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Answers to the most frequently asked questions about your annual payroll tax filings.

HomeWork Solutions, Inc., December 2001

PLEASE NOTE: All Form 1040 and Schedule H line numbers refer to the forms for the tax year 2001.

Q. How do I distribute the many copies of Form W-2?

First, employee copies must be distributed no later than January 31, 2002. These copies have been separated and inserted into mailing envelopes for your convenience. For individuals no longer in your employ, mail the W-2s no later than January 31 to their last known address.

BE SURE TO HAVE YOUR EMPLOYEE(S) REVIEW THE INFORMATION ON HIS/HER W-2 CAREFULLY BEFORE PROCEEDING TO THE NEXT STEP. Pay particular attention to the spelling of the employee's name and the social security number.

Next, you are required to mail the Form W-3 and a copy of all W-2(s) to the Social Security Administration no later than February 28, 2002. SIGN the original Form W-3 and mail it with your Forms W-2 Copy A (red ink). Mail the entire sheets - do not separate forms.

Mail to: Social Security Administration, Data Operations Center, Wilkes-Barre, PA 18769-0001

Lastly, an Employer Copy is to be retained with your records. It is stapled with your copies of your year end returns. Some states require you to submit form W-2 also. If required, separate instructions will be with the state transmittal form.

Q. Why could the wages in Box 1 of Form W-2 be greater than those in Boxes 3 & 5?

Taxes paid by the employer on behalf of an employee (generally Social Security and Medicare) are included in the wage amounts in Box 1 but not in the amounts in Boxes 3 and 5. This typically occurs when an employer pays a net amount to the worker and agrees to pay the worker's portion of Social Security and Medicare taxes.

Q. Why could my quarterly state unemployment tax return show no tax due even though I paid wages?

Unemployment contributions are paid on a wage base determined by state legislature. If you paid your employee wages in excess of this base, those excess wages are exempt from tax. However, you must submit the tax returns, even if no tax is due.

Q. How do Nanny Taxes impact my personal Federal Tax Return?

The wages paid and reconciliation of federal payroll taxes due are reported on Schedule H. You should attach Schedule H to your Form 1040 and enter the total of payroll taxes on Form 1040 Line 57. If you made quarterly tax payments on Form 1040ES, enter the sum of those payments remitted before January 15, 2002 on Form 1040 Line 60.

Q. Why do I need a Schedule H?

Schedule H calculates federal employment taxes due for household workers and is filed with your personal income tax Form 1040. The amounts shown on Line 27 of Schedule H must be entered on Form 1040 Line 57.

Q. Why are the Social Security and Medicare taxes shown on Forms W-2 less than the amounts shown on Schedule H?

Social Security and Medicare taxes remitted with Schedule H include the employee and employer components combined (15.3%). The Form W-2 reflects employee paid taxes only (7.65%) and does not include your employer contributions.

Q. My employee is concerned because no income taxes were deducted in 2001. What should I do?

Advise your employee that he/she is responsible for paying any income taxes due on wages he/she received. You may withhold (deduct) income taxes in 2002 to avoid these year end surprises. Contact us for a calculation of the withholding amounts.

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