For the correct calculation and reporting of employee and employer tax liabilities at the federal, state and local levels, including Workers Compensation liabilities, you must maintain tax–related information for:
- each GRE (GRE/Legal Entity) included in your Business Group
- your employees
- certain categories of earnings types and deductions.
Regular and overtime earnings are always subject to federal and state taxes. However at any point in time, other categories of earnings, and certain categories of pre–tax deductions, may be subject to different types of taxes and tax with holding at the federal and state levels.
What are the Taxability Rules for Workers Compensation?
States have different rules regarding the earnings categories to include in the payroll exposure used to calculate Workers Compensation liability.
Workers Compensation liability calculations also require that your jobs be assigned the Workers Compensation codes of one or more states. Associated with each state’s codes are the rates of the WC insurance carrier or carriers in the state.
What are the Rules for Wage and Tax Reporting (W-2s)?
Employers must report to their employees the amounts paid and with held so the employees can complete their own income tax returns and pay any amount owed to the Internal Revenue Service.
Employers accomplish these reporting goals with the Wage and Tax Statement, or form W-2. Information from this form is used to enforce the appropriate tax laws as legislated by federal and state governments.
In addition to reporting taxable income, some non taxable amounts must also be reported to ensure that employees correctly complete their individual income tax return. The same is true for state reporting,except that the amounts reported are generally limited to taxable income and taxes with held.
What are the Rules for State Quarterly Wage Listings on Magnetic Tape?
For the quarterly wage listings distributed to states in which you have employees, there is a requirement to maintain data for several different kinds of records. The Inter state Conference of Employment Security Agencies, Inc. (ICESA) has developed a format for magnetic reporting of state wage listings that more than 20 states have adopted. The ICESA format designates the records required for state wage listings by code letters, as in the following table below:
States that have not adopted the ICESA format for wage listings use the federal Social Security Administration (SSA) format, or a variant of this format. Some of these states do not explicitly require the Transmitter(A) and Authorization (B) Records, but do require some of the information appearing on these records.
How do I Calculate my Unemployment Tax Liability?
Employers use form 940 to determine your FUTA taxable wages for the calendar year and the FUTA tax liability on those wages after accounting for applicable state unemployment tax credits and FUTA tax deposits made during the year.
If you are covered by FUTA, you must report your liability annually on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. See IRC 3306(a) and IRS Regulation 31.3306(a)–1(b) for eligibility requirements. Using Form 940, you can also pay your fourth quarter liability if the liability is less than $100.
What are Experience Rates?
The Experience Rate is the rate an employer uses to determine the amount of unemployment taxes it must pay. The experience rate is determined by the employers “Experience Rating,” which in turn is determined by the employer’s unemployment benefit charges and average annual taxable payroll. The state provides the employer with its experience rate. Employers with a high turnover generally have a higher experience rate. Employers with little turnover have a lower experience rate.
Who Must File a Quarterly Federal Tax Return (Form W–941)?
This quarterly report must be filed by all employers that with hold federal income tax from employee compensation and are subject to with holding and payment of social security and/or Medicare taxes. Form 941, Employer’s Quarterly Federal Tax Return, provides the IRS with a report of each employer’s total taxable wages paid and payroll tax liability, which is then reconciled with the employer’s record of tax deposits and wage and tax information provided to employees on their W-2 forms.
Who Must File Retirement Plan Listings (Form 1099-R)?
At year’s end, employers who make distributions of retirement income are required to report those distributions and any amount with held for FIT on form 1099-R. Employers with more than 249 employees are required to file Forms 1099-R on magnetic media, unless a waiver has been granted. Employers must report any distributions from all types of retirement plans; both periodic and lump-sum payments must be reported as well.
Form 1099-R requires distributions from any of the following be reported:
- Pensions
- Annuities
- Retirement or Profit sharing plans
- IRAs
- Insurance Contracts
Oracle Payroll does not itself perform calculations to support taxation of payments to foreign persons. Oracle Payroll provides an interface to ' Windstar Technologies’ International Tax Navigator_ to allow Oracle customers to use International Tax Navigator in conjunction with Oracle Payroll for the purpose of U.S. tax treaty compliance.
Oracle HRMS stores all employee data for foreign persons, including:
- Passport and Visa Details
- Visa Visit History
- Visa Residency Details
- Visa Payroll Details
- Alien Income Forecast Information
Note: When using the International Tax Navigator in conjunction with Oracle Payroll, you are doing so under a separate license between you and Windstar Technologies, Inc. Oracle provides an interface to International Tax Navigator as a convenience to our customers. However, Oracle does not endorse International Tax Navigator. Oracle makes no representations or warranties regarding International Tax Navigator, or any other product that exchanges data with Oracle Payroll, including without limitation any warranties that International Tax Navigator accurately captures and reflects all applicable tax laws. You should consult your license agreement with Windstar Technologies to determine your rights regarding International Tax Navigator. Also, please note that Oracle Payroll provides an interface to the version of International Tax Navigator current as of Oracle’s release of Oracle Payroll; because International Tax Navigator is provided by another company; Oracle may not be able to provide an interface that works with future versions of International Tax Navigator.
Tax Information for GREs Each GRE represents an employer for which the US Internal Revenue Services provides an identifying number for tax purposes (sometimes called the employer identification number). When creating an organization classified as a GRE, you must enter federal, state and local tax rules for it. These rules include information such as the following:
- the GRE’s federal–level supplemental with holding calculation method, and any common pay master for the GRE’s employees
- self–adjust methods in use at the federal and state levels
- at the state level, rates needed for calculation of SUI
- identifiers used at the state and local levels
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