Publication 15
Circular E, Employer's Tax Guide
(Revised: 1/2003)

(Including 2003 Wage Withholding and Advance Earned Income Credit Payment Tables)

Change To Note

Social security and Medicare tax for 2003.   The social security wage base for 2003 is $87,000. There is no wage base limit for Medicare tax. The tax rate remains 6.2% for social security and 1.45% for Medicare tax.

Calendar

The following is a list of important dates. Also see Pub. 509, Tax Calendars for 2003.

Note:   If any date shown below falls on a Saturday, Sunday, or Federal holiday, use the next business day. A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. For any due date, you will meet the file or furnish requirement if the form is properly addressed and mailed First-Class or sent by an IRS designated private delivery service on or before the due date. See Private Delivery Services on page 5 for more information on IRS designated private delivery services.

By January 31

Furnish Forms 1099 and W-2.   Furnish each employee a completed Form W-2, Wage and Tax Statement. Furnish each recipient a completed Form 1099 (e.g., Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and Form 1099-MISC, Miscellaneous Income).

File Form 940 or 940-EZ.   File Form 940 or Form 940-EZ, Employer's Annual Federal Unemployment (FUTA) Tax Return. However, if you deposited all the FUTA tax when due, you have ten additional days to file.

File Form 945.   File Form 945, Annual Return of Withheld Federal Income Tax, to report any nonpayroll income tax withheld in 2002. See Nonpayroll Income Tax Withholding on page 4 for more information.

By February 15

Request new Form W-4 from exempt employees.   Ask for a new Form W-4, Employee's Withholding Allowance Certificate, from each employee who claimed exemption from withholding last year.

On February 16

Exempt Forms W-4 expire.   Any Form W-4 previously given to you claiming exemption from withholding has expired. Begin withholding for any employee who previously claimed exemption from withholding, but has not given you a new Form W-4 for the current year. If the employee does not give you a new Form W-4, withhold tax as if he or she is single, with zero withholding allowances. (See section 9.)

By February 28

File Forms 1099 and 1096.   File Copy A of all Forms 1099 with Form 1096, Annual Summary and Transmittal of U.S. Information Returns, with the IRS. For electronically filed returns, see By March 31 below.

File Forms W-2 and W-3.   File Copy A of all Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). For electronically filed returns, see By March 31 below.

File Form 8027.   File Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, with the Internal Revenue Service. (See section 6.) For electronically filed returns, see By March 31 below.

By March 31

File electronic Forms 1099, W-2, and 8027.   File Copy A of electronic (not magnetic media) Forms 1099 with the IRS and W-2 with the Social Security Administration. File electronic (not magnetic media) Form 8027 with the IRS. For information on reporting Form W-2 information to the SSA electronically, visit the SSA Web Site at www.ssa.gov/employer.

By April 30, July 31, October 31, and January 31

Deposit FUTA taxes.   Deposit Federal unemployment (FUTA) tax due if it is more than $100.

File Form 941.   File Form 941, Employer's Quarterly Federal Tax Return, and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter is less than $2,500 and the taxes are paid in full with a timely filed return. If you deposited all taxes when due, you have 10 additional days from the due dates above to file the return.

Before December 1

New Forms W-4.   Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year.

On December 31

Form W-5 expires.   Form W-5, Earned Income Credit Advance Payment Certificate, expires. Eligible employees who want to receive advance payments of the earned income credit next year must give you a new Form W-5.

Important Reminders

Electronic Filing

Forms 940 and 941 may be filed electronically. You may use your personal computer to transmit tax return information through an approved third-party transmitter. Visit the IRS Web Site at www.irs.gov/efile for a list of approved business providers (see Payroll Service Providers for Form 940). Certain employers may file Form 941 using their telephone. A 941 TeleFile package is automatically mailed to eligible employers each quarter.

Electronic Deposits

You may deposit your taxes electronically using the Electronic Federal Tax Payment System (EFTPS). Although use of EFTPS is required for certain employers (see section 11 for details), all employers may use this electronic payment system. Using EFTPS, you can transmit your tax payment information by telephone or your personal computer. To get more information or to enroll in EFTPS, call 1-800-555-4477 or 1-800-945-8400. You can also visit the EFTPS Web Site at www.eftps.gov.

Hiring New Employees

Eligibility for employment.   You must verify that each new employee is legally eligible to work in the United States. This will include completing the Immigration and Naturalization Service (INS) Form I-9, Employment Eligibility Verification. You can get the form from INS offices or by calling 1-800-870-3676. Contact the INS at 1-800-375-5283, or visit the INS Web Site at www.ins.gov for further information.

New hire reporting.   You are required to report any new employee to a designated state new hire registry. Many states accept a copy of Form W-4 with employer information added. Call the Office of Child Support Enforcement at 202-401-9267 or access its Web Site at www.acf.dhhs.gov/programs/cse/newhire for more information.

Income tax withholding.   Ask each new employee to complete the 2003 Form W-4. (See section 9.)

Name and social security number.   Record each new employee's name and number from his or her social security card. Any employee without a social security card should apply for one. (See section 4.)

Paying Wages, Pensions, or Annuities

Income tax withholding.   Withhold tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding rate. (If you have nonresident alien employees, see section 9.) Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Do not withhold on direct rollovers from qualified plans or governmental section 457 plans. See section 9 and Pub. 15-A, Employer's Supplemental Tax Guide. Pub. 15-A includes information on withholding on pensions and annuities.

Employer Responsibilities

Information Returns

You may have to file information returns to report certain types of payments made during the year. For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (e.g., independent contractors) for services performed for your trade or business. For details about filing Forms 1099 and for information about required electronic or magnetic media filing, see the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G for general information and the separate specific instructions for each information return you file (for example, 2003 Instructions for Forms 1099-MISC). Do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. See the separate Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required magnetic media filing. If you file 250 or more Forms W-2 or 1099, you must file them on magnetic media or electronically.

Information reporting call site.   The IRS operates a centralized call site to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free) or 304-263-8700 (not toll free). The call site can also be reached by e-mail at mccirp@irs.gov.

Nonpayroll Income Tax Withholding

Nonpayroll income tax withholding must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Form 945 is an annual tax return and the return for 2002 is due January 31, 2003. Separate deposits are required for payroll (Form 941) and nonpayroll (Form 945) withholding. Nonpayroll items include:

• Pensions, annuities, and IRAs.
• Military retirement.
• Gambling winnings.
• Indian gaming profits.
• Voluntary withholding on certain government payments.
• Backup withholding.

All income tax withholding reported on Forms 1099 or W-2G must be reported on Form 945. All income tax withholding reported on Form W-2 must be reported on Form 941, 943, or Schedule H (Form 1040).

Note:   Because distributions to participants from some nonqualified pension plans and deferred compensation plans are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941, not Form 945. However, because distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, income tax withheld must be reported on Form 945.

For details on depositing and reporting nonpayroll income tax withholding, see the separate Instructions for Form 945.

Backup withholding.   You generally must withhold 30% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). This withholding is referred to as backup withholding.

Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding.

Note:   Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, long-term care benefits, or real estate transactions.

You can use Form W-9, Request for Taxpayer Identification Number and Certification, to request payees to furnish a TIN and to certify that the number furnished is correct. You can also use Form W-9 to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. The Instructions for the Requester of Form W-9 includes a list of types of payees who are exempt from backup withholding. For more information, see Pub. 1679, A Guide to Backup Withholding.

Recordkeeping

Keep all records of employment taxes for at least 4 years. These should be available for IRS review. Records should include:

• Your employer identification number (EIN).
• Amounts and dates of all wage, annuity, and pension payments.
• Amounts of tips reported.
• Records of allocated tips.
• The fair market value of in-kind wages paid.
• Names, addresses, social security numbers, and occupations of employees and recipients.
• Any employee copies of Forms W-2 and W-2c that were returned to you as undeliverable.
• Dates of employment.
• Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them.
• Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4S, and W-4V).
• Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS.
• Copies of returns filed, including 941TeleFile Tax Records and confirmation numbers.
• Records of fringe benefits provided, including substantiation.

Change of Address

To notify the IRS of a new business mailing address or business location, file Form 8822, Change of Address.

Private Delivery Services

You can use certain private delivery services designated by the IRS to mail tax returns and payments. If you mail by the due date using any of these services, you are considered to have filed on time. The most recent list of designated private delivery services was published in September 2002. The list includes only the following:

• Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, Second Day Service.
• DHL Worldwide Express (DHL): DHL Same Day Service, DHL USA Overnight.
• Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day, FedEx International Priority, FedEx International First.
• United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus, and UPS Worldwide Express.

The private delivery service can tell you how to get written proof of the mailing date.

Private delivery services cannot deliver items to P.O. boxes. You must use the U.S. Postal Service to mail any item to an IRS P.O. box address.

Telephone Help

Tax questions.   You can call the IRS with your tax questions. Check your telephone book for the local number or call 1-800-829-4933.

Help for people with disabilities.   Telephone help is available using TTY/TDD equipment. You may call 1-800-829-4059 with your tax question or to order forms and publications. You may also use this number for assistance with unresolved tax problems.

Recorded tax information (TeleTax).   The TeleTax service provides recorded tax information on topics that answer many individual and business Federal tax questions. You can listen to up to three topics on each call you make. Touch-tone service is available 24 hours a day, 7 days a week. TeleTax topics are also available using a personal computer (connect to www.irs.gov).

A list of employment tax topics is provided below. Select, by number, the topic you want to hear and call 1-800-829-4477. For the directory of all topics, listen to topic 123.

TeleTax Topics

Unresolved Tax Issues

If you have attempted to deal with an IRS problem unsuccessfully, you should contact the Taxpayer Advocate. The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels.

While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

Your assigned personal advocate will listen to your point of view and will work with you to address your concerns. You can expect the advocate to provide:

• A fresh look at a new or on-going problem.
• Timely acknowledgement.
• The name and phone number of the individual assigned to your case.
• Updates on progress.
• Timeframes for action.
• Speedy resolution.
• Courteous service.

When contacting the Taxpayer Advocate, you should provide the following information:

• Your name, address, and employer identification number.
• The name and telephone number of an authorized contact person and the hours he or she can be reached.
• The type of tax return and year(s)
• A detailed description of the problem.
• Previous attempts to solve the problem and the office that had been contacted.
• A description of the hardship you are facing (if applicable).

You may contact a Taxpayer Advocate by calling a toll-free number, 1-877-777-4778. Persons who have access to TTY/TDD equipment may call 1-800-829-4059 and ask for Taxpayer Advocate assistance. If you prefer, you may call, write, or fax the Taxpayer Advocate office in your area. See Pub. 1546, The Taxpayer Advocate Service of the IRS, for a list of addresses and fax numbers.

Filing Addresses.   Generally, your filing address for Forms 940, 940-EZ, 941, 943, and 945 depends on the location of your residence or principal place of business and whether or not you included a payment with your return. There are separate filing addresses for these returns if you are an exempt organization or government entity. If you are located in the United States and do not include a payment with your return, you should file the form at either the Cincinnati or Ogden Service Centers. Beginning with returns for 2002, Form CT-1 (for railroad retirement taxes) is filed at the Cincinnati Service Center. See the form for details on where to file.

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