Page 202 - Essentials of Payroll: Management and Accounting

Payr oll Taxes and Remittances
A little-known rule is that the IRS requires an employer to send to
it any W-4 forms for employees who may be taking an excessive number
of allowances or who are claiming exemption from withholdings. This
is the case when an existing employee claims more than 10 withholdings,

or claims full exemption from withholding despite earning more than
$200 per week. The W-4 form should be sent to the IRS only if the
employees submitting the forms are still in employment at the end of
the quarter.The forms should be sent to the same IRS office where the
corporate Form 941 is filed, along with a cover letter that identifies the
business and notes its Employer Identification Number (EIN).

Federal Income Taxes

An employer is required by law to deduct income taxes from employee
pay. If it uses a payroll supplier, then the calculation of the appropriate
income tax amounts is completely invisible to it, since the supplier han-
dles this task. If the employer calculates income taxes using a software
package, then the software supplier will issue new tax tables each year
to accompany the software. In this case, too, there is little need for an
employer to know how the tax tables function. However, if a business

calculates its payroll internally and manually, then it needs the wage
bracket tax tables published by the IRS. They are contained within
Publications 15 and 15-A,which can be downloaded from the IRS web
site at www.irs.gov. These tables are published for a variety of scenarios,
such as for single or married employees;a variety of payroll periods;and
for withholding allowances numbering from 0 to 10. An example is
shown in Exhibit 7.2, which is taken from page 35 of the 2002

Publication 15-A. It lists the amount of income, Social Security, and
Medicare taxes to be withheld for a single person. Note, however, the
exhibit is incomplete;it shows only taxes due for wages in a small range,
and for 0 through 5 withholding allowances.

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