a proud partner with the
Instructions for Schedule H (Form 1040), Household
National Center for Missing and Exploited Children.
Employers.
Photographs of missing children selected by the Center
may appear in instructions on pages that would otherwise In some cases, such as when you employ both
be blank. You can help bring these children home by household employees and other employees, you may
looking at the photographs and calling 1-800-THE-LOST choose to report social security, Medicare, and withheld
(1-800-843-5678) if you recognize a child. Federal income taxes for your household employee(s) on
Form 941, Employer’s Quarterly Federal Tax Return, or
Purpose of Form Form 943, Employer’s Annual Federal Tax Return for
Use Form 940-EZ (or Form 940) to report your annual Agricultural Employees, instead of on Schedule H. If you
Federal Unemployment Tax Act (FUTA) tax. FUTA tax, choose to report on Form 941 or Form 943, you must use
together with state unemployment systems, provides for Form 940 or Form 940-EZ to report FUTA tax.
payments of unemployment compensation to workers Agricultural employers. File a FUTA tax return if either
who have lost their jobs. Most employers pay both 1 or 2 below applies:
Federal and state unemployment taxes. Only the 1. You paid cash wages of $20,000 or more to
employer pays this tax. Do not collect or deduct it from farmworkers during any calendar quarter in 2002 or 2003
your employees’ wages. The tax applies to the first or
$7,000 you pay each employee in a year after subtracting 2. You employed 10 or more farmworkers during
any exempt payments. The $7,000 amount is the Federal some part of a day (whether or not at the same time)
wage base. Your state wage base may be different. during any 20 or more different weeks in 2002 or 20 or
more different weeks in 2003.
When To File
File Form 940-EZ for 2003 by February 2, 2004. Count wages paid to aliens admitted on a temporary
However, if you deposited all FUTA tax when due, you basis to the United States to perform farmwork, also
may file on or before February 10, 2004. Your return will known as workers with “H-2(A)” visas, to see if you meet
be considered timely filed if it is properly addressed and either 1 or 2 above. However, wages paid to “H-2(A)”
mailed First Class or sent by an IRS designated delivery visa workers are not subject to FUTA tax.
service by the due date. See Circular E (Pub. 15), Indian tribal governments. Services rendered to a
Employer’s Tax Guide, for a list of designated delivery Federally-recognized Indian tribal government (including
services. Also see Where To File below. any subdivision, subsidiary, or wholly-owned business
enterprise) after December 20, 2000 are exempt from
Private delivery services cannot deliver items to FUTA tax (and no Form 940 or Form 940-EZ for 2003 is
!
CAUTION
P.O. boxes. required), subject to the tribe’s compliance with
applicable state law. For procedures on amending a 2000
Form 940 or Form 940-EZ, see Announcement 2001-16,
Who Must File I.R.B. 2001-8, February 20, 2001. You can find
Except as noted below, you must file if Test 1 or Test 2 Announcement 2001-16 on page 715 of Internal
below applies. Revenue Bulletin 2001-8 at www.irs.gov/pub/irs-irbs/
Test 1. You paid wages of $1,500 or more in any irb01-08.pdf. Also see section 3309(d).
calendar quarter in 2002 or 2003. Nonprofit organizations. Religious, educational,
Test 2. You had one or more employees for at least charitable, etc., organizations described in section
some part of a day in any 20 or more different weeks in 501(c)(3) and exempt from tax under section 501(a) are
2002 or 20 or more different weeks in 2003. not subject to FUTA tax and are not required to file.
Count all regular, temporary, and part-time employees. State and local government employers. State or local
A partnership should not count its partners. If a business government employers are not subject to FUTA tax and
changes hands during the year, each employer who are not required to file.
meets Test 1 or 2 must file. For purposes of Test 1 or
Test 2 only, do not include wages paid by the prior (or Where To File
subsequent) employer. In the list below, find the location where your legal
Household employers. File a FUTA tax return only if residence, principal place of business, office, or agency
you paid total cash wages of $1,000 or more (for all is located. Send your return to the Internal Revenue
household employees) in any calendar quarter in 2002 or Service at the address listed for your location. No street
2003 for household work in a private home, local college address is needed.
club, or local chapter of a college fraternity or sorority.
Individuals, estates, and trusts that owe FUTA tax for Note: Where you file depends on whether or not you are
household work in a private home, in most cases, must including a payment.
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• Penalties, interest, or special administrative taxes not
Exception for exempt organizations and government entities. If included in the contribution rate the state assigned to
you are filing Form 940-EZ for an exempt organization or
you.
government entity (Federal, state, local, or Indian tribal), use the
following addresses, regardless of location: • Voluntary contributions you paid to get a lower
assigned rate.
Return without payment: Return with payment:
P.O. Box 660351 Be sure to enter your state reporting number on
Ogden, UT 84201-0047 Dallas, TX 75266-0351 !
CAUTION
line B(2) at the top of the form. The IRS needs
this to verify your state contributions.
Connecticut, Delaware, District of Columbia, Illinois, Indiana,
Kentucky, Maine, Maryland, Massachusetts, Michigan, New Depositing FUTA Tax
Hampshire, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, When to deposit. Although Form 940-EZ covers a
West Virginia, Wisconsin calendar year, you may have to make deposits of the tax
Return without payment: Return with payment:
before filing the return. Generally, deposit FUTA tax
P.O. Box 105659 quarterly if your FUTA tax exceeds $100. Determine your
Cincinnati, OH 45999-0047 Atlanta, GA 30348-5659 FUTA tax for each of the first three quarters by
multiplying by .008 that part of the first $7,000 of each
employee’s annual wages you paid during the quarter.
Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida,
Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, If your FUTA tax for any of the first three quarters of
Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, 2003 (plus any undeposited amount of $100 or less from
North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas, any earlier quarter) is over $100, deposit it by the last day
Utah, Washington, Wyoming
of the first month after the end of the quarter. If it is $100
Return without payment: Return with payment: or less, carry it to the next quarter; a deposit is not
P.O. Box 660351 required. If your FUTA tax for the fourth quarter (plus any
Ogden, UT 84201-0047 Dallas, TX 75266-0351 undeposited amount from any earlier quarter) is over
$100, deposit the entire amount by February 2, 2004. If it
Puerto Rico, U.S. Virgin Islands
is $100 or less, you can either make a deposit or pay it
Return without payment: Return with payment: with your Form 940-EZ by February 2, 2004. (If you
P.O. Box 80105 deposit it by February 2, 2004, you may file Form 940-EZ
Philadelphia, PA 19255-0047 Cincinnati, OH 45280-0005 by February 10, 2004.)
The deposit due dates are shown in the following
If the location of your legal residence, principal place of business,
office, or agency is not listed above —
chart:
All Returns: If undeposited FUTA tax is over $100 on — Deposit it
Philadelphia, PA 19255-0047 by —
March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 30
June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 31
Amended Returns September 30
December 31
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October 31
January 31
Use a new Form 940-EZ to amend a previously filed
Form 940-EZ. Check the “Amended Return” box
above Part I. Enter all amounts that should have been If any deposit due date falls on a Saturday,
on the original return, and sign the form. Attach an TIP Sunday, or legal holiday, you may deposit on the
explanation of the reasons for the amended return. File next business day.
the amended return with the Internal Revenue Service
Center where you filed the original return. Do not mail an How to deposit. If you choose not to enroll in EFTPS
amended Form 940-EZ (even if it includes a payment) to and are not required to use the Electronic Federal Tax
a P.O. box location. Payment System (EFTPS) (see Electronic deposit
requirement below), you may use Form 8109, Federal
If you were required to file Form 940 but filed Form Tax Deposit Coupon, when you make each tax deposit.
940-EZ instead and you must correct an error, file the The IRS will pre-enroll you in EFTPS when you apply for
amended return on Form 940. See the Instructions for an employer identification number (EIN). Follow the
Form 940. instructions in your EIN Package to activate your
enrollment and begin making your tax deposits.
Credit for Contributions Paid For new employers, if you would like to receive a
Federal Tax Deposit (FTD) coupon booklet call
to a State Fund 1-800-829-4933. Allow 5 to 6 weeks for delivery.
You get a credit for amounts you pay to a state (including You must make your deposits with an authorized
the District of Columbia, Puerto Rico, and the U.S. Virgin financial institution (e.g., a commercial bank that is
Islands) unemployment fund by February 2, 2004 (or qualified to accept Federal tax deposits). To avoid a
February 10, 2004, if that is your Form 940-EZ due date). possible penalty, do not mail deposits directly to the IRS.
This credit is reflected in the FUTA tax rate of .008 shown Records of your deposits will be sent to the IRS for
on line 6. See FUTA rate on page 1. crediting to your business accounts.
“Contributions” are payments that a state requires an Electronic deposit requirement. You must make
employer to make to its unemployment fund for the electronic deposits of all depository taxes (such as
payment of unemployment benefits. However, employment tax, excise tax, and corporate income tax)
contributions do not include: using EFTPS in 2004 if:
• Any payments deducted or deductible from your • The total deposits of such taxes in 2002 were more
employees’ pay. than $200,000 or
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• You were required to use EFTPS in 2003. paying FUTA wages again, file Form 940-EZ (or Form
If you are required to use EFTPS and use Form 8109 940).
instead, you may be subject to a 10% penalty. If you are
not required to use EFTPS, you may participate Part I. Taxable Wages
voluntarily. To enroll in or get more information about
EFTPS, call 1-800-555-4477 or 1-800-945-8400; or to and FUTA Tax
enroll online, visit the EFTPS website at www.eftps.gov. Line 1 — Total payments. Enter the total payments
For deposits made by EFTPS to be on time, you (before any deductions) you made during the calendar
year for services of employees, even if the payments are
!
CAUTION
must initiate the transaction at least one business
day before the date the deposit is due. not taxable for FUTA tax. Include salaries, wages,
commissions, fees, bonuses, vacation allowances, and
amounts paid to temporary or part-time employees; the
Not Liable for FUTA Tax? value of goods, lodging, food, clothing, and noncash
If you receive Form 940-EZ and are not liable for FUTA fringe benefits; contributions to a 401(k) plan, payments
tax for 2003, write “Not Liable” across the front of the to an Archer MSA, payments under adoption assistance
form, sign the form, and return it to the IRS. programs, and contributions to SIMPLE retirement
accounts (including elective salary reduction
Penalties and Interest contributions); section 125 (cafeteria) plan benefits; and
sick pay (including third-party sick pay if liability is
Avoid penalties and interest by making tax deposits when transferred to the employer).
due, filing a correct return, and paying all taxes when
due. There are penalties for late deposits, insufficient For details on sick pay, see Pub. 15-A, Employer’s
deposits, failure to deposit using EFTPS (when required), Supplemental Tax Guide. Report amounts deferred
and late filing unless you can show reasonable cause. If under a nonqualified deferred compensation plan at the
you file late, attach an explanation to the return. There later of: (a) when services are performed or (b) when
are also penalties for willful failure to pay tax, make there is no substantial risk of forfeiture of the rights to the
returns, and for filing false or fraudulent returns. deferred amount. For details, see Regulations section
31.3306(r)(2)-1. Also, include tips of $20 or more in a
How To Get Forms and Publications month reported to you by your employees.
You can get most IRS forms and publications by Your method of payment does not determine whether
accessing the IRS website at www.irs.gov or by calling payments are wages. Thus, you may pay wages hourly,
the IRS at 1-800-TAX-FORM (1-800-829-3676). See the daily, weekly, monthly, or yearly. You may pay wages for
Instructions for Forms W-2 and W-3 for details and piecework or as a percentage of profits. You may pay
other options. wages in cash or some other way, such as goods,
lodging, food, or clothing. For items other than cash, use
their fair market value when paid.
Line 2 — Exempt payments. The amounts reported on
Specific Instructions line 2 are exempt from FUTA tax. For FUTA tax
You must complete lines A and B and Part I. If your purposes, “wages” and “employment” do not include
FUTA tax (line 6) is over $100, you must also complete every payment and every kind of service an employee
Part II. Please remember to sign the return. may perform. In general, payments excluded from wages
Employer’s name, address, calendar year, and and payments for services excepted from employment
employer identification number (EIN). If you are not are not subject to FUTA tax. Do not enter payments
using a preaddressed Form 940-EZ, type or print your over $7,000 for each employee that you enter on
name, trade name, address, calendar tax year, and EIN line 3.
on the form. Enter your name, address, calendar tax You may deduct exempt payments from total
year, and EIN here, even if you must complete Form payments only if you explain them on line 2. Amounts
940-EZ(V), Payment Voucher. that may be exempt from your state’s unemployment tax
Employer identification number (EIN). If you do not may not be exempt from FUTA tax. For example,
have an EIN, apply for one on Form SS-4, Application for corporate officers’ wages are not exempt from FUTA
Employer Identification Number, or by visiting the IRS tax even though your state may exempt those wages
website at www.irs.gov/smallbiz. If you do not have an from its unemployment tax.
EIN by the time your return is due, write “Applied For” Enter payments such as the following on line 2.
and the date you applied in the space shown for the These payments also must be entered on line 1.
number. 1. Agricultural labor if you did not meet either 1 or 2
Line A. Enter the amount of your state unemployment under Agricultural employers on page 2 and all
contributions for 2003 that you paid by February 2, 2004 payments to “H-2(A)” visa workers.
(or February 10, 2004, if that is your Form 940-EZ due 2. Benefit payments for sickness or injury under a
date). If your state has given you a zero percent workers’ compensation law.
experience rate so there are no required contributions, 3. Household service if you did not pay total cash
enter “0% Rate.” wages of $1,000 or more in any calendar quarter in 2002
Line B(1). Enter the state where you paid state or 2003.
unemployment contributions. If you paid to more than 4. Certain family employment. (See section 3 in
one state, you must file Form 940. Circular E (Pub.15).)
5. Certain fishing activities. (See Pub. 595, Tax
Line B(2). Enter your state reporting number. Highlights for Commercial Fishermen.)
Final return. If you will not have to file Form 940-EZ (or 6. Noncash payments for farmwork or household
Form 940) in the future, check the box on the line below services in a private home. (Only cash wages paid to
line B(2) and complete and sign the return. If you start these workers are taxable.)
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A–40
7. Value of certain meals and lodging. (See section 5 for year” must equal your total FUTA tax shown on
in Circular E (Pub.15).) line 6.
8. Cost of group-term life insurance. Record your FUTA tax liability based on when you pay
9. Payments attributable to the employee’s wages, not on when you deposit it. For example, if you
contributions to a sick-pay plan. pay wages on March 29, your FUTA tax on those wages
10. Employer contributions to a SIMPLE retirement is $200, and you deposit the $200 on April 30, you would
account (other than elective salary reduction record that $200 in the first quarter, not in the second.
contributions) and employer contributions to a 401(k)
plan (if included on line 1). Example. You had two employees and paid each
11. Employer payments to an Archer MSA. employee $4,000 in the first quarter, $5,000 in the
12. Benefits excludable under a section 125 second quarter, $5,000 in the third quarter, and $5,000 in
(cafeteria) plan. the fourth quarter. (None of the payments were exempt
13. Certain statutory employees. (See section 1 in from FUTA tax.) For the first quarter, multiply .008 x
Pub. 15-A.) $8,000 (the amount paid to both employees), and enter
14. Services performed by an inmate of a penal $64 in the space for the first quarter. For the second
institution. quarter, multiply .008 only by $6,000 ($3,000 for each
15. Employer reimbursements (including payments to a employee — the amount remaining to reach the $7,000
third party) for qualified moving expenses, to the extent maximum amount subject to FUTA tax for each
such expenses would otherwise be deductible by the employee), and enter $48 in the space for the second
employee. (See Pub. 521, Moving Expenses.) quarter. Because you paid each employee more than
16. Any other exempt service or pay. $7,000 by the end of the second quarter, enter zero in
the space for the third and fourth quarters. Enter $112 in
For more information, see section 15 in Circular E the “Total for year” space.
(Pub.15) or section 15 in Circular A (Pub. 51),
Agricultural Employer’s Tax Guide. Third Party Designee. If you want to allow any
individual, corporation, firm, organization, or partnership
Line 3 — Payments of more than $7,000 for services. to discuss your 2003 Form 940-EZ with the IRS, check
Enter the total of amounts over $7,000 you paid to each the “Yes” box in the “Third Party Designee” section of
employee during 2003 after subtracting any exempt the return. Also, enter the name, phone number, and any
payments shown on line 2. For example, you had 10 five numbers the designee chooses as his or her
employees and paid each $9,000 during the year, personal identification number (PIN). The authorization
including $500 of exempt payments per employee. Enter applies only to the tax form upon which it appears.
$15,000 on line 3, computed as follows:
By checking the “Yes” box, you are authorizing the
IRS to call the designee to answer any questions relating
Total payments (10 x $9,000) . . . . . . . . . . . . $90,000
to the information reported on your tax return. You are
Less: Exempt payments (10 x $500) . . . . . . . ($5,000) also authorizing the designee to:
Less: Total wage base amount (10 x $7,000) ($70,000)
• Exchange information concerning your tax return with
the IRS, and
Amount reported on line 3 . . . . . . . . . . . . . $15,000 • Request and receive written tax return information
relating to your tax return including copies of specific
Only the first $7,000 paid to each employee is notices, correspondence, and account transcripts.
subject to FUTA tax. Do not use the state wage base You are not authorizing the designee to receive any
for this entry. The state wage base may be different refund check, bind you to anything (including additional
from the Federal wage base of $7,000. Do not include tax liability), or otherwise represent you before the IRS. If
any exempt payments from line 2 in figuring the you want to expand the designee’s authorization or
$7,000. desire automatic issuance of copies of notices, see
Publication 947, Practice Before the IRS and Power of
Line 8 — Balance due. Make your check or money Attorney.
order payable to the “United States Treasury.” Write your
EIN, “Form 940-EZ,” and “2003” on your check or money The Third Party Designee authorization automatically
order. Enter the amount of the payment on Form expires one year from the due date (without regard to
940-EZ(V) at the bottom of Form 940-EZ. If the employer extensions) for filing your 2003 Form 940-EZ. If you or
information is not preprinted on the payment voucher, your designee desire to terminate the authorization, a
enter the requested information. (Make certain that the written statement conveying your wish to revoke the
entity information above line A is properly completed.) authorization should be submitted to the IRS Service
Center where the return was processed.
If the amount on line 8 is under $1, you do not have to Signature. Form 940-EZ must be signed as follows:
pay it. For payments over $100, see Depositing FUTA
Tax on page 3.
• Sole proprietorship – The individual owning the
business.
Line 9 — Overpayment. If the amount on line 9 is • Corporation – The president, vice president, or other
under $1, we will send a refund or apply it to your next principal officer.
return only on written request. • Partnership or unincorporated organization – A
responsible and duly authorized member or officer having
Part II. Record of Quarterly Federal knowledge of its affairs.
• Single member limited liability company treated as
Unemployment Tax Liability a disregarded entity –The owner of the limited liability
Complete this part only if your FUTA tax on line 6 is company.
over $100. To figure your FUTA tax for each quarter, • Trust or estate – The fiduciary.
multiply by .008 that part of the first $7,000 of each The return may also be signed by a duly authorized
employee’s annual wages you paid during the quarter. agent of the taxpayer if a valid power of attorney has
Enter the result in the space for that quarter. Your “Total been filed.
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A–41
section 6103 allows or requires the IRS to disclose or
Privacy Act and Paperwork Reduction Act Notice. give the information shown on your tax return to others
We ask for the information on this form to carry out the as described in the Code. For example, we may disclose
Internal Revenue laws of the United States. We need it to your tax information to the Department of Justice for civil
figure and collect the right amount of tax. Chapter 23, and criminal litigation, and to cities, states, and the
Federal Unemployment Tax Act, of Subtitle C, District of Columbia for use in administering their tax
Employment Taxes, of the Internal Revenue Code laws. We may also disclose this information to Federal
imposes a tax on employers with respect to employees. and state agencies to enforce Federal nontax criminal
This form is used to determine the amount of the tax that laws and to combat terrorism.
you owe. Section 6011 requires you to provide the The time needed to complete and file this form will
requested information if you are liable for FUTA tax under vary depending on individual circumstances. The
section 3301. Section 6109 requires you to provide your estimated average time is: Recordkeeping, 7 hr., 8 min.;
employer identification number (EIN). If you fail to provide Learning about the law or form, 1 hr., 5 min.;
this information in a timely manner, you may be subject Preparing and sending the form to the IRS, 1hr., 5
to penalties and interest. min.
You are not required to provide the information If you have comments concerning the accuracy of
requested on a form that is subject to the Paperwork these time estimates or suggestions for making this form
Reduction Act unless the form displays a valid OMB simpler, we would be happy to hear from you. You can
control number. Books or records relating to a form or its write to the Tax Products Coordinating Committee,
instructions must be retained as long as their contents Western Area Distribution Center, Rancho Cordova, CA
may become material in the administration of any Internal 95743-0001. Do not send Form 940-EZ to this office.
Revenue law. Instead, see Where To File on page 2.
Generally, tax returns and return information are
confidential, as required by section 6103. However,
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OMB No. 1545-0028
Form 940 Employer’s Annual Federal
Unemployment (FUTA) Tax Return
Internal Revenue Service (99) See separate Instructions for Form 940 for information on completing this form.
2003
T
Name (as distinguished from trade name) Calendar year FF
FD

You must Trade name, if any Employer identification number (EIN) FP
complete
I
this section.
Address (number and street) City, state, and ZIP code T
A Are you required to pay unemployment contributions to only one state? (If “No,” skip questions B and C.) Yes No
B Did you pay all state unemployment contributions by February 2, 2004? ((1) If you deposited your total FUTA
tax when due, check “Yes” if you paid all state unemployment contributions by February 10, 2004. (2) If a 0%
experience rate is granted, check “Yes.” (3) If “No,” skip question C.) Yes No
C Were all wages that were taxable for FUTA tax also taxable for your state’s unemployment tax? Yes No
If you answered “No” to any of these questions, you must file Form 940. If you answered “Yes” to all the
questions, you may file Form 940-EZ, which is a simplified version of Form 940. (Successor employers, see
Special credit for successor employers on page 3 of the separate instructions.) You can get Form 940-EZ
by calling 1-800-TAX-FORM (1-800-829-3676) or from the IRS website at www.irs.gov.
If you will not have to file returns in the future, check here (see Who Must File in the separate instructions) and
complete and sign the return
If this is an Amended Return, check here (see Amended Returns in the separate instructions)
Part I Computation of Taxable Wages
1 Total payments (including payments shown on lines 2 and 3) during the calendar year for
services of employees 1
2 Exempt payments. (Explain all exempt payments, attaching additional
sheets if necessary.)
2
3 Payments of more than $7,000 for services. Enter only amounts over the
first $7,000 paid to each employee (see separate instructions). Do not
include any exempt payments from line 2. The $7,000 amount is the
Federal wage base. Your state wage base may be different. Do not use
your state wage limitation 3
4 Add lines 2 and 3 4
5 Total taxable wages (subtract line 4 from line 1) 5
Be sure to complete both sides of this form, and sign in the space provided on the back.
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. DETACH HERE Cat. No. 11234O Form 940 (2003)
Form 940-V Payment Voucher OMB No. 1545-0028

Internal Revenue Service Use this voucher only when making a payment with your return. 2003
Complete boxes 1, 2, and 3. Do not send cash, and do not staple your payment to this voucher. Make your check or money order pa yable to the
“United States Treasury.” Be sure to enter your employer identification number (EIN), “Form 940,” and “2003” on your payment.
1 Enter your employer identification number (EIN). 2 Dollars Cents
3 Enter your business name (individual name for sole proprietors).
Enter your address.
A–43
Form 940 (2003) Page 2
Part II Tax Due or Refund
1 Gross FUTA tax. (Multiply the wages from Part l, line 5, by .062) 1
2 Maximum credit. (Multiply the wages from Part l, line 5, by .054) 2
3 Computation of tentative credit ( Note: All taxpayers must complete the applicable columns. )
(a) (b) (d) (e) (f) (g) (h) (i)
(c)
Name State reporting number(s) State experience rate period State ex- Contributions if Contributions Additional credit Contributions
Taxable payroll
of as shown on employer’s
(as defined in state act)
perience rate had been 5.4% payable at experience (col. (f) minus col.(g)) paid to state by
state state contribution returns From To (col. (c) x .054) rate (col. (c) x col. (e)) If 0 or less, enter -0-. 940 due date
rate
3a Totals
3b Total tentative credit (add line 3a, columns (h) and (i) only—for late payments, also see the
instructions for Part II, line 6) 3b
4
5
6 Credit: Enter the smaller of the amount from Part II, line 2 or line 3b; or the amount from the
worksheet on page 5 of the separate instructions 6
7 Total FUTA tax (subtract line 6 from line 1). If the result is over $100, also complete Part III 7
8 Total FUTA tax deposited for the year, including any overpayment applied from a prior year 8
9 Balance due (subtract line 8 from line 7). Pay to the “United States Treasury.” If you owe more
than $100, see Depositing FUTA Tax on page 3 of the separate instructions 9
10 Overpayment (subtract line 7 from line 8). Check if it is to be: Applied to next return
or Refunded 10
Record of Quarterly Federal Unemployment Tax Liability (Do not include state liability.) Complete only if
Part III
line 7 is over $100. See page 6 of the separate instructions.
Quarter First (Jan. 1–Mar. 31) Second (Apr. 1–June 30) Third (July 1–Sept. 30) Fourth (Oct. 1–Dec. 31) Total for year
Liability for quarter
Third Do you want to allow another person to discuss this return with the IRS (see separate instructions)? Yes. Complete the following. No
Party Designee’s Phone Personal identification
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and, t o the best of my knowledge and belief, it is
true, correct, and complete, and that no part of any payment made to a state unemployment fund claimed as a credit was, or is t o be, deducted from the payments to employees.
Signature Title (Owner, etc.) Date
Form 940 (2003)
A–44
Instructions for Form 940

Employer’s Annual Federal Unemployment
(FUTA) Tax Return
looking at the photographs and calling 1-800-THE-LOST

General Instructions (1-800-843-5678) if you recognize a child.
Items To Note Purpose of Form
Electronic deposit requirement. You may be required Use Form 940 (or Form 940-EZ) to report your annual
to deposit Federal taxes, such as employment tax, excise Federal Unemployment Tax Act (FUTA) tax. FUTA tax,
tax, and corporate income taxes, electronically using the together with state unemployment systems, provides for
Electronic Federal Tax Payment System (EFTPS). See payments of unemployment compensation to workers
Electronic deposit requirement on page 3 for details. who have lost their jobs. Most employers pay both
Electronic filing option. File Form 940 electronically Federal and state unemployment taxes. Only the
and receive proof of filing acknowledgement. Electronic employer pays FUTA tax. Do not collect or deduct it
payment options may also be available. Visit the IRS from your employees’ wages. The tax applies to the first
website at www.irs.gov/efile for details. $7,000 you pay each employee in a year after subtracting
any exempt payments. The $7,000 amount is the Federal
Enhanced Third Party Designee authority. The wage base. Your state wage base may be different.
authority given to a representative when a filer completes Form 940-EZ, Employer’s Annual Federal
the Third Party Designee section of Form 940 has been Unemployment (FUTA) Tax Return, is a simpler version
enhanced and is now revocable. Third-party designees of Form 940. You may use Form 940-EZ instead of Form
will now be able to exchange information with the IRS 940 to report your annual FUTA tax if —
concerning Form 940. They may also request and
receive written tax information relating to Form 940, • You paid unemployment contributions to only one
state,
including copies of specific notices, correspondence, and
account transcripts. The named third-party designee may • You paid all state unemployment contributions by
now be any individual, corporation, firm, organization, or February 2, 2004 (February 10, 2004, if you deposited all
FUTA tax when due), and
partnership. As a result, the enhanced Third Party
Designee authorization will be substantially equivalent to • All wages that were taxable for FUTA tax were also
Form 8821, Tax Information Authorization. See Third taxable for your state’s unemployment tax. If, for
Party Designee on page 6 for details. example, you paid wages to corporate officers (these
wages are taxable for FUTA tax) in a state that exempts
Mailing address change. You may need to mail Form corporate officers’ wages from its unemployment tax, you
940 to a different address than in previous years because cannot use Form 940-EZ.
the IRS has changed the filing location for several areas.
If an envelope was received with the tax package, please A successor employer claiming a credit for state
use it. Otherwise, see Where To File on page 2. ! unemployment contributions paid by the prior
CAUTION employer must file Form 940.
Signature on Form 940. Only an authorized individual
may sign Form 940. See Signature on page 6.
State unemployment information. You must contact
When To File
your state unemployment tax office to receive your state File Form 940 for 2003 by February 2, 2004. However, if
reporting number, state experience rate, and details you deposited all FUTA tax when due, you may file on or
about your state unemployment tax obligations. before February 10, 2004. Your return will be considered
timely filed if it is properly addressed and mailed First
Web-based application for an EIN. You may now apply Class or sent by an IRS-designated delivery service by
for an employer identification number (EIN) online by the due date. See Circular E (Pub. 15), Employer’s Tax
visiting the IRS website at www.irs.gov/smallbiz. See Guide, for a list of designated delivery services. Also see
also Employer identification number (EIN) on page 4. Where To File on page 2.
Worksheet for computing the Part II, line 6 credit if
state contributions were paid late. Filers who made Private delivery services cannot deliver items to
contributions to their state unemployment fund after the !
CAUTION
P.O. boxes.
due date for filing Form 940 should complete the
worksheet provided in the instructions for Part II, line 6,
on page 5, to compute the allowable credit. Do not report Who Must File
such contributions in Part II, line 3, column (i) or on line Except as noted below, you must file Form 940 if Test 1
3b. Any credit allowed for such state contributions will or Test 2 applies.
appear on line 6.
Test 1. You paid wages of $1,500 or more in any
Photographs of Missing Children calendar quarter in 2002 or 2003.
The Internal Revenue Service is a proud partner with the Test 2. You had one or more employees for at least
National Center for Missing and Exploited Children. some part of a day in any 20 or more different weeks in
Photographs of missing children selected by the Center 2002 or 20 or more different weeks in 2003.
may appear in instructions on pages that would otherwise Count all regular, temporary, and part-time employees.
be blank. You can help bring these children home by A partnership should not count its partners. If a business
Cat. No. 13660I
A–45
changes hands during the year, each employer who If you were required to file Form 940 but filed Form
meets Test 1 or 2 must file. For purposes of Test 1 or 940-EZ instead and you must correct an error, file the
Test 2 only, do not include wages paid by the prior (or amended return on Form 940.
subsequent) employer. But see Successor employer on
page 4. If you are filing an amended return after June 30 to
claim contributions to your state’s unemployment fund
Household employers. File a FUTA tax return only if that you paid after the due date of Form 940, attach a
you paid total cash wages of $1,000 or more (for all copy of the certification from the state. This will expedite
household employees) in any calendar quarter in 2002 or the processing of the amended return.
2003 for household work in a private home, local college
club, or local chapter of a college fraternity or sorority. Where To File
Individuals, estates, and trusts that owe FUTA tax for
household work in a private home, in most cases, must In the list below, find the location where your legal
file Schedule H (Form 1040), Household Employment residence, principal place of business, office, or agency
Taxes, instead of Form 940 (or Form 940-EZ). See the is located. Send your return to the Internal Revenue
Instructions for Schedule H (Form 1040), Household Service at the address listed for your location. No street
Employers. address is needed.
In some cases, such as when you employ both Note: Where you file depends on whether or not you are
household employees and other employees, you may including a payment.
choose to report social security, Medicare, and withheld
Federal income taxes for your household employee(s) on
Form 941, Employer’s Quarterly Federal Tax Return, or Exception for exempt organizations and government entities. If
you are filing Form 940 for an exempt organization or government
Form 943, Employer’s Annual Federal Tax Return for entity (Federal, state, local, or Indian tribal), use the following
Agricultural Employees, instead of on Schedule H. If you addresses, regardless of location:
choose to report on Form 941 or Form 943, you must use
Form 940 (or Form 940-EZ) to report FUTA tax. Return without payment: Return with payment:
P.O. Box 660095
Agricultural employers. File a FUTA tax return if either Ogden, UT 84201-0046 Dallas, TX 75266-0095
1 or 2 below applies:
1. You paid cash wages of $20,000 or more to Connecticut, Delaware, District of Columbia, Illinois, Indiana,
farmworkers during any calendar quarter in 2002 or 2003 Kentucky, Maine, Maryland, Massachusetts, Michigan, New
or Hampshire, New Jersey, New York, North Carolina, Ohio,
2. You employed 10 or more farmworkers during at Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia,
least some part of a day (whether or not at the same West Virginia, Wisconsin
time) during any 20 or more different weeks in 2002 or 20 Return without payment: Return with payment:
or more different weeks in 2003. P.O. Box 105887
Cincinnati, OH 45999-0046 Atlanta, GA 30348-5887
Count wages paid to aliens admitted on a temporary
basis to the United States to perform farmwork, also
known as workers with “H-2(A)” visas, to see if you meet Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida,
Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota,
either 1 or 2 above. However, wages paid to “H-2(A)” Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico,
visa workers are not subject to FUTA tax. North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas,
Utah, Washington, Wyoming
Indian tribal governments. Services rendered to a
Federally-recognized Indian tribal government (including Return without payment: Return with payment:
any subdivision, subsidiary, or wholly-owned business P.O. Box 660095
Ogden, UT 84201-0046 Dallas, TX 75266-0095
enterprise) after December 20, 2000 are exempt from
FUTA tax (and no Form 940 or Form 940-EZ for 2003 is Puerto Rico, U.S. Virgin Islands
required), subject to the tribe’s compliance with
applicable state law. For procedures on amending a 2000 Return without payment: Return with payment:
Form 940 or Form 940-EZ, see Announcement 2001-16, P.O. Box 80105
Philadelphia, PA 19255-0046 Cincinnati, OH 45280-0005
I.R.B. 2001-8, February 20, 2001. You can find
Announcement 2001-16 on page 715 of Internal
Revenue Bulletin 2001-8 at www.irs.gov/pub/irs-irbs/ If the location of your legal residence, principal place of business,
irb01-08.pdf. Also see code section 3309(d). office, or agency is not listed above —
All Returns:
Nonprofit organizations. Religious, educational, Philadelphia, PA 19255-0046
charitable, etc., organizations described in section
501(c)(3) and exempt from tax under section 501(a) are
not subject to FUTA tax and are not required to file.
Credit for Contributions Paid
State and local government employers. State or local
government employers are not subject to FUTA tax and to a State Fund
are not required to file. You get a credit for amounts you pay to a state (including
the District of Columbia, Puerto Rico, and the U.S. Virgin
Amended Returns Islands) unemployment fund by February 2, 2004 (or
February 10, 2004, if that is your Form 940 due date).
Use a new Form 940 to amend a previously filed Form Your FUTA tax will be higher if you do not pay the state
940. Check the “Amended Return” box above Part I. contributions timely. See the Part II, line 6 instructions
Enter all amounts that should have been on the original on page 5 if you did not pay state contributions by
return, and sign the form. Attach an explanation of the the due date of Form 940.
reasons for the amended return. For example, you are
filing to claim credit for contributions paid to your state “Contributions” are payments that a state requires an
unemployment fund after the due date of Form 940. File employer to make to its unemployment fund for the
the amended return with the Internal Revenue Service payment of unemployment benefits. However,
Center where you filed the original return. Do not mail an contributions do not include:
amended Form 940 (even if it includes a payment) to a • Any payments deducted or deductible from your
P.O. box location. employees’ pay.
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A–46
• Penalties, interest, or special administrative taxes not How to deposit. If you choose not to enroll in EFTPS
included in the contribution rate the state assigned to and are not required to use EFTPS (see Electronic
you. deposit requirement below), use Form 8109, Federal
• Voluntary contributions you paid to get a lower Tax Deposit Coupon, when you make each tax deposit.
assigned rate. The IRS will pre-enroll you in EFTPS when you apply for
Additional credit. You may receive an additional credit an employer identification number (EIN). Follow the
if you have a state experience rate lower than 5.4% instructions in your EIN Package to activate your
(.054). This applies even if your rate varies during the enrollment and begin making your tax deposits.
year. This additional credit is the difference between your For new employers, if you would like to receive a
actual state payments and the amount you would have Federal Tax Deposit (FTD) coupon booklet call
been required to pay at 5.4%. See Line 3 –Computation 1 – 800 – 829 – 4933. Allow 5 to 6 weeks for delivery.
of tentative credit on page 5. Make your deposits with an authorized financial
The total credit allowable may not be more than 5.4% institution (e.g., a commercial bank that is qualified to
of the total taxable FUTA wages. accept Federal tax deposits). To avoid a possible
Special credit for successor employers. A successor penalty, do not mail deposits directly to the IRS. Records
employer is an employer who received a unit of another of your deposits will be sent to the IRS for crediting to
employer’s trade or business or all or most of the your business accounts.
property used in the trade or business of another Electronic deposit requirement. You must make
employer. Immediately after the acquisition, the electronic deposits of all depository taxes (such as
successor employer must employ one or more individuals employment tax, excise tax, and corporate income tax)
who were employed by the previous owner. using the Electronic Federal Tax Payment System
You may be eligible for a credit based on the state (EFTPS) in 2004 if:
unemployment contributions paid by the previous • The total deposits of such taxes in 2002 were more
employer. You may claim these credits if you are a than $200,000 or
successor employer and acquired a business in 2003 • You were required to use EFTPS in 2003.
from a previous employer who was not required to file If you are required to use EFTPS and use Form 8109
Form 940 (or Form 940-EZ) for 2003. If you are eligible instead, you may be subject to a 10% penalty. If you are
to take this credit, you must file Form 940; you may not required to use EFTPS, you may participate
not use Form 940-EZ. See section 3302(e). Enter in voluntarily. To enroll in or get more information about
Part II, line 3, columns (a) through (i), the information of EFTPS, call 1-800-555-4477 or 1-800-945-8400, or to
the previous employer as if you paid the amounts. enroll online, visit the EFTPS website at www.eftps.gov.
If the previous employer was required to file Form 940 For deposits made by EFTPS to be on time, you
(or Form 940-EZ), see Successor employer on page 4. ! must initiate the transaction at least one business
CAUTION day before the date the deposit is due.
Depositing FUTA Tax
When to deposit. Although Form 940 covers a calendar Electronic Reporting
year, you may have to make deposits of the tax before You may file Form 940 electronically and receive proof of
filing the return. Generally, deposit FUTA tax quarterly if filing acknowledgement. Electronic payment options may
your FUTA tax exceeds $100. Determine your FUTA tax also be available. For information on filing Form 940
for each of the first three quarters by multiplying by .008 electronically, visit the IRS website at www.irs.gov/efile.
that part of the first $7,000 of each employee’s annual
wages you paid during the quarter. If any part of the
amounts paid is exempt from state unemployment tax,
Not Liable for FUTA Tax?
you may be required to deposit an amount greater than If you receive Form 940 and are not liable for FUTA tax
that determined using the .008 rate. For example, in for 2003, write “Not Liable” across the front of the form,
certain states, wages paid to corporate officers, certain sign the form, and return it to the IRS.
payments of sick pay by unions, and certain fringe
benefits are exempt from state unemployment tax. Penalties and Interest
If your FUTA tax for any of the first three quarters of Avoid penalties and interest by making tax deposits when
2003 (plus any undeposited amount of $100 or less from due, filing a correct return, and paying all taxes when
any earlier quarter) is over $100, deposit it by the last day due. There are penalties for late deposits, insufficient
of the first month after the end of the quarter. If it is $100 deposits, failure to deposit using EFTPS (when required),
or less, carry it to the next quarter; a deposit is not and late filing unless you can show reasonable cause. If
required. If your FUTA tax for the fourth quarter (plus any you file late, attach an explanation to the return. There
undeposited amount from any earlier quarter) is over are also penalties for willful failure to pay tax, make
$100, deposit the entire amount by February 2, 2004. If it returns, and for filing false or fraudulent returns.
is $100 or less, you can either make a deposit or pay it
with your Form 940 by February 2. (If you deposit it by How To Get Forms and Publications
February 2, you may file Form 940 by February 10, You can get most IRS forms and publications by
2004.) accessing the IRS website at www.irs.gov or by calling
The deposit due dates are shown in the following the IRS at 1-800-TAX-FORM (1-800-829-3676). See the
chart: Instructions for Forms W-2 and W-3 for details and
other options.
If undeposited FUTA tax is over $100 on — Deposit it
by —
March 31 . . .
June 30 . . . .
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April 30
July 31
Specific Instructions
September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . October 31 Employer’s name, address, calendar year, and
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . January 31 employer identification number (EIN). If you are not
using a preaddressed Form 940, type or print your name,
trade name, address, calendar tax year, and EIN on the
If any deposit due date falls on a Saturday, form. Enter your name, address, calendar tax year, and
TIP Sunday, or legal holiday, you may deposit on the EIN here, even if you must complete Form 940-V,
next business day. Payment Voucher.
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A–47
Employer identification number (EIN). If you do not 2. Benefit payments for sickness or injury under a
have an EIN, apply for one on Form SS-4, Application for workers’ compensation law.
Employer Identification Number or by visiting the IRS 3. Household services if you did not pay total cash
website at www.irs.gov/smallbiz. If you do not have an wages of $1,000 or more in any calendar quarter in 2002
EIN by the time a return is due, write “Applied For” and or 2003.
the date you applied in the space shown for the number. 4. Certain family employment. (See section 3 in
Questions A through C. If you answer “Yes” to all the Circular E (Pub. 15).)
questions, you may file Form 940-EZ, a simpler version 5. Certain fishing activities. (See Pub. 595, Tax
of Form 940. If you answer “No” to any of the questions Highlights for Commercial Fishermen.)
(or you are a successor employer claiming a credit for 6. Noncash payments for farmwork or household
state unemployment contributions paid by the prior services in a private home. (Only cash wages paid to
employer), you must file Form 940. these workers are taxable.)
7. Value of certain meals and lodging. (See section 5
Final return. If you will not have to file Form 940 (or in Circular E (Pub.15).)
Form 940-EZ) in the future, check the box on the line 8. Cost of group-term life insurance.
below question C and complete and sign the return. If 9. Payments attributable to the employee’s
you start paying FUTA wages again, file Form 940 (or contributions to a sick-pay plan.
Form 940-EZ). 10. Employer contributions to a SIMPLE retirement
account (other than elective salary reduction
Part I. Computation of Taxable Wages contributions) and employer contributions to a 401(k)
Line 1 — Total payments. Enter the total payments plan (if included on line 1).
(before any deductions) you made during the calendar 11. Employer payments to an Archer MSA.
year for services of employees, even if the payments are 12. Benefits excludable under a section 125
not taxable for FUTA tax. Include salaries, wages, (cafeteria) plan.
commissions, fees, bonuses, vacation allowances, and 13. Certain statutory employees. (See section 1 in
amounts paid to temporary or part-time employees; the Pub. 15-A.)
value of goods, lodging, food, clothing, and noncash 14. Services performed by an inmate of a penal
fringe benefits; contributions to a 401(k) plan, payments institution.
to an Archer MSA, payments under adoption assistance 15. Employer reimbursements (including payments to a
programs, and contributions to SIMPLE retirement third party) for qualified moving expenses, to the extent
accounts (including elective salary reduction such expenses would otherwise be deductible by the
contributions); section 125 (cafeteria) plan benefits; and employee. (See Pub. 521, Moving Expenses.)
sick pay (including third-party sick pay if liability is 16. Any other exempt service or pay.
transferred to the employer).
For more information, see section 15 in Circular E
For details on sick pay, see Pub. 15-A, Employer’s (Pub. 15) or section 15 in Circular A (Pub. 51),
Supplemental Tax Guide. Report amounts deferred Agricultural Employer’s Tax Guide.
under a nonqualified deferred compensation plan at the Line 3 — Payments of more than $7,000 for services.
later of: (a) when services are performed or (b) when Enter the total of amounts over $7,000 you paid to each
there is no substantial risk of forfeiture of the rights to the employee during 2003 after subtracting any exempt
deferred amount. For details, see Regulations section payments shown on line 2. For example, you had 10
31.3306(r)(2)-1. Include tips of $20 or more in a month employees and paid each $9,000 during the year,
reported to you by your employees. Also, include including $500 of exempt payments per employee. Enter
payments made by a previous employer if you are $15,000 on line 3, computed as follows:
counting those payments for the $7,000 wage base as
explained under Successor employer below. Total payments (10 x $9,000) . . . . . . . . . . . . . $90,000
Your method of payment does not determine whether Less: Exempt payments (10 x $500) . . . . . . . . ($5,000)
payments are wages. Thus, you may pay wages hourly,
daily, weekly, monthly, or yearly. You may pay wages for Less: Total wage base amount (10 x $7,000) . . ($70,000)
piecework or as a percentage of profits. You may pay Amount reported on line 3 . . . . . . . . . . . . . $15,000
wages in cash or some other way, such as goods,
lodging, food, or clothing. For items other than cash, use Only the first $7,000 paid to each employee is
their fair market value when paid. subject to FUTA tax. Do not use the state wage base
Line 2 — Exempt payments. The amounts reported on for this entry. The state wage base may be different
line 2 are exempt from FUTA tax. For FUTA tax from the Federal wage base of $7,000. Do not include
purposes, “wages” and “employment” do not include exempt payments from line 2 in figuring the $7,000.
every payment and every kind of service an employee Successor employer. If you acquired a business
may perform. In general, payments excluded from wages from an employer that was required to file Form 940 (or
and payments for services excepted from employment Form 940-EZ), you may count the wages that employer
are not subject to FUTA tax. Do not enter payments paid to the employees who continue to work for you when
over $7,000 for each employee that you enter on you figure the $7,000 wage base. Include on line 3 the
line 3. payments made by the previous employer that you
You may deduct exempt payments from total included on line 1.
payments only if you explain them on line 2. Amounts If the first employer paid $7,000 or more to the
that may be exempt from your state’s unemployment tax employee, also include on line 3 all the wages you paid
may not be exempt from FUTA tax. For example, to that employee. If the first employer did not pay at least
corporate officers’ wages are not exempt from FUTA $7,000 to the employee, subtract what the first employer
tax even though your state may exempt those wages paid from $7,000. Then subtract that result from the
from its unemployment tax. wages you paid to the employee, and include any result
Enter payments for services such as the following on on line 3.
line 2. These payments also must be entered on For example, during 2003, prior employer P paid
line 1. $5,000 to employee Jones before the acquisition and
1. Agricultural labor if you did not meet either 1 or 2 acquirer A paid $3,000 to Jones after the acquisition.
under Agricultural employers on page 2 and all Subtracting the $5,000 from $7,000 yields $2,000.
payments to “H-2(A)” visa workers. Subtracting the $2,000 from $3,000 (wages paid by
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A–48
acquirer A to Jones) yields $1,000. Acquirer A reports as payments of state unemployment contributions, attach
$8,000 (total payments) on line 1 and $6,000 ($5,000 a copy of the letter from your state. Do not include any
paid by prior employer P and $1,000 in excess of the penalties, interest, or special administrative taxes (such
$7,000 wage base) on line 3. See section 3306(b)(1) and as surcharges, employment and training taxes, excise
Regulations section 31.3306(b)(1)-1(b). tax, and assessments, which are generally listed as a
Line 5 — Total taxable wages. This is the total amount separate item on the state’s quarterly wage report) not
subject to FUTA tax. Use this amount in Part II to included in the experience rate assigned to you.
compute the gross FUTA tax and the maximum credit. Line 3a — Totals. Enter the totals of columns (h)
and (i).
Part II. Tax Due or Refund Line 3b — Total tentative credit. Add line 3a, columns
Line 1 — Gross FUTA tax. Multiply the total taxable (h) and (i). As noted above, column (i) includes only
wages from Part I, line 5, by .062. This is the maximum payments to your state unemployment fund that you
amount of FUTA tax. made by the due date for filing Form 940. Payments
Line 2 — Maximum credit. Multiply the total taxable made after the due date are eligible for a reduced credit
wages from Part I, line 5, by .054. This is the maximum and will appear on line 6 as described below.
credit against FUTA tax for state contributions. Line 6 — Credit. This is the credit allowable for your
Line 3 — Computation of tentative credit. You must payments to state unemployment funds. If you made no
complete all applicable columns to receive any credit. late state contributions, enter the smaller of the amount
Your state will provide an experience rate to you. If you from Part II, line 2 or line 3b. If you do not have to make
have been assigned an experience rate of zero percent payments to the state, enter zero on this line.
or more, but less than 5.4%, for all or part of the year, If any state contributions were made after the
use columns (a) through (i). If you have not been
assigned any experience rate, use columns (a), (b), (c),
! Form 940 due date (February 2 or February 10 as
CAUTION explained under When To File on page 1), your
and (i) only. If you have been assigned a rate of 5.4% or credit for late contributions is limited to 90% of the
higher, use columns (a), (b), (c), (d), (e), and (i) only. If amount that would have been allowable as a credit if
you were assigned an experience rate for only part of the such contributions were paid on or before the Form 940
year or the rate was changed during the year, complete a due date.
separate line for each rate period. Only taxpayers who made late contributions should
If you need additional lines, attach a separate complete the worksheet below.
statement with a similar format. Also, if you are a
successor employer, see Special credit for successor
employers, on page 3. Worksheet for Credit Computation if Any State
Column (a). Enter the two-letter abbreviation for the Contributions Were Paid After the Due Date for Filing
state(s) to which you were required to pay contributions Form 940
(including the District of Columbia, Puerto Rico, and the A. Enter the amount from Form 940, Part II,
U.S. Virgin Islands). line 2 . . . . . . . . . . . . . . . . . . . . . . . . . .
Column (b). Enter the state reporting number B. Enter the amount from Form 940, Part II,
assigned to you when you registered as an employer with line 3b, if any . . . . . . . . . . . . . . . . . . . .
each state. Failure to enter the correct number may result C. Subtract line B from line A. If zero or less,
in unnecessary correspondence. enter -0- . . . . . . . . . . . . . . . . . . . . . . . .
Column (c). Enter the state taxable payroll on which D. Enter total contributions paid to the
you must pay state unemployment taxes for each state state(s) after the Form 940 due date . . .
shown in column (a). If your experience rate is zero E. Enter the smaller of line C or D . . . . . . .
percent, enter the wages that would have been subject to F. Multiply line E by .90 (90%) . . . . . . . . . .
state unemployment tax if the zero percent rate had not G. Add lines B and F . . . . . . . . . . . . . . . . .
been granted. H. Enter the smaller of the amount on line G
or A here and on Form 940, Part II, line 6
Column (d). Enter the beginning and ending dates of
the experience rate shown in column (e). Example of late state contributions. You paid
Column (e). Enter your state experience rate — the $1,500 of state contributions by the Form 940 due date
rate the state assigned to you for paying your state and $1,000 after that date. Your maximum credit on Form
unemployment tax. This rate may change based on your 940, Part II, line 2 is $2,000, and your tentative credit on
“experience” with the state unemployment fund, for line 3b is $1,500. The maximum credit less the tentative
example, because of unemployment compensation paid credit is $500. If you had paid the $1,000 state
to your former employees. If you do not know your contributions on time, you would have been allowed an
experience rate, contact your state unemployment office. additional credit of only $500, not the full $1,000.
The state experience rate can be stated as a percentage Therefore, the credit for the late contributions is limited to
or as a decimal (e.g., 2.7% or .027). 90% of $500. You complete the worksheet as follows:
Column (f). Multiply the amount in column (c) by .054.
Column (g). Multiply the amount in column (c) by the A. Enter the amount from Form 940, Part II,
rate in column (e). line 2 . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000
Column (h). Subtract column (g) from column (f). If B. Enter the amount from Form 940, Part II,
zero or less, enter zero. This additional credit is the line 3b, if any . . . . . . . . . . . . . . . . . . . . 1,500
difference between 5.4% and your state experience rate. C. Subtract line B from line A. If zero or
less, enter -0- . . . . . . . . . . . . . . . . . . . . 500
Column (i). Enter the contributions you actually paid D. Enter total contributions paid to the
to the state unemployment fund by the due date for filing state(s) after the Form 940 due date . . . 1,000
your Form 940. Do not include amounts you are required E. Enter the smaller of line C or D . . . . . . . 500
to pay but have not paid by the Form 940 due date F. Multiply line E by .90 (90%) . . . . . . . . . . 450
(February 2 or February 10 as explained under When To G. Add lines B and F . . . . . . . . . . . . . . . . . 1,950
File on page 1). If you are filing Form 940 after the due H. Enter the smaller of the amount on line
date, include only payments made by the return due G or A here and on Form 940, Part II,
date, and see the instructions and worksheet under Line line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,950
6 — Credit below. If you are claiming excess credits
-5-
A–49
Enter $1,950 from line H of the worksheet on Form The Third Party Designee authorization automatically
940, Part II, line 6. This is the allowable credit for your expires one year from the due date (without regard to
contributions to the state unemployment fund. extensions) for filing your 2003 Form 940. If you or your
Line 9 — Balance due. Make your check or money designee desire to terminate the authorization, a written
order payable to the “United States Treasury.” Write your statement conveying your wish to revoke the
EIN, “Form 940,” and “2003” on your check or money authorization should be submitted to the IRS Service
order. Enter the amount of your payment on Form 940-V Center where the return was processed.
at the bottom of Form 940. If the employer information is Signature. Form 940 must be signed as follows:
not preprinted on the payment voucher, enter the • Sole proprietorship - The individual owning the
requested information. (Make certain also that the entity business.
information above line A is properly completed.) • Corporation - The president, vice president, or other
If the amount on line 9 is under $1, you do not have to principal officer.
pay it. For payments over $100, see Depositing FUTA • Partnership or unincorporated organization - A
Tax on page 3. responsible and duly authorized member or officer having
Line 10 — Overpayment. If the amount on line 10 is knowledge of its affairs.
under $1, we will send a refund or apply it to your next • Single member limited liability company treated as
return only on written request. a disregarded entity -The owner of the limited liability
company.
Part III. Record of Quarterly Federal • Trust or estate - The fiduciary.
The return may also be signed by a duly authorized
Unemployment Tax Liability agent of the taxpayer if a valid power of attorney has
Complete this part only if your FUTA tax in Part II, been filed.
line 7, is over $100. To figure your FUTA tax for each
quarter, multiply by .008 that part of the first $7,000 of Privacy Act and Paperwork Reduction Act Notice.
each employee’s annual wages you paid during the We ask for the information on this form to carry out the
quarter. Enter the result in the space for that quarter. Internal Revenue laws of the United States. We need it to
Your “Total for year” must equal your total FUTA tax figure and collect the right amount of tax. Chapter 23,
shown in Part II, line 7. Federal Unemployment Tax Act, of Subtitle C,
Record your FUTA tax based on when you pay wages, Employment Taxes, of the Internal Revenue Code
not on when you deposit it. For example, if you pay imposes a tax on employers with respect to employees.
wages on March 28, your FUTA tax on those wages is This form is used to determine the amount of the tax that
$200, and you deposit the $200 on April 30, you would you owe. Section 6011 requires you to provide the
record that $200 in the first quarter, not in the second. requested information if you are liable for FUTA tax under
Example. You had two employees and paid each section 3301. Section 6109 requires you to provide your
employee $4,000 in the first quarter, $5,000 in the employer identification number (EIN). If you fail to provide
second quarter, $5,000 in the third quarter, and $5,000 in this information in a timely manner, you may be subject
the fourth quarter. (None of these payments were exempt to penalties and interest.
from FUTA tax.) For the first quarter, multiply .008 x You are not required to provide the information
$8,000 (the amount paid to both employees), and enter requested on a form that is subject to the Paperwork
$64 in the space for the first quarter. For the second Reduction Act unless the form displays a valid OMB
quarter, multiply .008 only by $6,000 ($3,000 for each control number. Books or records relating to a form or its
employee —the amount remaining to reach the $7,000 instructions must be retained as long as their contents
maximum amount subject to FUTA tax for each may become material in the administration of any Internal
employee), and enter $48 in the space for the second Revenue law.
quarter. Because you paid each employee more than Generally, tax returns and return information are
$7,000 by the end of the second quarter, enter zero in confidential, as required by section 6103. However,
the space for the third and fourth quarters. Enter $112 in section 6103 allows or requires the IRS to disclose or
the “Total for year” space. give the information shown on your tax return to others
Third Party Designee. If you want to allow any as described in the Code. For example, we may disclose
individual, corporation, firm, organization, or partnership your tax information to the Department of Justice for civil
to discuss your 2003 Form 940 with the IRS, check the and criminal litigation, and to cities, states, and the
“Yes” box in the “Third Party Designee” section of the District of Columbia for use in administering their tax
return. Also, enter the name, phone number, and any five laws. We may also disclose this information to Federal
numbers the designee chooses as his or her personal and state agencies to enforce Federal nontax criminal
identification number (PIN). The authorization applies laws and to combat terrorism.
only to the tax form upon which it appears. The time needed to complete and file this form will
By checking the “Yes” box, you are authorizing the vary depending on individual circumstances. The
IRS to call the designee to answer any questions relating estimated average time is: Recordkeeping, 13 hr., 52
to the information reported on your tax return. You are min.; Learning about the law or the form, 1 hr., 17
also authorizing the designee to: min.; Preparing and sending the form to the IRS,
• Exchange information concerning your tax return with 1 hr., 50 min.
the IRS and If you have comments concerning the accuracy of
• Request and receive written tax return information these time estimates or suggestions for making this form
relating to your tax return including copies of specific simpler, we would be happy to hear from you. You can
notices, correspondence, and account transcripts. write to the Tax Products Coordinating Committee,
You are not authorizing the designee to receive any Western Area Distribution Center, Rancho Cordova, CA
refund check, bind you to anything (including additional 95743-0001. Do not send the Form 940 to this office.
tax liability), or otherwise represent you before the IRS. If Instead, see Where To File on page 2.
you want to expand the designee’s authorization or
desire automatic issuances of copies of notices, see
Pub. 947, Practice Before the IRS and Power of
Attorney.
-6-
A–50
Form 941 Employer’s Quarterly Federal Tax Return
(Rev. January 2004) See separate instructions revised January 2004 for information on completing this return.
Internal Revenue Service (99) Please type or print.
Enter state OMB No. 1545-0029
code for state Name (as distinguished from trade name) Date quarter ended
in which T
deposits were
made only if Trade name, if any Employer identification number FF
different from FD
state in Address (number and street) City, state, and ZIP code FP
address to
the right I
(see page T
2 of separate
instructions).
1 1 1 1 1 1 1 1 1 1 2 3 3 3 3 3 3 3 3 4 4 4 5 5 5
IRS Use
If address is
different
from prior
return, check
here
6 7 8 8 8 8 8 8 8 8 9 9 9 9 9 10 10 10 10 10 10 10 10 10 10
A If you do not have to file returns in the future, check here and enter date final wages paid
B If you are a seasonal employer, see Seasonal employers on page 1 of the instructions and check here
1 Number of employees in the pay period that includes March 12th 1
2 Total wages and tips, plus other compensation (see separate instructions) 2
3 Total income tax withheld from wages, tips, and sick pay 3
4 Adjustment of withheld income tax for preceding quarters of this calendar year 4
5 Adjusted total of income tax withheld (line 3 as adjusted by line 4) 5
6 Taxable social security wages 6a × 12.4% (.124) = 6b
Taxable social security tips 6c × 12.4% (.124) = 6d
7 Taxable Medicare wages and tips 7a × 2.9% (.029) = 7b
8 Total social security and Medicare taxes (add lines 6b, 6d, and 7b). Check here if wages
are not subject to social security and/or Medicare tax 8
9 Adjustment of social security and Medicare taxes (see instructions for required explanation)
Sick Pay $ ± Fractions of Cents $ ± Other $ = 9
10 Adjusted total of social security and Medicare taxes (line 8 as adjusted by line 9) 10
11 Total taxes (add lines 5 and 10) 11
12 Advance earned income credit (EIC) payments made to employees (see instructions) 12
13 Net taxes (subtract line 12 from line 11). If $2,500 or more, this must equal line 17,
column (d) below (or line D of Schedule B (Form 941)) 13
14 Total deposits for quarter, including overpayment applied from a prior quarter 14
15 Balance due (subtract line 14 from line 13). See instructions 15

16 Overpayment. If line 14 is more than line 13, enter excess here $
and check if to be: Applied to next return or Refunded.
● All filers: If line 13 is less than $2,500, do not complete line 17 or Schedule B (Form 941).
● Semiweekly schedule depositors: Complete Schedule B (Form 941) and check here
● Monthly schedule depositors: Complete line 17, columns (a) through (d), and check here
17 Monthly Summary of Federal Tax Liability. (Complete Schedule B (Form 941) instead, if you were a semiweekly schedule depositor.)
(a) First month liability (b) Second month liability (c) Third month liability (d) Total liability for quarter
Do you want to allow another person to discuss this return with the IRS (see separate instructions)? Yes. Complete the following. No
Third
Party
Designee’s Phone Personal identification
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge
Sign and belief, it is true, correct, and complete.
Here Signature
Print Your
Name and Title Date
For Privacy Act and Paperwork Reduction Act Notice, see back of Payment Voucher. Cat. No. 17001Z Form 941 (Rev. 1-2004)
A–51
Form 941 (Rev. 1-2004)
Where to file. In the list below, find the state where your legal residence, principal place of business, office, or
agency is located. Send your return to the Internal Revenue Service at the address listed for your location. No
street address is needed. Note: Where you file depends on whether or not you are including a payment.
Exception for exempt organizations and government entities. If you are filing Form 941 for an exempt
organization or government entity (Federal, state, local, or Indian tribal government), use the following addresses,
regardless of your location:
Return without payment: Ogden, UT 84201-0046
Return with payment: P.O. Box 660264, Dallas, TX 75266-0264
RETURN WITHOUT RETURN WITH

YOUR LOCATION
A PAYMENT PAYMENT
Connecticut, Delaware, Cincinnati, OH 45999-0005 P.O. Box 105703

District of Columbia, Atlanta, GA 30348-5703
Illinois, Indiana, Kentucky,
Maine, Maryland,
Massachusetts, Michigan,
New Hampshire,
New Jersey, New York,
North Carolina, Ohio,
Pennsylvania,
Rhode Island,
South Carolina,
Vermont, Virginia,
West Virginia, Wisconsin
Alabama, Alaska, Arizona, Ogden, UT 84201-0005 P.O. Box 660264

Arkansas, California, Dallas, TX 75266-0264
Colorado, Florida, Georgia,
Hawaii, Idaho, Iowa,
Kansas, Louisiana,
Minnesota, Mississippi,
Missouri, Montana,
Nebraska, Nevada,
New Mexico,
North Dakota, Oklahoma,
Oregon, South Dakota,
Tennessee, Texas, Utah,
Washington, Wyoming
No legal residence or Philadelphia, PA 19255-0005 P.O. Box 80106

principal place of business Cincinnati, OH 45280-0006
in any state
Caution: Your filing or payment address may have changed from prior years. If you are using an IRS provided
envelope, use only the labels and envelope provided with this tax package. Do not send Form 941 or any payments
to the Social Security Administration (SSA).
Who must sign. Form 941 must be signed as follows:
● Sole proprietorship—The individual owning the business.
● Corporation (including an LLC treated as a corporation)—The president, vice president, or other principal officer.
● Partnership (including an LLC treated as a partnership) or unincorporated organization—A responsible and
duly authorized member or officer having knowledge of its affairs.
● Single-member limited liability company (LLC) treated as a disregarded entity—The owner of the limited
liability company.
● Trust or estate—The fiduciary.
The return may also be signed by a duly authorized agent of the taxpayer if a valid power of attorney has been
filed.
Form 941 (Rev. 1-2004)
Electronic filing option. File Form 941 electronically Justice for civil and criminal litigation, and to cities,
and receive proof of filing acknowledgement. Electronic states, and the District of Columbia for use in
payment options may also be available. Visit the IRS administering their tax laws. We may also disclose this
website at www.irs.gov for details. information to Federal and state agencies to enforce
Privacy Act and Paperwork Reduction Act Notice. Federal nontax criminal laws and to combat terrorism.
We ask for the information on this form to carry out The time needed to complete and file this form will
the Internal Revenue laws of the United States. We vary depending on individual circumstances. The
need it to figure and collect the right amount of tax. estimated average time is:
Subtitle C, Employment Taxes, of the Internal Revenue For Form 941:
Code imposes employment taxes on wages, including
income tax withholding. This form is used to determine Recordkeeping 12 hr., 39 min.
the amount of the taxes that you owe. Section 6011 Learning about the law or the form 40 min.
requires you to provide the requested information if the Preparing the form 1 hr., 49 min.
tax is applicable to you. Section 6109 requires you to Copying, assembling, and sending
provide your employer identification number (EIN). If the form to the IRS 16 min.
you fail to provide this information in a timely manner,
you may be subject to penalties and interest. For Form 941TeleFile:
You are not required to provide the information Recordkeeping 5 hr., 30 min.
requested on a form that is subject to the Paperwork Learning about the law or the Tax
Reduction Act unless the form displays a valid OMB Record 18 min.
control number. Books and records relating to a form Preparing the Tax Record 24 min.
or instructions must be retained as long as their
TeleFile phone call 11 min.
contents may become material in the administration of
any Internal Revenue law. If you have comments concerning the accuracy of
these time estimates or suggestions for making this
Generally, tax returns and return information are
form simpler, we would be happy to hear from you.
confidential, as required by section 6103. However,
You can write to the Tax Products Coordinating
section 6103 allows or requires the IRS to disclose or
Committee, Western Area Distribution Center, Rancho
give the information shown on your tax return to others
Cordova, CA 95743-0001. Do not send Form 941 to
as described in the Code. For example, we may
this address.
disclose your tax information to the Department of
A–52
Form 941-V
Payment Voucher
Purpose of Form Specific Instructions

Complete Form 941-V if you are making a payment Box 1—Employer identification number (EIN). If you
with Form 941, Employer’s Quarterly Federal Tax do not have an EIN, apply for one on Form SS-4,
Return. We will use the completed voucher to credit Application for Employer Identification Number, and
your payment more promptly and accurately, and to write “Applied For” and the date you applied in this
improve our service to you. entry space.
If you have your return prepared by a third party and Box 2—Amount paid. Enter the amount paid with
make a payment with that return, please provide this Form 941.
payment voucher to the return preparer. Box 3—Tax period. Darken the capsule identifying the
quarter for which the payment is made. Darken only
Making Payments With Form 941 one capsule.
Make your payment with Form 941 only if: Box 4—Name and address. Enter your name and
● Your net taxes for the quarter (line 13 on Form 941) address as shown on Form 941.
are less than $2,500 and you are paying in full with a ● Enclose your check or money order made payable to
timely filed return or the “United States Treasury.” Be sure also to enter
● You are a monthly schedule depositor making a your EIN, “Form 941,” and the tax period on your
payment in accordance with the Accuracy of check or money order. Do not send cash. Please do
Deposits Rule. (See section 11 of Circular E not staple this voucher or your payment to the return
(Pub. 15), Employer’s Tax Guide, for details.) This (or to each other).
amount may be $2,500 or more. ● Detach the completed voucher and send it with your
Otherwise, you must deposit the amount at an payment and Form 941 to the address provided on the
authorized financial institution or by electronic funds back of Form 941.
transfer. (See section 11 of Circular E (Pub. 15) for Note: You must also complete the entity infor mation
deposit instructions.) Do not use the Form 941-V above line A on For m 941.
payment voucher to make Federal tax deposits.
Caution: If you pay amounts with For m 941 that
should have been deposited, you may be subject to a
penalty. See Deposit Penalties in section 11 of
Circular E (Pub. 15).
Detach Here and Mail With Your Payment and Tax Return. Form 941-V (2004)
941-V
OMB No. 1545-0029
Payment Voucher
Form

Internal Revenue Service (99)
Do not staple or attach this voucher to your payment. 2004
1 Enter your employer identification 2 Dollars Cents
number (EIN).
3 Tax period 4 Enter your business name (individual name if sole proprietor).
1st 3rd
Quarter Quarter Enter your address.
2nd 4th Enter your city, state, and ZIP code.

Quarter Quarter
A–53
Instructions for Form 941 Internal Revenue Service
(Rev. January 2004)

Employer’s Quarterly Federal Tax Return
filed Form 941 by electronic or TeleFile methods, do not

Items To Note also file a paper Form 941. For information about filing
Electronic filing option. File Form 941 electronically Form 941 electronically, visit the IRS website at
and receive proof of filing acknowledgement. Electronic www.irs.gov/efile.
payment options may also be available. Visit the IRS Seasonal employers are not required to file for
website at www.irs.gov/efile for details. quarters when they regularly have no tax liability because
Enhanced Third-Party Designee authority. The they have paid no wages. To alert the IRS that you will
authority given to a representative when a filer completes not have to file a return for one or more quarters during
the Third-Party Designee section of Form 941 has been the year, check the Seasonal employers box on line B
enhanced and is now revocable. Third-party designees of Form 941 for each quarter. See section 12 of
will now be able to exchange information with the IRS Circular E (Pub. 15), Employer’s Tax Guide, for more
concerning Form 941. They may also request and information.
receive written tax information relating to Form 941, Note: Employers of the following categories of workers
including copies of specific notices, correspondence, and do not usually file Form 941.
account transcripts. The named third-party designee may
now be any individual, corporation, firm, organization, or • Household employees. See Pub. 926, Household
partnership. As a result, the enhanced Third-Party Employer’s Tax Guide, and Schedule H (Form 1040),
Designee authorization will be substantially equivalent to Household Employment Taxes.
Form 8821, Tax Information Authorization. See • Farm employees. See Form 943, Employer’s Annual
Third-Party Designee on page 4 for details. Federal Tax Return for Agricultural Employees, and
Revision to line 2 instructions. Filers should now use Circular A (Pub. 51), Agricultural Employer’s Tax Guide.
amounts that would be entered in box 1 of Form W-2, Business reorganization or termination. If you sell or
Wage and Tax Statement, when entering wages, tips, transfer your business, you and the new owner must
and other compensation on line 2 of Form 941. See Line each file a return for the quarter in which the transfer
2— Total Wages and Tips, Plus Other Compensation occurred. Each should report only the wages it paid. A
on page 3 for details. change from one form of business to another, such as
Social security wage base for 2004. Stop withholding from sole proprietorship to partnership or corporation, is
social security tax after an employee reaches $87,900 in considered a transfer and requires a new EIN. See
taxable wages during 2004. (There is no limit on the section 1 of Circular E (Pub. 15). If a change occurs,
amount of wages subject to Medicare tax.) please attach a statement to your return that shows: new
Zero Wage return. Beginning in April of 2004, all owner’s name (or new name of the business); whether
U.S.-based (domestic) taxpayers may file their “Zero the business is now a sole proprietorship, partnership, or
Wage” Forms 941 by telephone using the 941TeleFile corporation; kind of change (sale or transfer); and date of
system. Eligible filers must have had: (a) no withholding, change. When two businesses merge, the continuing firm
(b) no federal tax deposits, and (c) no taxes to report for must file the return for the quarter the change took place.
the quarter. Dial 1-800-583-5345 (toll free) to use The other firm should file a final return.
941TeleFile. Final return. If you go out of business or stop paying
wages, file a final return. Be sure to check the final
General Instructions return box on line A and enter the date final wages were
paid in the area at the right. See the Instructions for
Forms W-2 and W-3 for information on the earlier dates
Purpose of Form for the expedited furnishing and filing of Form W-2 when
a final Form 941 is filed.
Use Form 941 to report income tax that you withheld
from wages (including tips), distributions from Preparing the Form
nonqualified pension plans (including nongovernmental The following will allow the IRS to process Form 941
section 457(b) plans), supplemental unemployment faster and more accurately:
compensation benefits, and third-party payments of sick
pay. Also use Form 941 to report social security and
• Make dollar entries without the dollar sign and comma
(0000.00).
Medicare taxes. • Enter negative amounts in parentheses.
Telephone Help • File the Form 941 that has your preprinted name and
You can call the IRS toll free at 1-800-829-4933 to order address.
FTD coupons (Form 8109) and for answers to your When To File
questions about completing Form 941, tax deposit rules,
or obtaining an employer identification number (EIN). File starting with the first quarter in which you are
required to withhold income tax or pay wages subject to
Who Must File social security and Medicare taxes.
Employers who withhold income tax on wages, or who
must pay social security or Medicare tax, must file Form Quarter Ending Due Date
941 each calendar quarter. After you file your first Form Jan.-Feb.-Mar. March 31 April 30
941, you must file a return for each quarter, even if you Apr.-May-June June 30 July 31
have no taxes to report (but see the seasonal July-Aug.-Sept. Sept. 30 Oct. 31
employers and final return information below). If you Oct.-Nov.-Dec. Dec. 31 Jan. 31
Cat. No. 14625L
A–54
If you made deposits on time in full payment of your more than 10 withholding allowances or (b) exemption
taxes for a quarter, you have 10 more days after the from income tax withholding if their wages will normally
above due dates to file. Your return will be considered be more than $200 a week. For details, see section 9 of
timely filed if it is properly addressed and mailed Circular E (Pub. 15).
First-Class or sent by an IRS-designated delivery service
on or before the applicable due date. See Circular E Forms W-5
(Pub. 15) for more information on IRS-designated Each eligible employee wishing to receive any advance
delivery services. If the due date for filing a return falls on earned income credit (EIC) payments must give you a
a Saturday, Sunday, or legal holiday, you may file your completed Form W-5, Earned Income Credit Advance
return on the next business day. Payment Certificate. The employer’s requirement to
notify certain employees about the EIC can be met by
Where To File giving each eligible employee Notice 797, Possible
See the back of Form 941 for the mailing address for Federal Tax Refund Due to the Earned Income Credit
your return. Do not send Form 941 or any payments to (EIC). See Circular E (Pub. 15) and Pub. 596, Earned
the Social Security Administration (SSA). Income Credit, for more information.
Your filing or payment address may have Employer Identification Number (EIN)
! changed from prior years. If you are using an
CAUTION IRS-provided envelope, use only the labels and
If you do not have an EIN, apply for one on Form SS-4,
Application for Employer Identification Number. Get this
envelope provided with this tax package. form from the IRS or the SSA. If you do not have an EIN
Depositing Taxes by the time your return is due, write “Applied For” and the
date you applied in the space shown for the number.
If your net taxes (line 13) are $2,500 or more for the Form SS-4 has information on how to apply for an EIN by
quarter, you must deposit your tax liabilities at an mail, fax, or by telephone. You may also apply for an EIN
authorized financial institution with Form 8109, Federal online at www.irs.gov/smallbiz.
Tax Deposit Coupon, or by using the Electronic Federal
Tax Payment System (EFTPS). You may pay the taxes Note: Always be sure that the EIN on the form you file
with Form 941 instead of depositing if your total taxes for matches the EIN assigned to your business by the IRS.
the quarter (line 13) are less than $2,500 and you pay in Do not show your social security number on forms calling
full with a timely filed return. See section 11 of Circular E for an EIN. Filing a Form 941 with an incorrect EIN or
(Pub. 15) for information and rules concerning Federal using the EIN of another business may result in penalties
tax deposits and to determine your status as a monthly and delays in processing your return.
or semiweekly schedule depositor. Preprinted Name, EIN, and Address
Reconciliation of Forms 941 and W-3 If your preprinted name, EIN, or address on Form 941 is
Certain amounts reported on your four quarterly Forms not correct, cross it out and type or print the correct
941 for 2004 should agree with your Form W-2, Wage information. However, do not change any of the
and Tax Statement, totals reported on your 2004 Form preprinted information on your Form 941-V, Payment
W-3, Transmittal of Wage and Tax Statements, or Voucher.
equivalent magnetic media reports (Form 6559) filed with
the SSA. The amounts that should agree are: income
tax withholding, social security wages, social security
tips, Medicare wages and tips, and the advance earned
Specific Instructions
income credit payment. If the totals do not agree, the IRS
may require you to explain any differences and correct State Code
any errors. For more information, see section 12 of If you made your deposits by FTD coupon or by using an
Circular E (Pub. 15). EFTPS bank account in a state other than that shown in
Penalties and Interest your address on Form 941, enter the state code for the
state where you made deposits or initiated EFTPS
There are penalties for filing a return late and paying or transfers in the box provided in the upper left corner of
depositing taxes late, unless there is reasonable cause. If the form. Use the Postal Service two-letter state
you file or pay late, please attach an explanation to your abbreviation as the state code. Enter the code “MU” in
return. There are also penalties for failure to: (a) furnish the state code box if you deposit in more than one other
Forms W-2 to employees and file copies with the SSA or state. If you deposit or initiate EFTPS transfers in the
(b) deposit taxes when required. (Do not attach an same state as shown in your address, do not make an
explanation of why the return is late to Forms W-2 sent to entry in this box.
the SSA.) In addition, there are penalties for willful failure
to file returns and pay taxes when due and for filing false Line A—Final Return
returns or submitting bad checks. Interest is charged on Check the box and enter the date final wages were paid
taxes paid late at the rate set by law. in the space provided if you do not have to file Form 941
A trust fund recovery penalty may apply if in the future. See also Final Return on page 1.
! income, social security, and Medicare taxes that
CAUTION must be withheld are not withheld or are not paid.
Line B—Seasonal Employer
The penalty is the full amount of any unpaid trust fund Check this box if you are a seasonal employer
tax. This penalty may apply when these unpaid taxes described on page 1.
cannot be immediately collected from the employer or Line 1—Number of Employees
business. The trust fund recovery penalty may be
imposed on all persons who are determined by the IRS to Enter the number of employees on your payroll during
be responsible for collecting, accounting for, and paying the pay period including March 12 (on the
over these taxes, and who acted willfully in not doing so. January-March calendar quarter return only). Do not
See section 11 in Circ. E (Pub. 15) for more information. include household employees, persons who received no
pay during the pay period, pensioners, or members of the
Forms W-4 Armed Forces.
Each quarter, send with Form 941 copies of any Forms An entry of 250 or more on line 1 indicates that you
W-4, Employee’s Withholding Allowance Certificate, must file Forms W-2 electronically or on magnetic media.
received during the quarter from employees claiming: (a) Call the SSA at 1-800-772-6270 or access the SSA
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A–55
website at www.socialsecurity.gov/employer for more instructions for the adjustment for uncollected employee’s
information on electronic or magnetic media filing. share of social security tax on tips.
Line 2—Total Wages and Tips, Plus Other An employee must report to you cash tips, including
tips you paid the employee for charge customers, totaling
Compensation $20 or more in a month by the 10th of the next month.
Enter amounts on line 2 that would also be included in The employee may use Form 4070, Employee’s Report
box 1 of your employees’ Forms W-2. See the of Tips to Employer, or submit a written statement.
Instructions for Forms W-2 and W-3 for details.
Do not include allocated tips on this line. Instead,
If you get timely notice from your insurance carrier report them on Form 8027, Employer’s Annual
concerning the amount of third-party sick pay that it paid Information Return of Tip Income and Allocated Tips.
to your employees, include the sick pay on line 2. If you Allocated tips are not reportable on Form 941 and are not
are an insurance company, do not include sick pay that subject to withholding of income, social security, or
you paid to policyholders’ employees here if you gave the Medicare tax.
policyholders timely notice of the payments. See Pub.
15-A, Employer’s Supplemental Tax Guide, for details. Line 7a—Taxable Medicare Wages and Tips
Line 3—Total Income Tax Withheld Report all wages and tips subject to Medicare tax. Also
include any sick pay and taxable fringe benefits subject
Enter the income tax that you withheld on wages, tips, to Medicare tax. See section 5 of Circular E (Pub. 15) for
taxable fringe benefits, and supplemental unemployment information on types of wages subject to Medicare tax.
compensation benefits. An insurance company should There is no limit on the amount of wages subject to
enter the income tax that it withheld on third-party sick Medicare tax. If none of the payments are subject to
pay here. Medicare tax, check the box in line 8. Include all tips
Line 4—Adjustment of Withheld Income Tax that your employees reported during the quarter, even if
you were not able to withhold the employee’s share of
Use line 4 to correct errors in income tax withheld from Medicare tax (1.45%). However, see the Line 9
wages paid in earlier quarters of the same calendar instructions below.
year. You may not adjust or claim a refund or credit for
any overpayment of income tax that you withheld or Line 9—Adjustment of Social Security and
deducted from an employee in a prior year. This is Medicare Taxes
because the employee uses the amount shown on Form
W-2 as a payment when filing his or her income tax Current period adjustments. In certain cases, amounts
return. Because any amount shown on line 4 increases reported as social security and Medicare taxes on lines
or decreases your tax liability, the adjustment must be 6b, 6d, and 7b must be adjusted to arrive at your correct
taken into account on line 17, Monthly Summary of tax liability. See section 13 of Circular E (Pub. 15) for
Federal Tax Liability, or on Schedule B (Form 941), information on the following:
Employer’s Record of Federal Tax Liability. For details on • Adjustment for the uncollected employee share of
how to report adjustments on the record of Federal tax social security and Medicare taxes on tips.
liability, see the instructions for line 17 (on page 4) or the • Adjustment for the employee share of social security
instructions for Schedule B (Form 941). Explain any and Medicare taxes on group-term life insurance
adjustments on Form 941c, Supporting Statement To premiums paid for former employees.
Correct Information, or an equivalent statement. See • Adjustment for the employee share of social security
section 13 of Circular E (Pub. 15). and Medicare taxes withheld by a third-party sick pay
payer.
Note: You may adjust income tax withholding for
quarters in earlier years only to correct an
• Fractions of cents adjustment.
administrative error. An administrative error occurs if Enter the adjustments for sick pay and fractions of
the amount you entered on Form 941 is not the amount cents in the appropriate line 9 entry spaces. Enter the
that you actually withheld. For example, if the total amount of all other adjustments in the “Other” entry
income tax actually withheld was incorrectly reported on space, and enter the total of the three types of
Form 941 due to a mathematical or transposition error, adjustments, including prior period adjustments
this would be an administrative error. The administrative (discussed below), in the line 9 entry space to the right.
error adjustment corrects the amount reported on Form Use parentheses (if possible) to show a net decrease to
941 to agree with the amount actually withheld from the the amounts reported on lines 6b, 6d, and 7b. Provide a
employees. supporting statement explaining any adjustments
reported in the “Other” entry space.
Line 6a—Taxable Social Security Wages Prior period adjustments. Use line 9 to correct errors in
Enter the total wages subject to social security tax that social security and Medicare taxes reported on an
you paid to your employees during the quarter. Also earlier return. If you report both an underpayment and an
include any sick pay and taxable fringe benefits subject overpayment, show only the net difference.
to social security tax. See section 5 of Circular E (Pub.
15) for information on types of wages subject to social Because any prior period adjustments shown on line 9
security tax. Enter the amount before deductions. Do not increase or decrease your tax liability, the adjustments
include tips on this line. Stop reporting an employee’s must be taken into account on line 17, Monthly Summary
wages (including tips) after he or she reaches $87,900 of Federal Tax Liability, or on Schedule B (Form 941).
for 2004. However, continue to withhold income and For details on how to report adjustments on the record of
Medicare tax for the whole year on wages and tips even Federal tax liability, see the instructions for line 17, later,
when the social security wage base of $87,900 is or the instructions for Schedule B (Form 941).
reached. See the Line 7a instructions for Medicare tax. If Explain any prior period adjustments on Form 941c.
none of the payments are subject to social security Do not file Form 941c separately from Form 941.
tax, check the box in line 8. Form 941c is not an amended return but is a statement
providing necessary information and certifications
Line 6c—Taxable Social Security Tips supporting the adjustments on lines 4 and/or 9 of Form
Enter all tips that your employees reported during the 941. If you do not have a Form 941c, you may file an
quarter until tips and wages for an employee reach equivalent supporting statement with the return providing
$87,900 in 2004. Do this even if you were not able to the required information about the adjustment(s). See
withhold the employee tax (6.2%). See the Line 9 section 13 of Circular E (Pub. 15).
-3-
A–56
If you are adjusting an employee’s social security an overreported liability in a prior period) and it exceeds
! or Medicare wages or tips for a prior year, you
CAUTION must file Form W-2c, Corrected Wage and Tax
your total liability for the month, do not enter a negative
amount for the month. Instead, enter “-0-” for the month
Statement, with Form W-3c, Transmittal of Corrected and carry over the unused portion of the adjustment to
Wage and Tax Statements. the next month.
Line 12—Advance Earned Income Credit For example, Pine Co. discovered on February 6,
2004, that it overreported social security tax on a prior
(EIC) Payments Made to Employees quarter return by $2,500. Its Form 941 taxes for the 1st
Enter any advance EIC payments that you made to your quarter of 2004 were: January $2,000, February $2,000,
employees. Your eligible employees may elect to receive March $2,000. Pine Co. should enter “$2,000” in column
part of the EIC as an advance payment. Eligible (a), “-0-” in column (b), “$1,500” in column (c), and the
employees must expect to have a qualifying child and total, “$3,500,” in column (d). The prior period adjustment
must give you a completed Form W-5 stating that they ($2,500) offsets the $2,000 liability for February and the
qualify for the EIC. Once the employee gives you a excess $500 must be used to offset March liabilities.
signed and completed Form W-5, you must make the Since the error was not discovered until February, it does
appropriate advance EIC payments. Advance EIC not affect January liabilities reported in column (a).
payments are generally made from withheld income tax If excess negative adjustments are carried forward to
and employee and employer social security and the next quarter, do not show those excess adjustments
Medicare taxes. See section 10 of Circular E (Pub. 15) on lines 4 or 9 because line 17 column (d) must equal
and Pub. 596. line 13. Instead, on your next quarter’s Form 941, report
If the amount of your advance EIC payments exceeds the excess negative adjustments on lines 4 or 9 and
your total taxes (line 11) for the quarter, you may claim a adjust (but not below zero) your line 17(a) liability.
refund of the overpayment or elect to have the credit
applied to your return for the next quarter. Provide a Third-Party Designee. If you want to allow any
statement with your return identifying the amount of individual, corporation, firm, organization, or partnership
excess payment(s) and the pay period(s) in which it was to discuss your Form 941 with the IRS, check the “Yes”
paid. See section 10 of Circular E (Pub. 15). box in the Third-Party Designee section of the return.
Line 15—Balance Due Also, enter the name, phone number, and any five
numbers that the designee chooses as his or her
You do not have to pay if line 15 is under $1. personal identification number (PIN). The authorization
Generally, you should show a balance due on line 15 applies only to the tax form upon which it appears.
only if your net tax liability for the quarter (line 13) is less
than $2,500. However, see section 11 of Circular E By checking the “Yes” box, you are authorizing the
(Pub. 15) regarding payments made under the accuracy IRS to call the designee to answer any questions relating
of deposits rule. (Make certain that the entity area to the information reported on your tax return. You are
above line A on Form 941 is properly completed). also authorizing the designee to:
• Exchange information concerning your tax return with
If you fail to make deposits as required and the IRS and
! instead pay the taxes with Form 941, you may be
CAUTION subject to a penalty.
• Request and receive written tax return information
notices, correspondence, and account transcripts.
Line 16—Overpayment You are not authorizing the designee to receive any
If you deposited more than the correct amount for a refund check, bind you to anything (including additional
quarter, you can have the overpayment refunded or tax liability), or otherwise represent you before the IRS. If
applied to your next return by checking the appropriate you want to expand the designee’s authorization or
box. If you do not check either box, your overpayment will desire automatic issuances of copies of notices, see
be applied to your next return. The IRS may apply your Pub. 947, Practice Before the IRS and Power of
overpayment to any past due tax account under your Attorney.
EIN. If line 16 is under $1, the amount will be refunded or The Third-Party Designee authorization automatically
applied to your next return only on written request. expires one year from the due date (without regard to
Line 17—Monthly Summary of Federal Tax extensions) for filing your Form 941. If you or your
Liability designee desire to terminate the authorization, a written
statement conveying your wish to revoke the
Note: This is a summary of your monthly tax liability, not authorization should be submitted to the IRS service
of deposits made. If line 13 is less than $2,500, do not center where the return was processed.
complete line 17 or Schedule B (Form 941).
Complete line 17 only if you were a monthly
Who Must Sign
schedule depositor for the entire quarter and line 13 is • Sole proprietorship —The individual owning the
$2,500 or more. (See section 11 of Circular E (Pub. 15) business.
for details on the deposit rules.) You are a monthly • Corporation (including an LLC treated as a
schedule depositor for the calendar year if the total corporation) —The president, vice president, or other
amount of your Form 941 taxes (line 11) reported for the principal officer.
lookback period is not more than $50,000. • Partnership (including an LLC treated as a
partnership) or unincorporated organization —A
The lookback period is the four consecutive quarters responsible and duly authorized member or officer having
ending on June 30 of the prior year. The 2004 lookback knowledge of its affairs.
period begins July 1, 2002, and ends June 30, 2003. • Single member limited liability company (LLC)
If you were a semiweekly schedule depositor treated as a disregarded entity —The owner of the
! during any part of the quarter, do not complete
CAUTION columns (a) through (d) of line 17. Instead,
limited liability company.
• Trust or estate —The fiduciary.
complete Schedule B (Form 941). The return may also be signed by a duly authorized
Reporting adjustments on line 17. If your net agent of the taxpayer if a valid power of attorney has
adjustment during a month is negative (e.g., correcting been filed.
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A–57
SCHEDULE B Employer’s Record of Federal Tax Liability
(FORM 941)
See Circular E for more information about employment tax returns. OMB No. 1545-0029
(Rev. January 2002)
Department of the Treasury 5151
Internal Revenue Service Attach to Form 941 or 941-SS.
Name as shown on Form 941 (or Form 941-SS) Employer identification number Date quarter ended
You must complete this schedule if you are required to deposit on a semiweekly schedule, or if your tax liability on
any day is $100,000 or more. Show tax liability here, not deposits. (The IRS gets deposit data from FTD coupons or
EFTPS.)
A. Daily Tax Liability—First Month of Quarter
1 8 15 22 29
2 9 16 23 30
3 10 17 24 31
4 11 18 25
5 12 19 26
6 13 20 27
7 14 21 28
A Total tax liability for first month of quarter A
B. Daily Tax Liability—Second Month of Quarter
1 8 15 22 29
2 9 16 23 30
3 10 17 24 31
4 11 18 25
5 12 19 26
6 13 20 27
7 14 21 28
B Total tax liability for second month of quarter B
C. Daily Tax Liability—Third Month of Quarter
1 8 15 22 29
2 9 16 23 30
3 10 17 24 31
4 11 18 25
5 12 19 26
6 13 20 27
7 14 21 28
C Total tax liability for third month of quarter C
D Total for quarter (add lines A, B, and C). This should equal line 13 of Form 941 (or line 10 of Form 941-SS) D
For Paperwork Reduction Act Notice, see page 2. Cat. No. 11967Q Schedule B (Form 941) (Rev. 1-2002)
A–58
Schedule B (Form 941) (Rev. 1-2002) Page 2
General Instructions Example A. Employer A, who is a Adjustments. Semiweekly schedule

semiweekly schedule depositor, pays depositors must take into account on
Purpose of form. Use Schedule B wages once each month on the last day Schedule B adjustments to correct
(Form 941) to report your tax liability of the month. On December 21, 2001, errors on prior returns (reported on lines
(income tax withheld plus both employee Employer A also paid year-end employee 4 and 9 of Form 941 or on line 9 of
and employer social security and bonuses (subject to employment tax and Form 941-SS). If the adjustment was to
Medicare taxes minus any advance income tax withholding). Because correct an underreported liability in a
earned income credit payments) on a Employer A is a semiweekly schedule prior quarter, report the adjustment on
daily basis. Form 941-SS filers report depositor, it is required to record the entry space corresponding to the
only employee and employer social employment tax and withholding date the error was discovered.
security and Medicare taxes. Do not liabilities on Schedule B (Form 941). If the adjustment corrects an
show Federal tax deposits. Deposit Employer A should report tax liabilities overreported liability, use the
information is obtained from the deposit for the 4th quarter (October –December) adjustment amount as a credit to offset
coupons (Form 8109) or from the on line 31, section A (First Month of subsequent liabilities until it is used up.
Electronic Federal Tax Payment System Quarter); line 30, section B (Second For example, Employer D discovered on
(EFTPS). Month of Quarter); and lines 21 and 31, 1/19/01 that it overreported social
Who must file. Semiweekly schedule section C (Third Month of Quarter). security tax on a prior quarter return by
depositors are required to complete and Enter the monthly totals on lines A, B, $10,000. It paid wages on 1/12/01,
attach Schedule B to Form 941. Monthly and C. Add these monthly subtotals and 1/19/01, 1/26/01, and 2/2/01 and had a
schedule depositors who accumulate enter the total tax liability for the quarter $5,000 tax liability for each of those pay
$100,000 or more on any day must also on line D. The amount on line D should dates. Employer D must report a $5,000
complete and attach Schedule B. If you equal Form 941, line 13 or Form liability on line 12, section A of Schedule
accumulate less than a $2,500 tax 941-SS, line 10. B. The adjustment for the $10,000
liability (reduced by any advance earned Example B. Employer B is a semiweekly overreported liability is used to offset the
income credit payment) during the schedule depositor. It has paydays every 1/19/01 and 1/26/01 liabilities, so these
quarter, and you pay in full with a timely other Friday. It accumulated a $20,000 two $5,000 liabilities are not deposited
filed return, you need not complete employment tax liability on each of the or reported on Schedule B. The $5,000
Schedule B (Form 941). following pay dates: 1/12/01; 1/26/01; liability for 2/2/01 must be reported on
Schedule B also must be used by 2/9/01; 2/23/01; 3/9/01; and 3/23/01. line 2, section B of Schedule B. See
semiweekly schedule depositors who file Since Employer B is a semiweekly section 13 of Circular E for details on
Form 941-SS, Employer’s Quarterly schedule depositor, it is required to reporting adjustments to correct errors
Federal Tax Return (for American record its tax liabilities on Schedule B on prior period returns.
Samoa, Guam, the Commonwealth of (Form 941). Employer B must record the
the Northern Mariana Islands, and the $20,000 of liabilities on lines 12 and 26 Paperwork Reduction Act Notice. We
U.S. Virgin Islands). of part A (First Month of Quarter); lines 9 ask for the information on this form to
Important. Schedule B (Form 941) is and 23 of part B (Second Month of carry out the Internal Revenue laws of
used by the IRS to determine if you Quarter); and lines 9 and 23 of part C the United States. You are required to
have timely deposited your employment (Third Month of Quarter). give us the information. We need it to
and withholding tax liabilities. Unless Example C. Employer C is a new ensure that you are complying with
Schedule B is properly completed and business and is a monthly schedule these laws and to allow us to figure and
filed with Form 941 or 941-SS, the IRS depositor for 2001. Employer C has collect the right amount of tax.
will not be able to process your return paydays every Friday and accumulated a You are not required to provide the
and will have to contact you for the $2,000 employment tax liability on information requested on a form that is
missing information. 1/12/01 and a $110,000 tax liability on subject to the Paperwork Reduction Act
1/19/01 and each of the following unless the form displays a valid OMB
Specific Instructions Fridays during 2001. Under the deposit control number. Books or records
rules, an employer becomes a relating to a form or its instructions must
Completing the Employer ’s Record of semiweekly schedule depositor when a be retained as long as their contents
Federal Tax Liability. If you are required $100,000 or more tax liability is may become material in the
to report your tax liabilities on Schedule accumulated on any day within a administration of any Internal Revenue
B (Form 941) as discussed above, file deposit period (see section 11 of law. Generally, tax returns and return
the schedule with Forms 941 or 941-SS. Circular E or section 8 of Circular SS for information are confidential, as required
Do not complete columns (a) through (d) details). Because Employer C by Code section 6103.
of the Monthly Summary of Federal Tax accumulated $112,000 on 1/19/01, it
Liability (line 17 on Form 941 or The time needed to complete and file
became a semiweekly schedule this form will vary depending on
941-SS). However, be sure to mark the depositor on that date and must
Schedule B checkbox above line 17. individual circumstances. The estimated
complete Schedule B (Form 941) and file average time is 2 hr., 53 min.
Each numbered space on the it with Form 941 or 941-SS. It should
schedule corresponds to dates during If you have comments concerning the
record the $2,000 liability on line 12 of
the quarter. Report your tax liabilities on accuracy of this time estimate or
section A and $110,000 on the
this schedule corresponding to the dates suggestions for making this form
applicable lines for the remaining pay
wages were paid, not when payroll simpler, we would be happy to hear from
dates.
liabilities accrued. For example, if your you. You can write to the Tax Forms
Employer C does not complete the Committee, Western Area Distribution
payroll period ends December 31, 2001, Monthly Summary of Federal Tax
and the wages for that period were paid Center, Rancho Cordova, CA
Liability (line 17 of Form 941 or 941-SS) 95743-0001. Do not send the tax form
on January 7, 2002, the employment tax even though it was a monthly schedule
liability for those wages should be to this address. Instead, see Where to
depositor until 1/19/01. file in the Form 941 or 941-SS
reported on Schedule B for the first
quarter of 2002 on line 7, section A (First instructions.
Month of Quarter).
A–59
Form 941c Supporting Statement To Correct Information
Do Not File Separately
OMB No. 1545-0256
(Rev. October 2003)

Department of the Treasury Page
Internal Revenue Service File with Forms 941, 941-M, 941-SS, 943, 945, or Form 843. No.
Name Employer identification number
Telephone number (optional) A This form supports adjustments to: Check only one box. (see instructions)
Form 941 Form 941-SS Form 945

Form 941-M Form 943
B This form is attached to and filed with the return for the C Enter the date that you discovered the error(s) reported on this form.
(If you are making more than one correction and the errors were not
period ending (month, year) discovered at the same time, explain in Part V.)
Part I Signature and Certification (You must complete this part for the IRS to process your adjustments for
overpayments.) Skip Part I if all of your adjustments are underpayments. (Part I applies to wages only.)
I certify that Forms W-2c, Corrected Wage and Tax Statement, have been filed (as necessary) with the Social Security
Administration, and that (check appropriate boxes):
All overcollected income taxes for the current calendar year and all social security and Medicare taxes for the current and
prior calendar years have been repaid to employees. For claims of overcollected employee social security and Medicare
taxes in earlier years, a written statement has been obtained from each employee stating that the employee has not
claimed and will not claim refund or credit of the amount of the overcollection.
All affected employees have given their written consent to the allowance of this credit or refund. For claims of
overcollected employee social security and Medicare taxes in earlier years, a written statement has been obtained from
each employee stating that the employee has not claimed and will not claim refund or credit of the amount of the
overcollection.
The social security tax and Medicare tax adjustments represent the employer’s share only. An attempt was made to
locate the employee(s) affected, but the affected employee(s) could not be located or will not comply with the certification
requirements.
None of this refund or credit was withheld from employee wages.
Sign
Here Signature Title Date
Part II Income Tax Withholding (Including Backup Withholding) Adjustment

(a) (b) (c)
(d)
Period Corrected (For quarterly Withheld Income Tax Correct Withheld
Withheld Income
returns, enter date quarter ended. Previously Reported Income Tax for
Tax Adjustment
For annual returns, enter year.) for Period Period
1
2
3
4
5 Net withheld income tax adjustment. If more than one page, enter total of all columns (d) on first
page only. Enter here and on the appropriate line of the return with which you file this form. 5
Part III Social Security Tax Adjustment (Use the tax rate in effect during the period(s) corrected. You must also
complete Part IV.)
(a)
(b) (c) (d) (e) (f)
Period Corrected (For quarterly
Wages Previously Correct Wages for Tips Previously Correct Tips for Social Security Tax
returns, enter date quarter ended.
Reported for Period Period Reported for Period Period Adjustment
For annual returns, enter year.)
1
2
3
4
5 Totals. If more than one page,
enter totals on first page only
6 Net social security tax adjustment. If more than one page, enter total of all columns (f) on first
page only. Enter here and on the appropriate line of the return with which you file this form 6
7 Net wage adjustment. If more than one page, enter total of all lines 7 on first page only. If line 5(c)
is smaller than line 5(b), enter difference in parentheses 7
8 Net tip adjustment. If more than one page, enter total of all lines 8 on first page only. If line 5(e)
is smaller than line 5(d), enter difference in parentheses 8
For Paperwork Reduction Act Notice, see page 4. Cat. No. 11242O Form 941c (Rev. 10-2003)
A–60
Form 941c (Rev. 10-2003) Page 2
Part IV Medicare Tax Adjustment
(a) (b) (c)
(d)
Period Corrected (For quarterly Wages and Tips Correct Wages
Medicare Tax
returns, enter date quarter ended. Previously Reported and Tips for
Adjustment
For annual returns, enter year.) for Period Period
1
2
3
4
5 Totals. If more than one page, enter totals on first page only
6 Net Medicare tax adjustment. If more than one page, enter total of all columns (d) on first page
only. Enter here and on the appropriate line of the return with which you file this form 6
7 Net wage and tip adjustment. If more than one page, enter total of all lines 7 on first page only.
If line 5(c) is smaller than line 5(b), enter difference in parentheses 7
Part V Explanation of Adjustments
A–61
Form 941c (Rev. 10-2003) Page 3
General Instructions Statute of limitations. Generally, you may make an

adjustment only within three years of the return due
Purpose of form. Use Form 941c to provide date or the date the return was filed, whichever is later.
background information and certifications supporting For purposes of the statute of limitations, the due date
prior period adjustments to income, social security, of Forms 941, 941-M, 941-SS, 943, and 945 is April 15
and Medicare taxes reported on Form 941, 941-M, of the year after the close of the tax year. For example,
941-SS, 943, or 945. File it with the tax return on the four quarterly Forms 941 filed for 2001 are all
which you are claiming the adjustment (Form 941, 943, treated as due on April 15, 2002. If they were filed on
945, etc.). You may use Form 941c even though you or before April 15, 2002, adjustments could be made
filed the original return on magnetic media or for any of the quarterly returns for 2001 until April 15,
electronically. 2005.
Do not use Form 941c as a supporting statement for
current period adjustments (e.g., adjustment for Specific Instructions
uncollected employee share of social security and
Medicare taxes on tips). No supporting statement is Complete all applicable columns on the line for each
required for the fractions-of-cents and third-party return period that you are correcting. Show the total
sick pay adjustments. See your form instructions. amount paid to all employees, not the amount for each
individual employee. If you need more space, use
Income tax withholding errors. Generally, you are not additional Forms 941c. If you use additional Forms
permitted to correct income tax withholding errors 941c as continuation pages, be sure that the total and
made in a prior calendar year. However, you may net adjustment lines on the first form include the totals
make an adjustment to correct an administrative error from the continuation pages. These lines are line 5 of
in a prior year. Refer to Circular E (Pub. 15), Part II, lines 5 through 8 of Part III, and lines 5 through
Employer’s Tax Guide, for more information on 7 of Part IV.
correcting administrative errors.
Line A. Check the box for the return that you are
More information. See Circular E (Pub. 15), Circular A adjusting. Check only one box. Use a separate
(Pub. 51), Agricultural Employer’s Tax Guide, or your Form 941c for each type of return (e.g., Form 941 and
form instructions for more information about Form 945).
adjustments.
Line B. Show the return period in which you are
How to use Form 941c. Form 941c is not an reporting tax adjustment(s). For example, if you are
amended return and must never be filed separately. making an adjustment on Form 941 for the quarter
You must make adjustments on the return (e.g., Form ending June 30, 2003, enter 06-2003. File Form 941c
941) for the period during which you discovered the with the return for this period. Do not show the return
error. There is no limit to the number of adjustments period(s) being corrected in this entry space.
that you can make, and these adjustments can be for
corrections to more than one prior period. However, if Line C. Enter the date that you discovered the
you filed two or more types of tax returns that need error(s). If you are making more than one correction
correction (for example, Form 941 and Form 943), use and the errors were not discovered at the same time,
a separate Form 941c for each type of return. The net leave line C blank and explain in Part V. The date that
adjustment increases or decreases your tax liability for you discover the error(s) is the date that your tax
the period in which the error was discovered and liability increases or decreases. Your deposits for this
adjusted. date must be adjusted accordingly. See the related
return instructions for more information.
If your adjustment(s) results in an overpayment, you
may apply for a refund using Form 843, Claim for Part I —Signature and certification. Part I applies to
Refund and Request for Abatement, instead of making wages only. If any adjustment is for an overpayment, it
an adjustment as discussed above. If you choose to cannot be processed unless you check at least one
file Form 843, you will receive a refund check (with box in Part I and you sign the certification. If you
interest) instead of reducing your current employment obtained written consents or statements from some
tax liability (no interest). When filing Form 843, attach employees but you could not locate or secure the
Form 941c or an equivalent statement. cooperation of the remaining employees, check both
the second and third boxes. Provide a summary in
If you did not file a return for one or more return Part V of the amount of the adjustments for both the
periods, do not use Form 941c to report the employees who provided statements and for those
information. Instead, file the required returns. who did not.
Corrections not required. You are not required to You may make an adjustment for both the employer
correct errors previously reported on the Summary of and employee shares of social security and Medicare
Federal Tax Liability (e.g., line 17, Form 941, or line 15, taxes for those employees who provided the required
Form 943) or on Schedule B (Form 941), Form 943-A written statement. But you may make adjustments for
or Form 945-A. Also, you are not required to correct only the employer’s share for those employees who did
amounts previously reported on lines 1 or 2 of not provide statements.
Form 941 or Form 941-M; or line 1 of Form 941-SS or
Form 943.
A–62
Form 941c (Rev. 10-2003) Page 4
Part II —Income tax withholding (including backup employee for any social security correction made after
withholding) adjustment. Use this part to correct you filed his or her Form W-2 with the SSA. Do not
income tax withholding (including backup withholding) send Form 941c (or a copy) to the SSA with
information that you previously reported. Show the Form(s) W-2c.
total amount of tax withheld, not the amount withheld Part IV —Medicare tax adjustment. Use this part to
from each individual. correct Medicare wages and tips information that you
After the end of the year, you cannot adjust the reported in an earlier period. You may make
amounts reported as income tax withheld (including corrections to Medicare taxes reported in prior
backup withholding) unless it is to correct an calendar years as long as the statute of limitations has
administrative error. An administrative error is any not expired (see Statute of limitations on page 3). If
error that does not change the amount of income tax you are reducing Medicare taxes, be sure to read and
that was actually withheld. For example, if the total check the appropriate boxes in Part I.
income tax actually withheld was incorrectly reported You must file a Form W-2c with the SSA and give
due to a mathematical computation or transposition copies to the employee for any Medicare correction
error, this is an administrative error. made after you filed Form W-2 with the SSA.
Except to correct an administrative error, you will not
be allowed a refund or credit for any prior year
overpayment of income tax withheld (including backup Paperwork Reduction Act Notice. We ask for the
withholding). This is because the amount of information on this form to carry out the Internal
withholding shown on Form W-2, Wage and Tax Revenue laws of the United States. You are required to
Statement, Form W-2G, Certain Gambling Winnings, give us the information. We need it to ensure that you
or Form 1099, is used as a credit on the employee ’s or are complying with these laws and to allow us to figure
income recipient ’s income tax return (Form 1040, etc.). and collect the right amount of tax.
If you are making an administrative error adjustment for You are not required to provide the information
a period during a prior calendar year, provide an requested on a form that is subject to the Paperwork
explanation in Part V. Reduction Act unless the form displays a valid OMB
Part III —Social security tax adjustment. Use this control number. Books or records relating to a form or
part to correct social security wages and tips its instructions must be retained as long as their
information that you reported in an earlier period. You contents may become material in the administration of
may make corrections to social security taxes reported any Internal Revenue law. Generally, tax returns and
in prior calendar years as long as the statute of return information are confidential, as required by Code
limitations has not expired (see Statute of limitations section 6103.
on page 3). If you are reducing social security taxes, The time needed to complete and file this form will
be sure to read and check the appropriate boxes in vary depending on individual circumstances. The
Part I. estimated average time is 9 hours and 12 minutes.
Because Form W-2 is used by the Social Security If you have comments concerning the accuracy of
Administration (SSA) to post an employee’s social this time estimate or suggestions for making this form
security wages and tips to his or her earnings record, simpler, we would be happy to hear from you. You can
you must file a Form W-2c, Corrected Wage and Tax write to the IRS at the address shown in the Privacy
Statement, with the SSA and give copies to the Act and Paperwork Reduction Act Notice in the
instructions of the tax return with which you file this
form.
A–63
Form 945 Annual Return of Withheld Federal Income Tax
For withholding reported on Forms 1099 and W-2G.
OMB No. 1545-1430

See separate instructions. (For more information on income tax withholding, see Circ. E (Pub. 15) and Pub. 15-A.)
Please type or print.
2003
IRS USE ONLY
Enter state code Name (as distinguished from trade name) Employer identification number T
for state in FF
which deposits
Trade name, if any FD
were made only
if different from FP
state in address Address (number and street) City, state, and ZIP code I
to the right
(see page 3 of T
separate
instructions).
1 1 1 1 1 1 1 1 1 1 2 3 3 3 3 3 3 3 3 4 4 4 5 5 5
If address is
IRS Use
different
from prior
return, check
here
6 7 8 8 8 8 8 8 8 8 9 9 9 9 10 10 10 10 10 10 10 10 10 10
A If you do not have to file returns in the future, check here and enter date final payments made
1 Federal income tax withheld from pensions, annuities, IRAs, gambling winnings, etc. 1
2 Backup withholding 2
3 Adjustment to correct administrative errors (see separate instructions) 3
4 Total taxes. If $2,500 or more, this must equal line 8M below or line M of Form 945-A 4
5 Total deposits for 2003 from your records, including overpayment applied from 2002 return 5
6 Balance due (subtract line 5 from line 4) (see separate instructions) 6
7 Overpayment. If line 4 is less than line 5, enter overpayment here $ and check if to be:
Applied to next return or Refunded

● All filers: If line 4 is less than $2,500, do not complete line 8 or Form 945-A.
● Semiweekly schedule depositors: Complete Form 945-A and check here
● Monthly schedule depositors: Complete line 8, entries A through M, and check here
8 Monthly Summary of Federal Tax Liability. (Complete Form 945-A instead, if you were a semiweekly schedule depositor.)
Tax liability for month Tax liability for month Tax liability for month
A January F June K November

B February G July L December
C March H August
M Total liability for
D April I September year (add lines A
E May J October through L)
Do you want to allow another person to discuss this return with the IRS (see separate instructions)? Yes. Complete the following. No
Third
Party
Designee’s Phone Personal identification
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge
Sign and belief, it is true, correct, and complete.
Here Signature
Print Your
Name and Title Date
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions. Cat. No. 14584B Form 945 (2003)
A–64
Form 945-V
Payment Voucher
Purpose of Form Specific Instructions

Complete Form 945-V if you are making a payment Box 1 —Employer identification number (EIN). If you
with Form 945, Annual Return of Withheld Federal do not have an EIN, apply for one on Form SS-4,
Income Tax. We will use the completed voucher to Application for Employer Identification Number, and
credit your payment more promptly and accurately, write “Applied For” and the date you applied in this
and to improve our service to you. entry space.
If you have your return prepared by a third party and Box 2 —Amount paid. Enter the amount paid with
make a payment with that return, please provide this Form 945.
payment voucher to the return preparer. Box 3 —Name and address. Enter your business
Making Payments With Form 945 name and address as shown on Form 945.
● Enclose your check or money order made payable to
Make a payment with your 2003 Form 945 only if :
the "United States Treasury." Be sure also to enter
● Your total taxes for the year (line 4 on Form 945) your EIN, “Form 945,” and “2003” on your check or
are less than $2,500 and you are paying in full with a money order. Do not send cash. Please do not staple
timely filed return or this voucher or your payment to the return (or to each
● You are a monthly schedule depositor making a other).
payment in accordance with the Accuracy of ● Detach the completed voucher and send it with your
Deposits Rule. (See section 11 of Circular E (Pub. payment and Form 945 to the address provided in the
15), Employer’s Tax Guide, for details.) This amount separate Instructions for Form 945.
may be $2,500 or more.
Otherwise, you are required to deposit the amount at
an authorized financial institution or by electronic funds
transfer. (See section 11 of Circular E (Pub. 15) for
deposit instructions.) Do not use the Form 945-V
payment voucher to make Federal tax deposits.
Caution: If you pay amounts with For m 945 that
should have been deposited, you may be subject to a
penalty. See Deposit Penalties in section 11 of
Circular E (Pub. 15).
Detach Here and Mail With Your Payment and Tax Return.
OMB No. 1545-1430

Form 945-V Payment Voucher
Use this voucher when making a payment with your return. 2003
1 Enter your employer identification number (EIN) 2 Dollars Cents
3 Enter your business name (individual name if sole proprietor).
Enter your address.
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Instructions for Form 945

Annual Return of Withheld Federal Income Tax
Circular E (Pub. 15), Employer’s Tax Guide, for more

Changes To Note information.
Enhanced Third Party Designee authority. The Related publications. Circular E (Pub. 15) explains the
authority given to a representative when a filer completes rules for withholding, depositing, and reporting Federal
the Third Party Designee section of Form 945 has been income tax. Pub. 15-A, Employer’s Supplemental Tax
enhanced and is now revocable. Third-party designees Guide, includes information on Federal income tax
will now be able to exchange information with the IRS withholding from pensions, annuities, and Indian gaming
concerning Form 945. They may also request and profits. For information on withholding from gambling
receive written tax information relating to Form 945 winnings, see the Instructions for Forms W-2G and
including copies of specific notices, correspondence, and 5754. These publications are available on the IRS
account transcripts. The named third-party designee may website at www.irs.gov or by calling 1-800-TAX-FORM
now be any individual, corporation, firm, organization, or (1-800-829-3676).
partnership. As a result, the enhanced Third Party
Designee authorization will be substantially equivalent to Telephone Help. You can call the IRS toll free at
Form 8821, Tax Information Authorization. See Third 1-800-829-4933 to order FTD coupons (Form 8109) and
Party Designee on page 4 for details. for answers to your questions about completing Form
945, tax deposit rules, or obtaining an employer
Web-based application for an EIN. You may now apply identification number (EIN).
for an employer identification number (EIN) online by
visiting the IRS website at www.irs.gov/smallbiz. See Who must file. If you withhold Federal income tax
also Employer identification number (EIN) on page 2. (including backup withholding) from nonpayroll payments,
you must file Form 945. You are not required to file Form
General Instructions 945 for those years in which you do not have a
nonpayroll tax liability. Do not report on Form 945
Purpose of form. Use Form 945 to report Federal withholding that is required to be reported on Form 1042,
income tax withheld from nonpayroll payments. Annual Withholding Tax Return for U.S. Source Income
Nonpayroll payments include the following: of Foreign Persons.
• Pensions (including governmental section 457(b) plan When to file. For 2003, file Form 945 by February 2,
distributions), annuities, and IRA distributions 2004. However, if you made deposits on time in full
• Military retirement payment of the taxes for the year, you may file the return
• Gambling winnings by February 10, 2004. Your return will be considered
• Indian gaming profits timely filed if it is properly addressed and mailed
• Voluntary withholding on certain government payments First-Class or sent by an IRS-designated private delivery
• Backup withholding service on or before the due date. See Circular E (Pub.
Report all Federal income tax withholding from 15) for more information on IRS-designated private
nonpayroll payments or distributions on one Form 945. delivery services.
Do not file more than one Form 945 for any calendar
year. Where to file. In the list below, find the location of your
legal residence, principal place of business, office, or
All Federal income tax withholding reported on Forms agency. Send your return to the Internal Revenue
1099 (e.g., Form 1099-R or 1099-MISC) or Form W-2G Service at the address listed for your location. No street
must be reported on Form 945. Do not report Federal address is needed.
income tax withholding from wages on Form 945.
All employment taxes and Federal income tax Where you file depends on whether or not you
withholding reported on Form W-2, Wage and Tax TIP are including a payment with the return.
Statement, must be reported on Form 941 (or Form 943
for agricultural employees, Schedule H (Form 1040) for Exception for exempt organizations and
household employees, or Form CT-1 for railroad government entities. If you are filing Form 945 for an
employees). exempt organization or government entity (Federal, state,
Do not report on Form 945 Federal income tax local, or Indian tribal government), use the following
withheld on distributions to participants from nonqualified addresses, regardless of your location:
pension plans (including nongovernmental section
457(b) plans) and some other deferred compensation Return without payment: Ogden, UT 84201-0042
arrangements that are treated as wages and are reported Return with payment: P.O. Box 660443, Dallas, TX
on Form W-2. Report such withholding on Form 941. See 75266-0443
Cat. No. 20534D
A–66
willfully if the person knows that the required actions are
Connecticut, Delaware, District of Columbia, Illinois, not taking place.
Indiana, Kentucky, Maine, Maryland, Massachusetts,
Voluntary income tax withholding. States must allow
Michigan, New Hampshire, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island, South
unemployment compensation recipients to elect to
Carolina, Vermont, Virginia, West Virginia, Wisconsin have Federal income tax withheld at a 10% rate in 2004.
Recipients paid under the Railroad Unemployment
Return without payment: Return with payment: Insurance Act may also elect withholding at a 10% rate in
P.O. Box 105092 2004.
Cincinnati, OH 45999-0042 Atlanta, GA 30348-5092
Recipients of any of the following Federal payments
may request Federal income tax withholding in 2004 at a
Alabama, Alaska, Arizona, Arkansas, California, rate of 7%, 10%, 15%, or 25%:
Colorado, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, • Social security and Tier 1 railroad retirement benefits
Louisiana, Minnesota, Mississippi, Missouri, Montana, • Certain crop disaster payments
Nebraska, Nevada, New Mexico, North Dakota, • Commodity Credit Corporation loans
Oklahoma, Oregon, South Dakota, Tennessee, Texas, The payee may request withholding on Form W-4V,
Utah, Washington, Wyoming Voluntary Withholding Request, or you may develop your
Return without payment: Return with payment: own substitute form. Any voluntary withholding on these
P.O. Box 660443 payments must be reported on Form 945 (and on Form
Ogden, UT 84201-0042 Dallas, TX 75266-0443 1099-G) and is subject to the deposit rules.
If you have no legal residence or principal place of Depositing Withheld Taxes

business in any state – Deposit all nonpayroll (Form 945) Federal income tax
Return without payment: Return with payment: withholding, including backup withholding, using Form
P.O. Box 80108 8109, Federal Tax Deposit Coupon, at an authorized
Philadelphia, PA 19255-0042 Cincinnati, OH 45280-0008 financial institution, unless you are required to use the
EFTPS electronic deposit system (see below). Combine
all Form 945 taxes for deposit purposes. Do not combine
Employer identification number (EIN). If you do not deposits for Forms 941, 943, or CT-1 with deposits for
have an EIN, apply for one on Form SS-4, Application for Form 945. If you deposit using Form 8109, be sure to
Employer Identification Number. Get this form by calling darken the space for Form “945” on Form 8109.
1-800-TAX-FORM (1-800-829-3676) or from the IRS Generally, the deposit rules that apply to Form 941
website at www.irs.gov/smallbiz. If you do not have an also apply to Form 945. However, because Form 945 is
EIN by the time your return is due, write “Applied For” an annual return, the rules for determining your deposit
and the date you applied in the space shown for the schedule (discussed below) are different from those for
number. Form 941. See section 11 of Circular E (Pub. 15) for a
Note: If you are reporting withholding on pension detailed discussion of the deposit rules.
distributions, be sure to be consistent in using the same Determining your deposit schedule. There are two
name and EIN for all reporting and depositing of taxes deposit schedules —monthly or semiweekly— for
(e.g., on Forms 945, 1099-R, and 8109/EFTPS). Filing determining when you must deposit withheld Federal
Form 945 with an incorrect name and EIN or failure to income tax. These schedules tell you when a deposit is
use the same name and EIN in all reporting and due after a tax liability arises (i.e., you make a payment
depositing of taxes may result in penalties and delays in subject to Federal income tax withholding, including
processing your return. backup withholding). Before the beginning of each
Penalties and interest. There are penalties for filing calendar year, you must determine which of the two
Form 945 late and for paying or depositing taxes late, deposit schedules you must use.
unless there is reasonable cause. See section 11 of For 2004, you are a monthly schedule depositor for
Circular E (Pub. 15) for more information on deposit Form 945 if the total tax reported on your 2002 Form 945
penalties. There are also penalties for failure to furnish (line 4) was $50,000 or less. If the total tax reported for
information returns (e.g., Forms 1099-MISC, 1099-R, or 2002 exceeded $50,000, you are a semiweekly schedule
W-2G) to payees and failure to file copies with the IRS. depositor.
If amounts that must be withheld are not withheld If you are a monthly schedule depositor and
! or are not deposited or paid to the United States ! accumulate a $100,000 liability or more on any
CAUTION day during a calendar month, your deposit
CAUTION Treasury, the trust fund recovery penalty may
apply. The penalty is the full amount of any unpaid trust schedule changes to semiweekly for the remainder of the
fund tax. This penalty may apply when these unpaid year and for the following year. See section 11 of
taxes cannot be immediately collected from the employer Circular E (Pub. 15) for more information on the
or business. The trust fund recovery penalty may be $100,000 next-day deposit rule.
imposed on all persons who are determined by the IRS to Electronic deposit requirement. You must make
have been responsible for collecting, accounting for, and electronic deposits of all depository taxes (such as
paying over these taxes, and who acted willfully in not employment tax, withheld income tax, excise tax, and
doing so. Willfully in this case means voluntarily, corporate income tax) using the Electronic Federal Tax
consciously, and intentionally. A responsible person acts Payment System (EFTPS) in 2004 if:
-2-
A–67
• The total deposits of such taxes in 2002 were more error adjustment corrects the amount reported on Form
than $200,000 or 945 to agree with the amount actually withheld from
• You were required to use EFTPS in 2003. nonpayroll payments.
If you are required to use EFTPS and use Form 8109 You must report an adjustment to correct an
instead, you may be subject to a 10% penalty. If you are administrative error on Form 945 in the year in which you
not required to use EFTPS, you may participate discover the error. If the net adjustment is negative
voluntarily. To enroll in or get more information about (reducing your tax liability), enclose the amount reported
EFTPS, call 1-800-555-4477 or 1-800-945-8400. Or to on line 3 in parentheses (if possible).
enroll online, visit www.eftps.gov.
You will not be allowed a refund or credit for any prior
year’s overpayment of Federal income tax that you
withheld from a payee. This is because the payees use
Specific Instructions the amount of withholding shown on the information
State code. If you made your deposits by FTD coupon return (e.g., Form 1099-R) as a credit when filing their
(Form 8109) or by using an EFTPS bank account in a income tax returns.
state other than that shown in your address on Form 945, If you are making an adjustment(s) to correct a prior
enter the state code for the state where you made year administrative error, report the net adjustment
deposits or initiated EFTPS transfers in the box provided (including adjustments to Federal income tax withholding
in the upper left corner of Form 945. Use the Postal and backup withholding) on line 3. Complete Form 941c,
Service two-letter state abbreviation as the state code. Supporting Statement To Correct Information, or an
Enter the code “MU” in the state code box if you deposit equivalent statement, and file it with Form 945 to provide
in more than one state. If you deposit in the same state the required information on the adjustment(s). Be sure to
as shown in your address, do not make an entry in this identify the adjustment(s) in the supporting statement
box. (Part V of Form 941c) as correcting an administrative
Line A —Final return. If you go out of business or end error and provide a description of the error(s). Do not file
operations and you will not be required to file Form 945 in Form 941c separately from Form 945.
the future, file a final return. Be sure to check the final Reporting adjustments on line 8 or on Form 945-A.
return box and enter the date that final income payments The amount of the adjustment(s) also must be taken into
were made. account in the monthly summary of Federal tax liability
Line 1 —Federal income tax withheld. Enter the (line 8) or on Form 945-A, Annual Record of Federal Tax
Federal income tax that you withheld from pensions Liability. If the adjustment increases your tax liability,
(including distributions from governmental section include the adjustment with any other amount on the
457(b) plans), annuities, IRA distributions, military entry space for the date that you discovered the error. If
retirement, Indian gaming profits, and gambling winnings the adjustment decreases your tax liability, use the
(regular gambling withholding only). Also enter any adjustment amount as a credit to offset subsequent
voluntary amount that you withheld on certain liabilities on line 8 or Form 945-A until it is used up. (See
government payments. If you are required to report section 13 of Circular E (Pub. 15) for more information.
Federal income tax withholding on Forms 1099 (e.g., The Circular E (Pub. 15) instructions for making
Form 1099-R or Form W-2G), you must report the adjustments refer to Form 941 but also apply to Form
Federal income tax withheld on Form 945. 945 adjustments.)
Federal income tax withholding reported on Form W-2 If you are not required to complete line 8 or Form
must be reported on Forms 941, 943, or Schedule H TIP 945-A because your total taxes are less than
(Form 1040), as appropriate. $2,500, do not show adjustments on line 8 or on
Line 2 —Backup withholding. Enter any backup Form 945-A.
withholding, including backup withholding on gambling Line 4 — Total taxes. Add lines 1 and 2 and add or
winnings. subtract any net adjustment on line 3. If total taxes are
Regulated investment companies (RICs) and real $2,500 or more, the amount reported on line 4 must
estate investment trusts (REITs) must report any backup equal the total liability for the year reported on line 8M of
withholding on Form 945 in the year that the dividends the Monthly Summary of Federal Tax Liability, or line M
are actually paid. This includes January payments of of Form 945-A.
dividends declared during October, November, and Line 5 — Total deposits. Enter your total Form 945
December of the prior year. (See the Instructions for deposits for the year, including any overpayment applied
Form 1099-DIV for special reporting requirements.) from your 2002 return.
Line 3 —Adjustment to correct administrative errors. Line 6 — Balance due. You do not have to pay if line 6
You cannot make an adjustment on Form 945 to correct is under $1. You should have a balance due only if your
Federal income tax withholding or backup withholding total taxes for the year (line 4) are less than $2,500.
reported in a prior calendar year unless it is to correct an (However, see section 11 of Circular E (Pub. 15)
administrative error. An administrative error occurs if regarding payments made under the Accuracy of
the amount you entered on Form 945 is not the amount Deposits Rule.) Enter your EIN, “Form 945,” and “2003”
that you actually withheld. For example, if the total on your check or money order and make it payable to the
Federal income tax actually withheld was incorrectly “United States Treasury.” If line 4 is $2,500 or more and
reported on Form 945 due to a math or transposition you deposited all taxes when due, the amount on line 6
error, this is an administrative error. The administrative should be zero.
-3-
A–68
If you fail to make required deposits (using authorization should be submitted to the IRS service
! EFTPS or Form 8109, as required) and instead
CAUTION pay these amounts with your return, you may be
center where the return was processed.
Who must sign. Form 945 must be signed as follows:
subject to a penalty. • Sole proprietorship – The individual owning the
Line 7 —Overpayment. If you deposited more than the business.
correct amount for the year, you can have the • Corporation – The president, vice president, or other
overpayment refunded or applied to your next return by principal officer.
checking the appropriate box. The IRS may apply your • Partnership or unincorporated organization – A
overpayment to any past due tax account under your responsible and duly authorized member or officer having
EIN. If line 7 is under $1, we will send a refund or apply it knowledge of its affairs.
to your next return only on written request. • Trust or estate – The fiduciary.
Line 8 —Monthly Summary of Federal Tax Liability. The return may also be signed by a duly authorized
agent of the taxpayer if a valid power of attorney has
This is a summary of your monthly tax liability, been filed.
!
CAUTION
not a summary of deposits made. If line 4 is less
than $2,500, do not complete line 8 or Form
945-A. Privacy Act and Paperwork Reduction Act Notice.
Complete line 8 if you were a monthly schedule We ask for the information on this form to carry out the
depositor for the entire year. (See Determining your Internal Revenue laws of the United States. We need it to
deposit schedule on page 2). figure and collect the right amount of tax. Sections 3402,
3405, and 3406 of the Internal Revenue Code require
Report your liabilities on Form 945-A instead of on taxpayers to pay over to the IRS Federal income tax
line 8 if: withheld from certain nonpayroll payments and
• You were a semiweekly schedule depositor during distributions, including backup withholding. This form is
2003. Do not complete entries A through M of line 8. used to determine the amount of the taxes that you owe.
Instead, complete and file Form 945-A with Form 945. Section 6011 requires you to provide the requested
• You were a monthly schedule depositor for 2003 information if the tax applies to you. Section 6109
and during any month you accumulated nonpayroll taxes requires you to provide your employer identification
of $100,000 or more. Because this converted you to a number (EIN). If you fail to provide this information in a
semiweekly schedule depositor for the remainder of 2003 timely manner, you may be subject to penalties and
(and for 2004), you must report your liabilities on Form interest.
945-A for the entire year. Do not complete entries A
through M of line 8. (See section 11 of Circular E (Pub. You are not required to provide the information
15) for more information on the $100,000 Next-Day requested on a form that is subject to the Paperwork
Deposit Rule.) Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its
Third Party Designee. If you want to allow any instructions must be retained as long as their contents
individual, corporation, firm, organization, or partnership may become material in the administration of any Internal
to discuss your 2003 Form 945 with the IRS, check the Revenue law.
“Yes” box in the Third Party Designee section of the
return. Also, enter the name, phone number, and any five Generally, tax returns and return information are
numbers that the designee chooses as his or her confidential, as required by section 6103. However,
personal identification number (PIN). The authorization section 6103 allows or requires the Internal Revenue
applies only to the tax form upon which it appears. Service to disclose or give the information shown on your
tax return to others described in the Code. For example,
By checking the “Yes” box, you are authorizing the we may disclose your tax information to the Department
IRS to call the designee to answer any questions relating of Justice for civil and criminal litigation, and to cities,
to the information reported on your tax return. You are states, and the District of Columbia for use in
also authorizing the designee to: administering their tax laws. We may also disclose this
• Exchange information concerning your tax return with information to other countries under a tax treaty, or to
the IRS and Federal and state agencies to enforce Federal nontax
• Request and receive written tax return information criminal laws and to combat terrorism.
notices, correspondence, and account transcripts. The time needed to complete and file this form will
You are not authorizing the designee to receive any vary depending on individual circumstances. The
refund check, bind you to anything (including additional estimated average time is: Recordkeeping, 6 hr., 55
tax liability), or otherwise represent you before the IRS. If min.; Learning about the law or the form, 35 min.; and
you want to expand the designee’s authorization or Preparing and sending the form to the IRS, 43 min. If
desire automatic issuances of copies of notices, see you have comments concerning the accuracy of these
Pub. 947, Practice Before the IRS and Power of time estimates or suggestions for making this form
Attorney. simpler, we would be happy to hear from you. You can
write to the Tax Products Coordinating Committee,
The Third Party Designee authorization automatically Western Area Distribution Center, Rancho Cordova, CA
expires one year from the due date (without regard to 95743-0001. Do not send Form 945 to this address.
extensions) for filing your 2003 Form 945. If you or your Instead, see Where to file on page 1.
designee desire to terminate the authorization, a written
statement conveying your wish to revoke the
-4-
A–69
Form 945-A Annual Record of Federal Tax Liability OMB No. 1545-1430
(Rev. August 2003)
Department of the Treasury 䊳 File with Form 945 or CT-1.
Name (as shown on Form 945 or CT-1) Employer identification number
January tax liability February tax liability March tax liability

1 17 1 17 1 17
2 18 2 18 2 18
3 19 3 19 3 19
4 20 4 20 4 20
5 21 5 21 5 21
6 22 6 22 6 22
7 23 7 23 7 23
8 24 8 24 8 24
9 25 9 25 9 25
10 26 10 26 10 26
11 27 11 27 11 27
12 28 12 28 12 28
13 29 13 29 13 29
14 30 14 14 30
15 31 15 15 31
16 16 16
A Total for month 䊳 B Total for month 䊳 C Total for month 䊳
April tax liability May tax liability June tax liability

1 17 1 17 1 17
2 18 2 18 2 18
3 19 3 19 3 19
4 20 4 20 4 20
5 21 5 21 5 21
6 22 6 22 6 22
7 23 7 23 7 23
8 24 8 24 8 24
9 25 9 25 9 25
10 26 10 26 10 26
11 27 11 27 11 27
12 28 12 28 12 28
13 29 13 29 13 29
14 30 14 30 14 30
15 15 31 15
16 16 16
D Total for month 䊳 E Total for month 䊳 F Total for month 䊳
Cat. No. 14733M Form 945-A (Rev. 8-2003)
A–70
Form 945-A (Rev. 8-2003) Page 2
July tax liability August tax liability September tax liability
1 17 1 17 1 17
2 18 2 18 2 18
3 19 3 19 3 19
4 20 4 20 4 20
5 21 5 21 5 21
6 22 6 22 6 22
7 23 7 23 7 23
8 24 8 24 8 24
9 25 9 25 9 25
10 26 10 26 10 26
11 27 11 27 11 27
12 28 12 28 12 28
13 29 13 29 13 29
14 30 14 30 14 30
15 31 15 31 15
16 16 16
G Total for month 䊳 H Total for month 䊳 I Total for month 䊳
October tax liability November tax liability December tax liability

1 17 1 17 1 17
2 18 2 18 2 18
3 19 3 19 3 19
4 20 4 20 4 20
5 21 5 21 5 21
6 22 6 22 6 22
7 23 7 23 7 23
8 24 8 24 8 24
9 25 9 25 9 25
10 26 10 26 10 26
11 27 11 27 11 27
12 28 12 28 12 28
13 29 13 29 13 29
14 30 14 30 14 30
15 31 15 15 31
16 16 16
J Total for month 䊳 K Total for month 䊳 L Total for month 䊳
M Total tax liability for year (add lines A through L). This should equal line 4 on Form 945 (or line 13
on Form CT-1) 䊳
Form 945-A (Rev. 8-2003)
A–71
Form 945-A (Rev. 8-2003) Page 3
General Instructions Example 3. Because Elm Co. is a new business, it is a monthly

schedule depositor for 2003. During January, it withheld income
Purpose of form. Use this form to report nonpayroll income tax tax on nonpayroll payments as follows: $2,000 on January 10;
withholding on Form 945, Annual Return of Withheld Federal $99,000 on January 24. The deposit rules require that a monthly
Income Tax, based on the dates the amounts were withheld. schedule depositor begin depositing on a semiweekly deposit
These nonpayroll items include backup withholding and schedule when a $100,000 or more tax liability is accumulated
withholding on pensions, annuities, IRAs, Indian gaming profits, on any day within a month (see section 11 of Circular E (Pub.
gambling winnings, and military retirement. Also use Form 945-A 15) for details). Since Elm Co. accumulated $101,000 ($2,000 +
to report tax liabilities reported on Form CT-1, Employer’s $99,000) on January 24, 2003, it became a semiweekly schedule
Annual Railroad Retirement Tax Return. depositor. Elm Co. must complete Form 945-A and file it with
Note: Form 945-A is a summary of your tax liability, not a Form 945. It must record $2,000 on line 10 and $99,000 on line
summary of deposits made. (The IRS gets deposit data from FTD 24 for January. No entries should be made on line 8 of Form
coupons or EFTPS.) 945 although Elm Co. was a monthly schedule depositor until
January 24.
Who must file. Semiweekly schedule depositors are required to
complete and file Form 945-A with Form 945 or CT-1. Do not Adjustments. Semiweekly schedule depositors must report
complete this form if you are a monthly schedule depositor, adjustments on Form 945-A to correct administrative errors on
unless you accumulate a tax liability of $100,000 during any prior Forms 945 and errors on prior Forms CT-1. (Reminder:
month of the year. Monthly schedule depositors who accumulate You will not be allowed a refund or credit for any prior year
$100,000 become semiweekly schedule depositors for the overpayment of income tax that you withheld or deducted from
remainder of the year and must complete Form 945-A for the a payee.) For information on correcting administrative errors, see
entire year. The deposit rules, including the $100,000 next-day the Instructions for Form 945, the Instructions for Form CT-1,
deposit rule, are explained in section 11 of Circular E (Pub. 15), and section 13 of Circular E (Pub. 15). (The Circular E (Pub. 15)
Employer’s Tax Guide, the Instructions for Form 945, and the instructions for making adjustments refer to Form 941, but they
Instructions for Form CT-1. also apply to Form 945 adjustments.) If the adjustment increases
your current liability, report the adjustment on the entry space
Important. Form 945-A is used by the IRS to match your tax corresponding to the date the error was discovered.
liability reported on this form with your deposits and to
determine if you have deposited your withholding tax liabilities If the adjustment decreases your current liability, use the
on time. Unless Form 945-A is properly completed and filed with adjustment amount as a credit to offset subsequent liabilities on
Form 945 or CT-1, the IRS will not be able to process your Form 945-A until it is used up. For example, on January 8, 2003,
return and will have to contact you for the missing information. Oak Rail Co. discovered that a mathematical error was made on
a prior year return, resulting in a $10,000 overstatement of
nonpayroll income tax withholding. Since the correct amounts
Specific Instructions were withheld and reported on Forms 1099-R, this is an
If you are required to report your tax liabilities on Form 945-A as administrative error that can be corrected on Form 945. Oak Rail
discussed above, file it with Form 945 or CT-1. Do not complete Co. made payments subject to nonpayroll income tax
entries A through M of the Monthly Summary of Federal Tax withholding on January 3, 10, 17, 24, and 31 and had a $5,000
Liability (line 8 on Form 945) or the Monthly Summary of Railroad tax liability for each of those pay dates. On Form 945-A, it must
Retirement Tax Liability (page 2 of Form CT-1). However, be sure report $5,000 on line 3 for January. The adjustment for the
to mark the semiweekly schedule depositor checkbox above line $10,000 overstatement is used to offset the January 10 and 17
8 of Form 945. liabilities, so these two $5,000 liabilities are not deposited or
Each numbered space on Form 945-A corresponds to dates reported on Form 945-A. The $5,000 liabilities for January 24
during the year. Report your tax liabilities corresponding to the and 31 must be reported on lines 24 and 31 for January.
dates payments were made, not when the liabilities accrued. For Paperwork Reduction Act Notice. We ask for the information
example, if you became liable for a pension distribution on on this form to carry out the Internal Revenue laws of the United
December 31, 2002, but did not make the distribution until States. You are required to give us the information. We need it
January 3, 2003, the income tax withholding liability for the to ensure that you are complying with these laws and to allow
distribution must be reported on Form 945-A for 2003, on line 3 us to figure and collect the right amount of tax.
for January.
You are not required to provide the information requested on a
Example 1. Cedar Co., which has a semiweekly deposit form that is subject to the Paperwork Reduction Act unless the
schedule, makes periodic payments on gambling winnings on form displays a valid OMB control number. Books or records
the 15th day of each month. On December 24, 2003, in addition relating to a form or its instructions must be retained as long as
to its periodic payments, it withheld from a payment on their contents may become material in the administration of any
gambling winnings under the backup withholding rules. Since Internal Revenue law. Generally, tax returns and return
Cedar Co. is a semiweekly schedule depositor, it must record information are confidential, as required by Code section 6103.
these nonpayroll withholding liabilities on Form 945-A. It must
report tax liabilities on line 15 for each month and line 24 for The time needed to complete and file this form will vary
December. Cedar Co. enters the monthly totals on lines A depending on individual circumstances. The estimated average
through L. It adds these monthly subtotals and enters the total time is:
tax liability for the year on line M. The amount on line M should Recordkeeping 6 hr., 27 min.
equal line 4 of Form 945. Learning 6 min.
Example 2. Fir Co. is a semiweekly schedule depositor. During Preparing and sending
January, it withheld income tax on pension distributions as the form to the IRS 12 min.
follows: $52,000 on January 10; $35,000 on January 24. Since
If you have comments concerning the accuracy of these time
Fir Co. is a semiweekly schedule depositor, it must record its
estimates or suggestions for making this form simpler, we would
income tax withholding liabilities on Form 945-A. It must record
be happy to hear from you. You can write to the IRS at the
$52,000 on line 10 and $35,000 on line 24 for January.
address listed in the Instructions for Form 945.
A–72
9595 VOID CORRECTED
PAYER’S name, street address, city, state, ZIP code, and telephone no. 1 Rents OMB No. 1545-0115
$ Miscellaneous
2 Royalties 2004 Income
$ Form 1099-MISC
3 Other income 4 Federal income tax withheld
Copy A
$ $ For
PAYER’S Federal identification RECIPIENT’S identification 5 Fishing boat proceeds 6 Medical and health care payments Internal Revenue
number number Service Center
File with Form 1096.

$ $
RECIPIENT’S name 7 Nonemployee compensation 8 Substitute payments in lieu of
dividends or interest For Privacy Act
and Paperwork
$ $ Reduction Act
Street address (including apt. no.) 9 Payer made direct sales of 10 Crop insurance proceeds Notice, see the
$5,000 or more of consumer 2004 General
products to a buyer
(recipient) for resale 䊳 $ Instructions for
City, state, and ZIP code 11 12 Forms 1099,
1098, 5498,
Account number (optional) 2nd TIN not. 13 Excess golden parachute 14 Gross proceeds paid to and W-2G.
payments an attorney
$ $
15 16 State tax withheld 17 State/Payer’s state no. 18 State income
$ $
$ $
Form 1099-MISC Cat. No. 14425J Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page
Instructions for Payers

General and specific form instructions Caution: Because paper for ms are
are provided as separate products. The scanned dur ing processing, you cannot
products you should use to complete file with the IRS For ms 1096, 1098,
Form 1099-MISC are the 2004 General 1099, or 5498 that you pr int from the
Instructions for Forms 1099, 1098, IRS website.
5498, and W-2G and the separate
Due dates. Furnish Copy B of this
specific instructions, 2004 Instructions
form to the recipient by January 31,
for Form 1099-MISC. A chart in the
2005.
general instructions gives a quick guide
to which form must be filed to report a File Copy A of this form with the IRS
particular payment. To order these by February 28, 2005. If you file
instructions and additional forms, call electronically, the due date is March
1-800-TAX-FORM (1-800-829-3676). 31, 2005.
A–73
9898 VOID CORRECTED
PAYER’S name, street address, city, state, and ZIP code 1 Gross distribution OMB No. 1545-0119 Distributions From
Pensions, Annuities,
$ Retirement or
2a Taxable amount 2003 Profit-Sharing
Plans, IRAs,
Insurance
$ Form 1099-R Contracts, etc.
2b Taxable amount Total Copy A
not determined distribution For
PAYER’S Federal identification RECIPIENT’S identification 3 Capital gain (included 4 Federal income tax Internal Revenue
number number in box 2a) withheld Service Center
$ $ File with Form 1096.

RECIPIENT’S name 5 Employee contributions 6 Net unrealized
or insurance premiums appreciation in For Privacy Act
employer’s securities and Paperwork
Reduction Act
$ $ Notice, see the
Street address (including apt. no.) 7 Distribution IRA/ 8 Other 2003 General
code(s) SEP/ Instructions for
SIMPLE
Forms 1099,
$ % 1098, 5498,
City, state, and ZIP code 9a Your percentage of total 9b Total employee contributions and W-2G.
distribution % $
Account number (optional) 10 State tax withheld 11 State/Payer’s state no. 12 State distribution
$ $
$ $
13 Local tax withheld 14 Name of locality 15 Local distribution
$ $
$ $
Form 1099-R Cat. No. 14436Q Department of the Treasury - Internal Revenue Service
Do Not Cut or Separate Forms on This Page — Do Not Cut or Separate Forms on This Page
A–74
Form SS-8
(Rev. June 2003)
Determination of Worker Status
for Purposes of Federal Employment Taxes OMB No. 1545-0004

and Income Tax Withholding
Name of firm (or person) for whom the worker performed services Worker’s name
Firm’s address (include street address, apt. or suite no., city, state, and ZIP code) Worker’s address (include street address, apt. or suite no., city, state,
and ZIP code)
Trade name Telephone number (include area code) Worker’s social security number
( )
Telephone number (include area code) Firm’s employer identification number Worker’s employer identification number (if any)
( )
If the worker is paid by a firm other than the one listed on this form for these services, enter the name, address, and employe r identification number
of the payer.
Important Information Needed To Process Your Request

We must have your permission to disclose your name and the information on this form and any attachments to other
parties involved with this request. Do we have your permission to disclose this information? Yes No
If you answered “No” or did not mark a box, we will not process your request and will not issue a determination.
You must answer ALL items OR mark them “Unknown” or “Does not apply.” If you need more space, attach another sheet.
A This form is being completed by: Firm Worker; for services performed to .
(beginning date) (ending date)
B Explain your reason(s) for filing this form (e.g., you received a bill from the IRS, you believe you received a Form 1099 or Form W-2 erroneously,
you are unable to get worker’s compensation benefits, you were audited or are being audited by the IRS).
C Total number of workers who performed or are performing the same or similar services .
D How did the worker obtain the job? Application Bid Employment Agency Other (specify) .
E Attach copies of all supporting documentation (contracts, invoices, memos, Forms W-2, Forms 1099, IRS closing agreements, IRS r ulings, etc.).
In addition, please inform us of any current or past litigation concerning the worker’s status. If no income reporting forms (F orm 1099-MISC or
W-2) were furnished to the worker, enter the amount of income earned for the year(s) at issue $ .
F Describe the firm’s business.
G Describe the work done by the worker and provide the worker’s job title.
H Explain why you believe the worker is an employee or an independent contractor.
I Did the worker perform services for the firm before getting this position? Yes No N/A
If “Yes,” what were the dates of the prior service?
If “Yes,” explain the differences, if any, between the current and prior service.
J If the work is done under a written agreement between the firm and the worker, attach a copy (preferably signed by both parties ). Describe
the terms and conditions of the work arrangement.
For Privacy Act and Paperwork Reduction Act Notice, see page 5. Cat. No. 16106T Form SS-8 (Rev. 6-2003)
A–75
Form SS-8 (Rev. 6-2003) Page 2
Part I Behavioral Control
1 What specific training and/or instruction is the worker given by the firm?
2 How does the worker receive work assignments?
3 Who determines the methods by which the assignments are performed?

4 Who is the worker required to contact if problems or complaints arise and who is responsible for their resolution?
5 What types of reports are required from the worker? Attach examples.
6 Describe the worker’s daily routine (i.e., schedule, hours, etc.).
7 At what location(s) does the worker perform services (e.g., firm ’s premises, own shop or office, home, customer ’s location, etc.)?
8 Describe any meetings the worker is required to attend and any penalties for not attending (e.g., sales meetings, monthly meeti ngs, staff
meetings, etc.).
9 Is the worker required to provide the services personally? Yes No
10 If substitutes or helpers are needed, who hires them?
11 If the worker hires the substitutes or helpers, is approval required? Yes No
If “Yes,” by whom?
12 Who pays the substitutes or helpers?
13 Is the worker reimbursed if the worker pays the substitutes or helpers? Yes No
If “Yes,” by whom?
Part II Financial Control
1 List the supplies, equipment, materials, and property provided by each party:
The firm
The worker
Other party
2 Does the worker lease equipment? Yes No
If “Yes,” what are the terms of the lease? (Attach a copy or explanatory statement.)
3 What expenses are incurred by the worker in the performance of services for the firm?
4 Specify which, if any, expenses are reimbursed by:

The firm
Other party
5 Type of pay the worker receives: Salary Commission Hourly Wage Piece Work
Lump Sum Other (specify)
If type of pay is commission, and the firm guarantees a minimum amount of pay, specify amount $ .
6 Is the worker allowed a drawing account for advances? Yes No
If “Yes,” how often?
Specify any restrictions.
7 Whom does the customer pay? Firm Worker

If worker, does the worker pay the total amount to the firm? Yes No If “No,” explain.
8 Does the firm carry worker ’s compensation insurance on the worker? Yes No
9 What economic loss or financial risk, if any, can the worker incur beyond the normal loss of salary (e.g., loss or damage of eq uipment,
material, etc.)?
Form SS-8 (Rev. 6-2003)
A–76
Part III Relationship of the Worker and Firm
1 List the benefits available to the worker (e.g., paid vacations, sick pay, pensions, bonuses).
2 Can the relationship be terminated by either party without incurring liability or penalty? Yes No
If “No,” explain your answer.
3 Does the worker perform similar services for others? Yes No

If “Yes,” is the worker required to get approval from the firm? Yes No
4 Describe any agreements prohibiting competition between the worker and the firm while the worker is performing services or duri ng any later
period. Attach any available documentation.
5 Is the worker a member of a union? Yes No

6 What type of advertising, if any, does the worker do (e.g., a business listing in a directory, business cards, etc.)? Provide c opies, if applicable.
7 If the worker assembles or processes a product at home, who provides the materials and instructions or pattern?
8 What does the worker do with the finished product (e.g., return it to the firm, provide it to another party, or sell it)?
9 How does the firm represent the worker to its customers (e.g., employee, partner, representative, or contractor)?
10 If the worker no longer performs services for the firm, how did the relationship end?
Part IV For Service Providers or Salespersons —Complete this part if the worker provided a service directly to
customers or is a salesperson.
1 What are the worker’s responsibilities in soliciting new customers?
2 Who provides the worker with leads to prospective customers?

3 Describe any reporting requirements pertaining to the leads.
4 What terms and conditions of sale, if any, are required by the firm?
5 Are orders submitted to and subject to approval by the firm? Yes No
6 Who determines the worker ’s territory?
7 Did the worker pay for the privilege of serving customers on the route or in the territory? Yes No
If “Yes,” whom did the worker pay?
If “Yes,” how much did the worker pay? $ .
8 Where does the worker sell the product (e.g., in a home, retail establishment, etc.)?
9 List the product and/or services distributed by the worker (e.g., meat, vegetables, fruit, bakery products, beverages, or laund ry or dry cleaning
services). If more than one type of product and/or service is distributed, specify the principal one.
10 Does the worker sell life insurance full time? Yes No

11 Does the worker sell other types of insurance for the firm? Yes No
If “Yes,” enter the percentage of the worker ’s total working time spent in selling other types of insurance. %
12 If the worker solicits orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar
establishments, enter the percentage of the worker ’s time spent in the solicitation. %
13 Is the merchandise purchased by the customers for resale or use in their business operations? Yes No
Describe the merchandise and state whether it is equipment installed on the customers ’ premises.
Part V Signature (see page 4)

Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of m y knowledge and belief, the facts
presented are true, correct, and complete.

(Type or print name below)
Form SS-8 (Rev. 6-2003)
A–77
General Instructions Additional copies of this form may be obtained by calling

1-800-829-4933 or from the IRS website at www.irs.gov.
Section references are to the Internal Revenue Code unless
otherwise noted. Fee
Purpose There is no fee for requesting an SS-8 determination letter.
Firms and workers file Form SS-8 to request a determination Signature
of the status of a worker for purposes of Federal
employment taxes and income tax withholding. Form SS-8 must be signed and dated by the taxpayer.
A Form SS-8 determination may be requested only in A stamped signature will not be accepted.
order to resolve Federal tax matters. If Form SS-8 is The person who signs for a corporation must be an officer
submitted for a tax year for which the statute of limitations of the corporation who has personal knowledge of the facts.
on the tax return has expired, a determination letter will not If the corporation is a member of an affiliated group filing a
be issued. The statute of limitations expires 3 years from the consolidated return, it must be signed by an officer of the
due date of the tax return or the date filed, whichever is later. common parent of the group.
The IRS does not issue a determination letter for proposed The person signing for a trust, partnership, or limited
transactions or on hypothetical situations. We may, however, liability company must be, respectively, a trustee, general
issue an information letter when it is considered appropriate. partner, or member-manager who has personal knowledge of
the facts.
Definition
Firm. For the purposes of this form, the term “firm” means
Where To File
any individual, business enterprise, organization, state, or Send the completed Form SS-8 to the address listed below
other entity for which a worker has performed services. The for the firm’s location. However, for cases involving Federal
firm may or may not have paid the worker directly for these agencies, send Form SS-8 to the Internal Revenue Service,
services. If the firm was not responsible for payment for Attn: CC:CORP:T:C, Ben Franklin Station, P.O. Box 7604,
services, be sure to enter the name, address, and Washington, DC 20044.
employer identification number of the payer on the first
page of Form SS-8 below the identifying information for Firm ’s location: Send to:
the firm and the worker.
Alaska, Arizona, Arkansas,
The SS-8 Determination Process California, Colorado, Hawaii,
Idaho, Illinois, Iowa, Kansas,
The IRS will acknowledge the receipt of your Form SS-8. Minnesota, Missouri, Montana, Internal Revenue Service
Because there are usually two (or more) parties who could be Nebraska, Nevada, New SS-8 Determinations
affected by a determination of employment status, the IRS Mexico, North Dakota, P.O. Box 630
attempts to get information from all parties involved by Oklahoma, Oregon, South Stop 631
sending those parties blank Forms SS-8 for completion. The Dakota, Texas, Utah, Holtsville, NY 11742-0630
case will be assigned to a technician who will review the Washington, Wisconsin,
facts, apply the law, and render a decision. The technician Wyoming, American Samoa,
may ask for additional information from the requestor, from Guam, Puerto Rico, U.S. Virgin
other involved parties, or from third parties that could help Islands
clarify the work relationship before rendering a decision. The
IRS will generally issue a formal determination to the firm or Alabama, Connecticut,
payer (if that is a different entity), and will send a copy to the Delaware, District of Columbia,
worker. A determination letter applies only to a worker (or a Florida, Georgia, Indiana,
class of workers) requesting it, and the decision is binding on Kentucky, Louisiana, Maine,
the IRS. In certain cases, a formal determination will not be Maryland, Massachusetts, Internal Revenue Service
issued. Instead, an information letter may be issued. Michigan, Mississippi, New SS-8 Determinations
Although an information letter is advisory only and is not Hampshire, New Jersey, New 40 Lakemont Road
binding on the IRS, it may be used to assist the worker to York, North Carolina, Ohio, Newport, VT 05855-1555
fulfill his or her Federal tax obligations. Pennsylvania, Rhode Island,
Neither the SS-8 determination process nor the review of South Carolina, Tennessee,
any records in connection with the determination constitutes Vermont, Virginia, West Virginia,
an examination (audit) of any Federal tax return. If the all other locations not listed
periods under consideration have previously been examined,
the SS-8 determination process will not constitute a Instructions for Workers
reexamination under IRS reopening procedures. Because this
is not an examination of any Federal tax return, the appeal If you are requesting a determination for more than one firm,
rights available in connection with an examination do not complete a separate Form SS-8 for each firm.
apply to an SS-8 determination. However, if you disagree For m SS-8 is not a claim for refund of social secur ity
with a determination and you have additional information and Medicare taxes or Federal income tax
concerning the work relationship that you believe was not withholding.
previously considered, you may request that the determining
office reconsider the determination. If the IRS determines that you are an employee, you are
responsible for filing an amended return for any corrections
related to this decision. A determination that a worker is an
Completing Form SS-8 employee does not necessarily reduce any current or prior
Answer all questions as completely as possible. Attach tax liability. For more information, call 1-800-829-1040.
additional sheets if you need more space. Provide
information for all years the worker provided services for the
firm. Determinations are based on the entire relationship
between the firm and the worker.
A–78
Time for filing a claim for refund. Generally, you must file considered in conjunction with a Form SS-8 determination
your claim for a credit or refund within 3 years from the date because the determination does not constitute an
your original return was filed or within 2 years from the date examination of any tax return. For more information regarding
the tax was paid, whichever is later. section 530 of the 1978 Revenue Act and to determine if you
Filing Form SS-8 does not prevent the expiration of the qualify for relief under this section, you may visit the IRS
time in which a claim for a refund must be filed. If you are website at www.irs.gov .
concerned about a refund, and the statute of limitations for Privacy Act and Paperwork Reduction Act Notice. We ask
filing a claim for refund for the year(s) at issue has not yet for the information on this form to carry out the Internal
expired, you should file Form 1040X, Amended U.S. Revenue laws of the United States. This information will be
Individual Income Tax Return, to protect your statute of used to determine the employment status of the worker(s)
limitations. File a separate Form 1040X for each year. described on the form. Subtitle C, Employment Taxes, of the
On the Form 1040X you file, do not complete lines 1 Internal Revenue Code imposes employment taxes on
through 24 on the form. Write “Protective Claim” at the top wages. Sections 3121(d), 3306(a), and 3401(c) and (d) and
of the form, sign and date it. In addition, you should enter the related regulations define employee and employer for
the following statement in Part II, Explanation of Changes to purposes of employment taxes imposed under Subtitle C.
Income, Deductions, and Credits: “Filed Form SS-8 with the Section 6001 authorizes the IRS to request information
Internal Revenue Service Office in (Holtsville, NY; Newport, needed to determine if a worker(s) or firm is subject to these
VT; or Washington, DC; as appropriate). By filing this taxes. Section 6109 requires you to provide your taxpayer
protective claim, I reserve the right to file a claim for any identification number. Neither workers nor firms are required
refund that may be due after a determination of my to request a status determination, but if you choose to do
employment tax status has been completed. ” so, you must provide the information requested on this form.
Failure to provide the requested information may prevent us
Filing Form SS-8 does not alter the requirement to timely
from making a status determination. If any worker or the firm
file an income tax return. Do not delay filing your tax return
has requested a status determination and you are being
in anticipation of an answer to your SS-8 request. In
asked to provide information for use in that determination,
addition, if applicable, do not delay in responding to a you are not required to provide the requested information.
request for payment while waiting for a determination of your However, failure to provide such information will prevent the
worker status. IRS from considering it in making the status determination.
Providing false or fraudulent information may subject you to
Instructions for Firms penalties. Routine uses of this information include providing
If a worker has requested a determination of his or her it to the Department of Justice for use in civil and criminal
status while working for you, you will receive a request from litigation, to the Social Security Administration for the
the IRS to complete a Form SS-8. In cases of this type, the administration of social security programs, and to cities,
IRS usually gives each party an opportunity to present a states, and the District of Columbia for the administration of
statement of the facts because any decision will affect the their tax laws. We may also disclose this information to
employment tax status of the parties. Failure to respond to Federal and state agencies to enforce Federal nontax
this request will not prevent the IRS from issuing a criminal laws and to combat terrorism. We may provide this
determination letter based on the information he or she has information to the affected worker(s) or the firm as part of
made available so that the worker may fulfill his or her the status determination process.
Federal tax obligations. However, the information that you You are not required to provide the information requested
provide is extremely valuable in determining the status of the on a form that is subject to the Paperwork Reduction Act
worker. unless the form displays a valid OMB control number. Books
If you are requesting a determination for a particular class or records relating to a form or its instructions must be
of worker, complete the form for one individual who is retained as long as their contents may become material in
representative of the class of workers whose status is in the administration of any Internal Revenue law. Generally, tax
question. If you want a written determination for more than returns and return information are confidential, as required by
one class of workers, complete a separate Form SS-8 for section 6103.
one worker from each class whose status is typical of that The time needed to complete and file this form will vary
class. A written determination for any worker will apply to depending on individual circumstances. The estimated
other workers of the same class if the facts are not materially average time is: Recordkeeping, 22 hrs.; Learning about
different for these workers. Please provide a list of names the law or the form, 47 min.; and Preparing and sending
and addresses of all workers potentially affected by this the form to the IRS, 1 hr., 11 min. If you have comments
determination. concerning the accuracy of these time estimates or
If you have a reasonable basis for not treating a worker as suggestions for making this form simpler, we would be happy
an employee, you may be relieved from having to pay to hear from you. You can write to the Tax Products
employment taxes for that worker under section 530 of the Coordinating Committee, Western Area Distribution Center,
1978 Revenue Act. However, this relief provision cannot be Rancho Cordova, CA 95743-0001. Do not send the tax form
to this address. Instead, see Where To File on page 4.
A–79
U.S. Department of Justice OMB No. 1115-0136
Immigration and Naturalization Service Employment Eligibility Verification
Please read instructions carefully before completing this form. The instructions must be available during completion of
this form. ANTI-DISCRIMINATION NOTICE. It is illegal to discriminate against work eligible individuals. Employers
CANNOT specify which document(s) they will accept from an employee. The refusal to hire an individual because of a
future expiration date may also constitute illegal discrimination.
Section 1. Employee Information and Verification. To be completed and signed by employee at the time employment begins
Print Name: Last First Middle Initial Maiden Name
Address (Street Name and Number) Apt. # Date of Birth (month/day/year)
City State Zip Code Social Security #
I attest, under penalty of perjury, that I am (check one of the following):

I am aware that federal law provides for A citizen or national of the United States
imprisonment and/or fines for false statements or A Lawful Permanent Resident (Alien # A____________
use of false documents in connection with the An alien authorized to work until___/___/___
completion of this form. (Alien # or Admission #____________________
Employee’s Signature Date (month/day/year)
Preparer and/or Translator Certification. (To be completed and signed if Section 1 is prepared by a person
other than the employee.) I attest, under penalty of perjury, that I have assisted in the completion of this form and that
to the best of my knowledge the information is true and correct.
Preparer's/Translator’s Signature Print Name
Address (Street Name and Number, City, State, Zip Code) Date (month/day/year)
Section 2. Employer Review and Verification. To be completed and signed by employer. Examine one document from List A OR
examine one document from List B and one from List C as listed on the reverse of this form and record the title, number and expiration date, if any, of
the document(s)
List A OR List B AND List C

Document title: _____________ __________________ __________________
Issuing authority: ____________ __________________ __________________
Document #: _____________ __________________ __________________
Expiration Date (if any): __/__/__ __/__/__ __/__/__
Document #: _____________
Expiration Date (if any): __/__/__
CERTIFICATION - I attest, under penalty of perjury, that I have examined the document(s) presented by the above-named
employee, that the above-listed document(s) appear to be genuine and to relate to the employee named, that the
employee began employment on (month/day/year) ___/___/___and that to the best of my knowledge the employee
is eligible to work in the United States. (State employment agencies may omit the date the employee began
employment).
Signature of Employer or Authorized Representative Print Name Title
Business or Organization Name Address (Street Name and Number, City, State, Zip Code) Date (month/day/year)
Section 3. Updating and Reverification. To be completed and signed by employer

A. New Name (if applicable) B. Date of rehire (month/day/year) (if applicable)
C. If employee’s previous grant of work authorization has expired, provide the information below for the document that establishes current employment
eligibility.
Document Title:____________Document #:____________Expiration Date (if any):__/__/__
I attest, under penalty of perjury, that to the best of my knowledge, this employee is eligible to work in the United States, and if the employee
presented document(s), the document(s) I have examined appear to be genuine and to relate to the individual.
Signature of Employer or Authorized Representative Date (month/day/year)
Form I-9 (Rev. 11-21-91) N
A–80
U.S. Department of Justice OMB No. 1115-0136
Immigration and Naturalization Service Employment Eligibility Verification
INSTRUCTIONS
PLEASE READ ALL INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS FORM.
Anti-Discrimination Notice. It is illegal to discriminate against any individual (other than an alien not authorized to work in the
U.S.) in hiring, discharging, or recruiting or referring for a fee because of that individual’s national origin or citizenship status. It is
illegal to discriminate against work eligible individuals. Employers CANNOT specify which document(s) they will accept from an
employee. The refusal to hire an individual because of a future expiration date may also constitute illegal discrimination.
Section 1 - Employee. All employees, citizens and • If an employee is rehired within three (3) years of the
noncitizens, hired after November 6, 1986, must complete date this form was originally completed and the
Section 1 of this form at the time of hire, which is the actual employee’s work authorization has expired or if a
beginning of employment. The employer is responsible for current employee’s work authorization is about to
expire (reverification), complete Block B and:
ensuring that Section 1 is timely and properly completed. - examine any document that reflects that the
employee is authorized to work in the U.S. (see
List A or C),
Preparer/Translator Certification. The Preparer/Translator - record the document title, document number and
Certification must be completed if Section 1 is prepared by a expiration date (if any) in Block C, and
person other than the employee. A preparer/translator may be - complete the signature block.
used only when the employee is unable to complete Section 1
on his/her own. However, the employee must still sign Section Photocopying and Retaining Form I-9. A blank I-9 may be
1 personally. reproduced provided both sides are copied. The Instructions
must be available to all employees completing this form.
Employers must retain completed I>9s for three (3) years after
the date of hire or one (1) year after the date employment ends,
Section 2 - Employer. For the purpose of completing this whichever is later.
form, the term “employer” includes those recruiters and
referrers for a fee who are agricultural associations, agricultural For more detailed information, you may refer to the INS
employers, or farm labor contractors. Handbook for Employers, (Form M-274). You may obtain
the handbook at your local INS office.
Employers must complete Section 2 by examining evidence of
identity and employment eligibility within three (3) business Privacy Act Notice. The authority for collecting this
information is the Immigration Reform and Control Act of 1986,
days of the date employment begins. If employees are Pub. L. 99-603 (8 U.S.C. 1324a).
authorized to work, but are unable to present the required
document(s) within three business days, they must present a This information is for employers to verify the eligibility of
receipt for the application of the document(s) within three individuals for employment to preclude the unlawful hiring, or
business days and the actual document(s) within ninety (90) recruiting or referring for a fee, of aliens who are not authorized
days. However, if employers hire individuals for a duration of to work in the United States.
less than three business days, Section 2 must be completed at
the time employment begins. Employers must record: 1) This information will be used by employers as a record of their
document title; 2) issuing authority; 3) document number, 4) basis for determining eligibility of an employee to work in the
United States. The form will be kept by the employer and made
expiration date, if any; and 5) the date employment begins. available for inspection by officials of the U.S. Immigration and
Employers must sign and date the certification. Employees Naturalization Service, the Department of Labor, and the Office
must present original documents. Employers may, but are not of Special Counsel for Immigration Related Unfair Employment
required to, photocopy the document(s) presented. These Practices.
photocopies may only be used for the verification process and
must be retained with the I>9. However, employers are still Submission of the information required in this form is voluntary.
responsible for completing the I>9. However, an individual may not begin employment unless this
form is completed since employers are subject to civil or
criminal penalties if they do not comply with the Immigration
Reform and Control Act of 1986.
Section 3 - Updating and Reverification. Employers
must complete Section 3 when updating and/or reverifying the Reporting Burden. We try to create forms and instructions that
I>9. Employers must reverify employment eligibility of their are accurate, can be easily understood, and which impose the
employees on or before the expiration date recorded in least possible burden on you to provide us with information.
Section 1. Employers CANNOT specify which document(s) Often this is difficult because some immigration laws are very
they will accept from an employee. complex. Accordingly, the reporting burden for this collection of
information is computed as follows: 1) learning about this form,
• If an employee’s name has changed at the time this 5 minutes; 2) completing the form, 5 minutes; and 3) assembling
form is being updated/ reverified, complete Block A. and filing (recordkeeping) the form, 5 minutes, for an average of
15 minutes per response. If you have comments regarding the
accuracy of this burden estimate, or suggestions for making this
• If an employee is rehired within three (3) years of the form simpler, you can write to both the Immigration and
date this form was originally completed and the Naturalization Service, 425 I Street, N.W., Room 5304,
employee is still eligible to be employed on the same Washington, D. C. 20536; and the Office of Management and
basis as previously indicated on this form (updating), Budget, Paperwork Reduction Project, OMB No. 1115-0136,
complete Block B and the signature block. Washington, D.C. 20503.
Form I-9 (Rev. 11-21-91) N

EMPLOYERS MUST RETAIN COMPLETED I>9
PLEASE DO NOT MAIL COMPLETED I-9 TO INS
A–81
LISTS OF ACCEPTABLE DOCUMENTS
LIST A LIST B LIST C
Documents that Establish Both Documents that Establish Documents that Establish
Identity and Employment OR Identity AND Employment Eligibility
Eligibility
1. Driver’s license or ID card 1. U.S. social security card issued
1. U.S. Passport (unexpired or
expired) issued by a state or outlying by the Social Security
possession of the United States Administration (other than a
provided it contains a card stating it is not valid for
2. Certificate of U.S. Citizenship photograph or information such employment)
(INS Form N-560 or N-561) as name, date of birth, sex,
height, eye color, and address
2. Certification of Birth Abroad
3. Certificate of Naturalization 2. ID card issued by federal, state, issued by the Department of
(INS Form N-550 or N-570) or local government agencies or State (Form FS-545 or Form
entities provided it contains a DS-1350)
photograph or information such
4. Unexpired foreign passport,
as name, date of birth, sex,
with I-551 stamp or attached
INS Form I-94 indicating height, eye color, and address
unexpired employment 3. Original or certified copy of a
authorization 3. School ID card with a birth certificate issued by a
photograph state, county, municipal
authority or outlying possession
5. Alien Registration Receipt Card of the United States bearing an
4. Voter’s registration card
with photograph (INS Form official seal
I-151 or I-551) 5. U.S. Military card or draft record
6. Military dependent’s ID card 4. Native American tribal document

6. Unexpired Temporary Resident
Card (INS Form I-688)
7. U.S. Coast Guard Merchant
Mariner Card
5. U.S. Citizen ID Card (INS Form
7. Unexpired Employment
8. Native American tribal document I-197)
Authorization Card (INS Form
I-688A)
9. Driver’s license issued by a
Canadian government authority 6. ID Card for use of Resident
8. Unexpired Reentry Permit (INS
Citizen in the United States
Form I-327) For persons under age 18 who (INS Form I-179)
are unable to present a
document listed above:
9. Unexpired Refugee Travel
Document (INS Form I-571)
7. Unexpired employment
10. Unexpired Employment 10. School record or report card authorization document issued
Authorization Document issued by the INS (other than those
by the INS which contains a 11. Clinic, doctor, or hospital record listed under List A)
photograph (INS Form I-688B)
12. Day-care or nursery school
record
Illustrations of many of these documents appear in Part 8 of the Handbook for Employers (M-274)
Form I-9 (Rev. 11-21-91) N
A–82
A–83
A–84
Table for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income—Forms 668-W(c), 668-W(c)(DO) and 668-W(ICS)
I. (NOTE: Amounts are for each pay period.) 2004
Filing Status: Single Filing Status: Married FilingJoint Return(and Qualifying Widow(er)s)
Pay Number of Exemptions Claimed on Statement Pay Number of Exemptions Claimed on Statement
Period 1 2 3 4 5 6 More than 6 Period 1 2 3 4 5 6 More than 6
18.65 plus 11.92 for 37.31 plus 11.92 for
Daily 30.58 42.50 54.42 66.35 78.27 90.19 each exemption Daily 49.23 61.15 73.08 85.00 96.92 108.85
each exemption
93.27 plus 52.62 for 186.54 plus 59.62 for

Weekly 152.88 212.50 272.12 331.73 391.35 450.96 Weekly 246.15 305.77 365.38 425.00 484.62 544.23
each exemption each exemption
186.54 plus 119.23 for 373.08 plus 119.23 for

Biweekly 305.77 425.00 544.23 663.46 782.69 901.92 Biweekly 492.31 611.54 730.77 850.00 969.23 1088.46
202.08 plus 129.17 for 401.17 plus 129.17 for

Semimonthly 331.25 460.42 589.58 718.75 847.92 977.08 Semimonthly 533.33 662.50 791.67 920.83 1050.00 1179.17
404.17 plus 258.33 for Monthly 1066.67 1325.00 1583.33 1841.67 2100.00 2358.33 808.33 plus 258.33 for
Monthly 662.50 920.83 1179.17 1437.50 1695.83 1954.17
Filing Status: Unmarried Head of Household Filing Status: Married FilingSeparate Return
Pay Number of Exemptions Claimed on Statement Pay Number of Exemptions Claimed on Statement
Period 1 2 3 4 5 6 More than 6 Period 1 2 3 4 5 6 More than 6
27.50 plus 11.92 for 18.65 plus 11.92 for
Daily 39.42 51.35 63.27 75.19 87.12 99.04 Daily 30.58 42.50 54.42 66.35 78.27 90.19
137.50 plus 59.62 for 93.27 plus 59.62 for

Weekly 197.12 256.73 316.35 375.96 435.58 495.19 Weekly 152.88 212.50 272.12 331.73 391.35 450.96
A–85
275.00 plus 119.23 for 186.54 plus 119.23 for

Biweekly 394.23 513.46 632.69 751.92 871.15 990.38 Biweekly 305.77 425.00 544.23 663.46 782.69 901.92
297.92 plus 129.17 for Semimonthly 202.08 plus 129.17 for

Semimonthly 427.08 566.25 685.42 814.58 943.75 1072.92 331.25 460.42 598.58 718.75 847.92 977.08
Monthly 854.17 1112.50 1370.83 1629.17 1887.50 2145.83 595.83 plus 258.33 for Monthly 662.50 920.83 1179.17 1437.50 1695.83 1954.17 404.17 plus 258.33 for
Table for Figuring Additional Exempt Amount for Examples

II.
Taxpayers at Least 65 Years Old and / or Blind
These tables show the amount exempt from a levy on wages, salary, and other income. For example:
Additional Exempt Amount
Filing Status * Daily Weekly Biweekly Semimonthly Monthly 1. A single taxpayer who is paid weekly and claims three exemptions (including one for the taxpayer)
has $272.12 exempt from levy.
Single or Head 1 4.62 23.08 46.15 50.00 100.00
of Household 2. If the taxpayer in number 1 is over 65 and writes 1 in the ADDITIONAL STANDARD DEDUCTION
2 9.23 46.15 92.31 100.00 200.00
space on Parts 3, 4, and 5 of the levy, $295.20 is exempt from this levy ($272.12 plus $23.08).
1 3.65 18.27 36.54 39.58 79.17
3. A taxpayer who is married, files jointly, is paid biweekly, and claims two exemptions (including
Any other 2 7.31 36.54 73.08 79.17 158.33
one for the taxpayer) has $611.54 exempt from levy.
Filing Status
3 10.96 54.81 109.62 118.75 237.50
4. If the taxpayer in number 3 is over 65 and has a spouse who is blind, this taxpayer should write
4 14.62 73.08 146.15 158.33 316.67 2 in the ADDITIONAL STANDARD DEDUCTION space on Parts 3, 4, and 5 of the levy. Then,
* ADDITIONAL STANDARD DEDUCTION claimed on Parts 3, 4, and 5 of levy $684.62 is exempt from this levy ($611.54 plus $73.08).
Publication 1494 (Rev. 1-2004) www.irs.gov Catalog Number 11439T Department of the Treasury – Internal Revenue Service

Payroll Practice Fundamentals Chapter 1

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PAYROLL PRACTICE

Chapter 1: Payroll Fundamentals

The American Payroll Association

The functions within a payroll department vary from company to

Paying employees Depositing and reporting taxes

Payroll Fundamentals 1–1

Technology: New software and web-based applications can

The Payroll Process

First, you need to determine who is an employee and who is not.

1–2 Payroll Practice Fundamentals

1.2.1 Employees vs. independent contractors

Designating a worker’s status as employee or independent

1.2.2 Common law test

Payroll Fundamentals 1–3

• Required to comply with • Sets own hours; determines

• Works exclusively for the • Can work for multiple

• Hired by the employer • Is self-employed

• Subject to dismissal; can quit • A contract governs how the

• Has a continuing relationship • Works by the job

• Work done personally • Permitted to employ assistants

• Performs services under the • Performs services under the

• Paid a salary; reimbursed for • Payment by the job;

• Furnished tools, equipment, • Furnishes own tools, equipment,

• If an outside salesperson: • Controls the sales process and

1.2.3 Temporary service/leased employees

Organizations may have individuals who are not classified as

1–4 Payroll Practice Fundamentals

1.2.4 Misclassifying workers.

Check Your Understanding

1. Payroll’s chief product – the paycheck – must be:

2. What taxes must be withheld from an employee’s pay?

a. Federal income, social security and Medicare

Payroll Fundamentals 1–5

a. Federal income, social security and Medicare

4. Who has the responsibility to determine if the worker is an

5. Prior to affiliating with Radar Chemicals, Rebecca, a chemical

a. Rebecca is an independent contractor under common

6. Roger, a retired safety inspector for Rocco Manufacturing, was

a. Roger is an independent contractor under common law.

1–6 Payroll Practice Fundamentals

a. Rachel is an independent contractor under common

8. Which of the following would be considered an independent

a. A temporary receptionist from an agency

Answers to Quiz 1.1

2. a In addition to federal income, social security and Medicare

3. d Independent contractors must pay their own taxes as,

4. a Even though the IRS and SSA have a stake in determining

Payroll Fundamentals 1–7

Rebecca is behaving like an employee (use of employer’s

6. c. Consultants are generally treated as independent

7. c. Whether or not an employee is full-time or part-time or

8. c. Being paid by the job rather than a guaranteed salary is a

1.3 The Fair Labor Standards Act

1–8 Payroll Practice Fundamentals

1.3.1 Exempt vs. nonexempt employees

The Department of Labor has proposed significant changes to the

1.3.2 Exempt Employees

Payroll Fundamentals 1–9

A professional employee may also be exempt if the employee: 1) is

Those in highly skilled computer software occupations fall into

1–10 Payroll Practice Fundamentals

Laws change over time. Stay informed. The minimum salaries

Special exemptions exist