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Pay and File Taxes on Behalf of Consumers

IRS Form 941: Employer's Quarterly Federal Tax Return and Payments

Policy: 

In accordance with Section 3504 of the Internal Revenue Code, Revenue Procedure 70-6 and Proposed Regulations REG-137036-08 (January 13, 2010) and Revenue Procedure 2013-39, F/EA files Form 941 quarterly in aggregate, on behalf of all participants in the Program. F/EA uses its separate agent Employer Identification Number (EIN) to file Form 941 and to deposit workers Federal Withholding Tax, workers FICA and employer FICA. Federal Withholding Tax and employee and employer FICA are deposited by the F/EA with the IRS on within 24 business hours of each payroll. 

As applicable, F/EA submits Schedule B for Form 941 with Form 941.  Schedule B shows F/EA liability if F/EA deposits more often than monthly per deposit requirements.  Deposit requirements are determined based on F/EA aggregate liability, not on individual employer liability.  Most F/EAs must deposit more often than monthly and therefore must submit Schedule B for Form 941 with Form 941.
 
F/EA must submit Schedule R for Form 941 with Form 941 .
 
F/EA utilizes reconciliation processes to ensure 941 taxes are paid accurately, timely and in accordance with existing regulation. On a monthly basis, F/EA reconciles 941 payments to debits for 941 payments from Program Operating Account (See Reconciliation of General Ledger Liability Account for FICA and Reconciliation of General Ledger Liability Account for Federal Withholding Tax). Quarterly, F/EA Accountant ensures sum of quarterly debits from Program Operating Account for 941 payments matches payments reported on Form 941.
 
Documentation showing payments of FICA and Federal Withholding Tax made on behalf of consumers is made available to Program Administrator and consumers upon request.
Procedure: 
  1. F/EA makes 941 deposit on each day payroll checks are cut with a check date for that day
  2. 941 deposit includes FICA (Social Security and Medicare tax) withheld from workers pay, FICA (Social Security and Medicare tax)  paid by the employer on workers pay and Federal Income Tax withheld from workers pay
  3. F/EA makes all deposits using IRS online payment system, EFTPS.gov.
  4. On a weekly basis, <<Staff Title>> produces and prints a report called the EFTPS Batch Provider Payment Inquiry.  This report shows all deposits made for the F/EA's separate FEIN for the prior week.
  • The EFTPS Batch Provider Payment Inquiry shows each 941 deposit made on behalf of F/EA, the date the deposit was made and the settlement date
 5.  <<Staff Title>> reviews EFTPS Batch Provider Payment Inquiry and compares it to the week's Payroll Registers to ensure that the report accurately reflects 941 liabilities for the week.
 6.  Any discrepancies are researched and resolved.
 7.  After resolving any discrepancies, EFTPS Batch Provider Payment Inquiry is provided to F/EA Accountant.
 8.  Upon receiving EFTPS Batch Provider Payment Inquiry, F/EA Accountant logs into Bank website
 9.  Verify that a payment for the amount listed on the EFTPS Batch Provider Payment Inquiry was made from the bank account
10. Ensure the payment date shown by Bank matches Settlement Date on EFTPS Batch Provider Payment Inquiry
11. F/EA Accountant writes on EFTPS Batch Provider Payment Inquiry: “verified with bank on <<date>>” and initials
12. These weekly breakdowns are stored in F/EA Accountant’s applicable file until quarter end
13. At quarter end, <<Staff Title> produces a quarterly payroll summary of 941 payment from the EFTPS website.  This report is called EFTPS Batch Provider Payment Inquiry Report
14. Form 941 is completed per attached example.
15. F/EA Accountant verifies Form 941 to ensure that Payroll Department accurately reported wages paid, federal withholding tax and employer and workers FICA
16. Reconcile payments
17. Sum all payments made for FICA from Worker F/EA Payroll Account found here: <<File Path>> Payroll download
18. Locate spreadsheet for each of the three months in the quarter
19. Sort by transaction and description
20. Sub total ‘Amount’ by transaction
  • This provides subtotals of payments for each tax type

21. Subtotals with description “IRS USATAXPYMT” are weekly Federal Income Tax, and Employer and Employee FICA payments

22. Add the subtotals with description “IRS USATAXPYMT” for each month in the quarter

23. This creates monthly totals of payments

24. Compare this to the liability amounts on Schedule B to ensure that payments for each month are equal to or greater than liabilities

  • Voids may cause payments to be greater than liabilities in a month
  • If a payment in a previous month is greater than a liability, the liability in a later month can be greater than the payments for that month by the exact amount that was overpaid in a previous month

25. Complete lines 17, 18 and 19 on Quarterly Reconciliation Document

26. Compare the liability on each date on Form 941 Schedule B to the amount for each “Settlement Date” on the EFTPS Batch Provider Inquiry

27. Ensure that the amount on Form 941 Schedule B is less than or equal to the amount on the EFTPS Batch Provider Inquiry for the settlement date

28. Ensure that the settlement date and the date on Schedule B match in each case

  • Report any discrepancies to reporting agent
  • Reporting agent will file form 941-X as necessary

29. Compare the sum of payments for all three months from bank account to “Total liability for the quarter” on schedule B

30. Ensure sum of payments is greater than or equal to “Total liability for the quarter” on Schedule B
31. Compare the sum of payments for the quarter as debited from the bank account to Line 11 on Form 941

32. If a discrepancy exists, review prior quarter’s 941 Box 13 to see if an overpayment was made

33. Ensure that the discrepancy equals the difference between Line 11 941 and sum of debits from bank account


34. Compare Schedule B 941 Deposits to debits from bank account

35. Ensure all values on dates match

36. Ensure monthly totals match

37. <<Staff Title>> reviews Form 941, Schedules B and R and all supporting documents.
 
38. After <<Staff Title>> signs off on Form 941, mail Form 941 to applicable IRS office via UPS
 
39. Obtain UPS Tracking number
 
40. Enter date shipped on Quarterly Tax Reconciliation document
  • Quarter 1 is due by April 30
  • Quarter 2 is due by July 31
  • Quarter 3 is due by October 31
  • Quarter 4 is due by January 31

41. <<Staff Title>> scans all documents and stores them at <<File Path>>

42. Signed reconciliation sheets are stored for a minimum of 7 years.


 
Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

  1. On a monthly basis, F/EA independently reconciles 941 payments to debits for 941 payments from Program Operating Account.
    • This ensures that payments are reconciled monthly prior to being reconciled again when the quarterly return is filed with the IRS
  2. The F/EA Accountant performs the quarterly 941 and payment reconciliation
    • The F/EA Accountant verifies the supporting documents, the bank statement and 941 return for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is pre-numbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  3. The <<Staff Title>> reviews the reconciliation statement and the supporting documents for accuracy
    • The <<Staff Title>> verifies not only completeness, but also validity.
    • The <<Staff Title>> reviews all documents for mathematical accuracy.
    • After reviewing, the <<Staff Title>> Signs and dates the reconciliation sheet.
  4. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
  5. The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.

Producing F/EA Schedule B for Form 941

Policy: 

<<Insert policy for completing Schedule B of Form 941>>

Procedure: 

<<Insert procedure for completing Schedule B of Form 941>>

Internal Controls: 

<<Insert internal controls for completing Schedule B of Form 941>>

Producing F/EA Schedule R for Form 941

Policy: 

F/EAs must file Schedule R with their Forms 941. Vendor Fiscal/Employer Agents that operate in Self-Directed (also known as Participant-Directed and Consumer-Directed) programs operate under Section 3504 of the Internal Revenue Code and must file a Schedule R with their aggregate Form 941.

Schedule R (Form 941) is used to allocate the aggregate information reported on Form 941 to each participant employer.  For purposes of Schedule R (Form 941), the Internal Revenue Service refers to employers represented by agents as their 'clients'.  

When the F/EA serves 15 or more employer clients, complete as many Continuation Sheets for Schedule R as necessary.  Attached Schedule R (Form 941) and any Continuation Sheets to the aggregate Form 941.  F/EA should file Schedule R and Form 941 together with the Internal Revenue Service.

Schedule R is due with Form 941 for each quarter that an agent files an aggregate Form 941, beginning with Quarter 1, 2010.

Procedure: 

<<Insert procedure to produce Schedule R for Form 941>>

Internal Controls: 

<<Insert internal controls to produce Schedule R for Form 941>>

State Unemployment Tax Returns and Payments

Policy: 

In accordance with State regulation, consumers must file and pay State Unemployment Tax, as calculated on workers gross wages, individually using the individual participant’s account number designated for this purpose.  Payments and returns are made and filed per regulation on a quarterly basis.

Each participant employer has his/her own experience rate for State Unemployment Tax.  This means that each individual employer may pay a different tax rate for State Unemployment Tax.  In most states, new employers are designated a standard "New Employer Rate".  New employers usually maintain the "New Employer Rate" for some uniform time period.

Each state maintains a taxable wage base.  The taxable wage base is the amount of gross wages paid to an workers in a calendar year that are taxable for State Unemployment Purposes.  Any wages paid to the workers in excess of the taxable wage base are considered "Excess Wages" and are not taxable for State Unemployment Purposes.

 
F/EA utilizes the employer tax cost allocation in the participant's budget to pay State Unemployment Tax.
 
F/EA utilizes a reconciliation process to ensure that payments are made and returns filed on behalf of consumers accurately, timely and in accordance with existing regulation. This reconciliation is performed by the F/EA Accountant quarterly.
 
On a quarterly basis, F/EA Quality Assurance Administrator audits filings and deposits for State Unemployment Insurance. Quality Assurance Administrator collects a random sample of payments and compares payments rates and thresholds on report to payroll edit registers and rate notices.
 
Additional policies, for each portion of the process, are presented below prior to the procedure outlined for each process.
 
Documentation showing payments of State Unemployment Tax made on behalf of consumers is made available to Program Administrator and consumers upon request.
Procedure: 

Filing and Payment

  1.  At quarter end, <<Staff Title>> within Payroll Department uses Payroll System to produce State Unemployment Tax report for each employer
  2. Each report shows <<insert per state requirements>>:
  • Employer gross wages paid in the quarter
  • Employer Unemployment Tax Rate
  • Taxable wages
  • Excess wages
  • Unemployment tax liability
  • Employee name and Social Security Numbers paid this quarter
  • Gross wages by workers
  • Taxable wages by workers
  • Excess wages by workers
  1. Using Payroll System, <<Staff Title>> produces payments to accompany State Unemployment Tax reports <<payments may be paper checks or an Electronic Funds Transfer file>>
  2. <<Staff Title>> selects sample of 10% of employers represented by agent for the quarter
  3. <<Staff Title>> selects Unemployment Insurance Tax reports and corresponding payments for 10% of participants for quality check
  4. <<Insert process used to Quality Check data>>
  5. After reports and payments have successfully passed the Quality Check process, <<Staff Title>> submits reports and payments to State Department of Labor
  6. <<Insert process to submit reports and payments.  May be electronic or on paper.  Process will vary depending on state.>>

Reconciliation of Unemployment Return and Payment

On a quarterly basis, within 30 days of the unemployment return and payment due date (30 days to allow time for payments to clear the bank), the F/EA Accountant reconciles unemployment returns to debits from the program operating bank account. F/EA performs a quarterly audit of returns and payments to ensure that the payroll system is accurately producing unemployment reporting and payment data, including filing state unemployment in accordance with each employer’s unemployment insurance rate, wages and wage base threshold.
  1. Each quarter F/EA sends a Transmittal Report for e-filing showing the employer, state ID, State Unemployment tax payment, total wages, excess wages, taxable wages, tax rate, Federal ID and monthly workers counts
  2. F/EA Accountant collects Transmittal Report and copy of Division of Unemployment Assistance check from applicable file folder
  3. F/EA Accountant opens spreadsheet called Quarterly Tax Reconciliation CYYY saved at <<File Path>>
    1. Open the tab labeled for SUTA and the quarter in question
    2. Complete the Quarterly Tax Reconciliation by entering values next to the labels using the <<Transmittal Report>> and payments to State Department of Labor
  4. Compare the sum of payments on the <<Transmittal Report>> to the amounts debited for State Unemployment Tax from program operating account <<insert detail>>
  5. Identify any discrepancies
  6. Any discrepancies must be researched and resolved
  7. Report discrepancies to Payroll Department as applicable
  8. Payroll Department will file amended returns as applicable
  9. If no discrepancies identified, F/EA Accountant prints Quarterly Tax Reconciliation document
  10. F/EA Accountant signs and dates Quarterly Tax Reconciliation document next to “Prepared By”
  11. F/EA Accountant provides Quarterly Tax Reconciliation document and supporting documents to <<Staff Title>>
  12. <<Staff Title>> signs and dates Quarterly Tax Reconciliation document next to “Verified By”
  1. <<Staff Title>> scans all documents and stores them at <<File Path>> 
  2. Signed reconciliation sheets are stored for a minimum of 7 years.
Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

  1. On a monthly basis, F/EA reconciles State Unemployment Insurance (SUTA) payments to debits for such payments from Program Operating Account (See Reconciliation of General Ledger Liability Account for Unemployment Tax)
    • This verifies that payments are actually made
  2. Payroll Department submits a UPS shipping receipt showing the date the paper returns and payments are mailed to State Department of Labor
    • F/EA Accountant reviews UPS shipping receipt to ensure that paper returns are mailed on or before due date
  3. Payroll Department submits a transmittal receipt showing the date the electronic returns are submitted to State Department of Labor
    • F/EA Accountant reviews transmittal receipt to ensure that paper returns are mailed on or before due date
  4. The F/EA Accountant performs the quarterly SUTA return and payment reconciliation
    • The F/EA Accountant compares values on relevant documents for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is prenumbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  5. The <<Staff Title>> reviews the reconciliation statement and the supporting documents for accuracy
    • The <<Staff Title>> verifies not only completeness, but also validity.
    • The <<Staff Title>> reviews all documents for mathematical accuracy.
    • After reviewing, the <<Staff Title>> signs and dates the control document, the reconciliation sheet.
  6. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
  7. The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.

State Withholding Tax Returns and Payments

Policy: 

Per the contract with Program Administrator, F/EA must file and remit State Withholding Tax (SWT) withheld from consumers’ workers on behalf of consumers. The State Department of Revenue requires returns to be filed and payments to be remitted individually using the participant’s individual account number designated for this purpose. Payments of State Withholding Tax withheld from workers pay must be made per each employer’s required deposit schedule. The deposit schedule is set by the State Department of Revenue or equivalent based on the employer’s quarterly liability.

F/EA utilizes a reconciliation process to ensure that the reporting agent is making payments and filing returns on behalf of consumers accurately, timely and in accordance with existing regulation. This reconciliation is performed by the F/EA Accountant and <<Staff Title>> (or assigned staff) quarterly, within 10 days of the reporting agent completing the quarterly filing and payment.
 
Documentation showing payments of State Withholding Tax made on behalf of consumers is made available to Program Administrator and consumers upon request.
 
Additional policies, as they apply to each portion of the process, are stated below prior to each procedure.
Procedure: 

Reconciliation of State Withholding Tax Return and Payment

The reporting agent deposits withheld State Withholding Tax on behalf of employers per each employer’s individual deposit schedule. Payments may be made on behalf of an employer weekly, monthly or quarterly. 
 
On a quarterly basis, the reporting agent files returns for State Withholding Tax to the State Department of Revenue or equivalent on behalf of individual consumers. Returns are filed quarterly regardless of the participant’s deposit schedule. Within 10 days of the State Withholding Tax return due date, the F/EA Accountant reconciles reports and payments made by the reporting agent (see process below). On a quarterly basis within 30 days of the quarterly State Withholding Tax deposit due date (30 days to allow time for payments to clear the bank), the F/EA Accountant reconciles State Withholding Tax returns as provided by the Payroll Department to debits from the service funds bank account for State Withholding Tax (See Policy and Procedure <<X>>). The combination of these two reconciliations serve for F/EA to ensure that State Withholding Tax returns and payments are made timely and that payment have been made in accordance with each return. F/EA performs a quarterly audit of returns and payments to ensure that the reporting agent is accurately paying and filing State Withholding Tax in accordance with each participant’s wages and deposit schedule and employees’ allowances.
  1. Payroll Staff sends State EFT – ACH Transaction Audit report with each deposit, whether it be weekly, monthly or quarterly
  2. F/EA Accountant stores these reports until quarter end
  3. Quarterly, F/EA Accountant collects all State EFT –ACH Transaction Audit reports and F/EA Payroll Journal Summary report for the quarter
    • Note that prior to being used for reconciliation to State Withholding data, F/EA Payroll Journal Summary is reconciled to Payroll System Register and sum of weekly F/EA Payroll Journal reports (see Policy and Procedure <<X>>)
  4. F/EA Accountant reconciles sum of deposits from State EFT – ACH Transaction Audit report to F/EA Payroll Journal Summary report
  5. F/EA Accountant opens spreadsheet called Quarterly Tax Reconciliation CYYY saved at <<File Path>>
  6. For each State EFT – ACH Transaction audit report, enter the date paid and the total amount paid under State EFT – ACH Transaction Report on line 1 through 24 of Quarterly Tax Reconciliation
  • The amount paid for each Transaction Audit Report will automatically total on line 25
  • On line 25 under Amount on F/EA Payroll Journal Summary Report enter the total State Withholding Tax

  7.  Reporting Agent also sends an excel report called F/EA DOR Payment Reconciliation quarterly

  • This shows quarterly payments, monthly payments, weekly payments vs. the liability for each employer
  • This report also shows the difference between payments and liability

  8.  As an additional verification, F/EA DOR Payment Reconciliation quarterly is compared to F/EA Payroll Journal reports for the quarter

  • A variance may occur because participant transferred to another F/EA mid-quarter and all liabilities for that participant are shown on the F/EA DOR Payment Reconciliation report

  9.  Obtain UPS Tracking number used to ship paper returns for employers who became liable for state withholding tax this quarter to DOR from reporting agent

10.  Go to www.ups.com , enter tracking number

11.  Verify that shipment date for DOR shipment occurred on or before the Return Due Date

12.  Enter date shipped on Quarterly Tax Reconciliation document

  • Quarter 1 is due by April 30
  • Quarter 2 is due by July 31
  • Quarter 3 is due by October 31
  • Quarter 4 is due by January 31

13.  Obtain receipt from electronic transmittal of state withholding tax returns from reporting agent

14.  Verify that the transmittal date occurred on or before the Return Due Date

15.  Enter transmittal date on Quarterly Tax Reconciliation document

  • Quarter 1 is due by April 30
  • Quarter 2 is due by July 31
  • Quarter 3 is due by October 31
  • Quarter 4 is due by January 31

16.  F/EA Accountant reviews variance and accounts for transfers

17.  Any discrepancies are identified and resolved

18.  Adjustments are made as required on the F/EA DOR Payment Reconciliation

Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

  1. On a monthly basis, F/EA reconciles State Withholding Tax payments made by reporting agent to debits for such payments from Service Funds F/EA Operating Account (See Policy and Procedure <<X>>)
    • This ensures that payments that the reporting agent reports as making are actually made
  2. The reporting agent submits a UPS shipping receipt showing the date the paper returns and payments are mailed to DOR
    • F/EA Accountant reviews UPS shipping receipt to ensure that paper returns are mailed on or before due date
  3. The reporting agent submits a transmittal receipt showing the date the electronic returns are submitted to DOR
  4. The F/EA Accountant performs the quarterly State Withholding Tax return and payment reconciliation
    • The F/EA Accountant verifies compares values on relevant documents for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is prenumbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  5. The <<Staff Title>> reviews the reconciliation statement and the supporting documents for accuracy
    • The <<Staff Title>> verifies not only completeness, but also validity.
    • The <<Staff Title>> reviews all documents for mathematical accuracy.
    • After reviewing, the <<Staff Title>> signs and dates the control document, the reconciliation sheet.
  6. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
  7. The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.
 

IRS Form 940: Employer's Annual Federal Unemployment (FUTA) Tax Return and Payment

Policy: 

In accordance with Section 3504 of the Internal Revenue Code, Revenue Procedure 70-6 as modified by Proposed regulations REG-137036-08-1 and in accordance with Revenue Procedure 2013-39, F/EA Files Form 940 annually and in aggregate on behalf of all consumers in the participant direction program. F/EA uses their separate agent Employer Identification Number (EIN) to file Form 940.  Per IRS regulation, F/EA deposits employer Federal Unemployment Tax quarterly on behalf of all consumers. 

F/EA Accountant utilizes reconciliation processes to ensure that the Payroll Department filed and paid estimated, quarterly 940 taxes accurately, timely and in accordance with existing regulation. On a monthly basis, F/EA reconciles 940 reports to debits for 940 payments from Program Operating Account.
 
Documentation showing payments of Federal Unemployment Tax made on behalf of consumers is made available to Program Administrator and consumers upon request.


 
Procedure: 

Reconcile and Verify 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, Payment

Performed Quarterly
 
Federal Unemployment Tax (FUTA) payments are made quarterly by the Payroll Department. F/EA Accountant (or assigned staff) verifies that payments were made timely and accurately using the below process.
 
  1.  Per IRS Guidance, the Payroll Department makes one aggregate payment per quarter for Federal Unemployment Tax on behalf of all consumers represented by F/EA
  2. <<Insert Process Used to determine estimate FUTA deposit amounts by employer and then deposit FUTA in aggregate using the F/EA's separate FEIN).
  3. A breakdown of the quarterly payment, the EFTPS Batch Provider Payment Inquiry, is submitted to F/EA Accountant by the Payroll Department after payment to IRS is completed
  4. F/EA Accountant (or assigned staff) collects EFTPS Batch Provider Payment Inquiry
  5. Open “Quarterly Tax Reconciliation” saved at <<File Path>>
  6. Complete the Quarterly Tax Reconciliation by entering values next to the labels for each document
  7.  Insert FUTA liability amount from Payroll Department Report
  8.  Enter amount on Line 1 of Quarterly Reconciliation document
  9. Review payment amount on EFTPS Batch Provider Payment Inquiry
  10. Enter amount on Line 1 of Quarterly Reconciliation document
  11. Review “Settlement Date” on EFTPS Payment Batch Inquiry
  12. Verify that “Settlement Date” for 940 Payment occurred on or before the 940 Payment Due Date
  13. Enter Settlement Date on Quarterly Tax Reconciliation document
  • Quarter 1 is due by April 30
  • Quarter 2 is due by July 31
  • Quarter 3 is due by October 31
  • Quarter 4 is due by January 31

 14.  Review the “Variance” column of the Quarterly Tax Reconciliation document

  • Any value greater than or less than “0” in the “Variance” column indicates discrepancy
  • Any discrepancies must be researched and resolved
  • Report discrepancies to reporting agent as applicable
  • Payroll Department will make a supplemental payment or adjust an overpayment as necessary

 15.  If no discrepancies identified, F/EA Accountant prints Quarterly Tax Reconciliation document

 16.  F/EA Accountant signs and dates Quarterly Tax Reconciliation document next to “Prepared By” 

 17.  F/EA Accountant provides Quarterly Tax Reconciliation document and supporting documents to <<Staff Title>>

 18.  <<Staff Title>> signs and dates Quarterly Tax Reconciliation document next to “Verified By”

 19.  <<Staff Title>> scans all documents and stores them at <<File Path>>

 20.  Signed reconciliation sheets are stored for a minimum of 7 years.

 
Reconcile and Verify 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, Payment
Performed Annually
 
Per IRS Regulation, Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is filed annually and in aggregate on behalf of all consumers represented by F/EA. Annually when Form 940 is filed with the IRS by the reporting agent, F/EA Accountant verifies form 940 for accuracy and to ensure it was filed timely.
 
  1. <<Insert process to collect applicable payroll data and complete Form 940 per Sample>>     
  2. At year-end, form 940 is compared to FUTA payments and liabilities for the calendar year  <<Insert process to verify and reconcile Form 940>>
  3. Review the “Variance” column of the Quarterly Tax Reconciliation document
  • Any value greater than or less than “0” in the “Variance” column indicates discrepancy
  • Any discrepancies must be researched and resolved
  • Report discrepancies to Payroll Department as applicable
  • Payroll Department files Form 940C as necessary

  4.  Obtain UPS Tracking number used to ship Form 940 to IRS from Payroll Department

  5.  Go to www.ups.com , enter tracking number

  6.  Verify that shipment date for 940 shipment occurred on or before the 940 Due Date

  7.  Enter date shipped on Quarterly Tax Reconciliation document

  • Form 940 is due by January 31

  8.  If no discrepancies identified, F/EA Accountant prints Quarterly Tax Reconciliation document

  9.  F/EA Accountant signs and dates Quarterly Tax Reconciliation document next to “Prepared By”

10.  F/EA Accountant provides Quarterly Tax Reconciliation document and supporting documents to <<Staff Title>>

11.  <<Staff Title>> signs and dates Quarterly Tax Reconciliation document next to “Verified By”

12.  <<Staff Title>> scans all documents and stores them at <<File Path>>

13.  Signed reconciliation sheets are stored for a minimum of 7 years.

Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

  1. On a quarterly basis, F/EA reconciles 940 payments to EFTPS Batch Provider Payment Inquiry
    • This ensures that payments are reconciled quarterly prior to being reconciled again when the annual return is filed with the IRS
  2. Quarterly, 940 payments are reconciled as part of the standard bank reconciliation process
  3. The F/EA Accountant performs the quarterly 940 payment reconciliation
    • The F/EA Accountant verifies the supporting documents, the bank statement and 940 return for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is prenumbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  4. The F/EA Accountant performs the annual 940 return reconciliation
    • The F/EA Accountant verifies the supporting documents, the bank statement and 940 return for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is prenumbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  5. The <<Staff Title>> reviews the reconciliation statement and the supporting documents, the bank statement and 940 return for accuracy
    • The <<Staff Title>> verifies not only completeness, but also validity.
    • The <<Staff Title>> reviews all documents for mathematical accuracy.
    • After reviewing, the <<Staff Title>> signs and dates the control document, the reconciliation sheet.
  6. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
  7. The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.
Policy and Procedures: 
FUTA
940
form 940

Non-Resident Tax Returns and Payments

Policy: 

When consumers employ workers who live in a state other than the state the participant lives in, "non-resident" workers state income and state unemployment taxes must be managed.  Each state has different rules and regulations for how non-resident taxes must be handled.  Some states have reciprocal agreements with other border states.  If two states have a reciprocal agreement and an individual lives in one of those states and works in the other, the individual will only be subject to the income tax in the state where he lives. All states with reciprocal agreements have provisions that exempt an workers from having the tax withheld for the state where he works, but employers are not required to withhold the tax for the state where the workers lives.

The F/EA manages non-resident tax responsibilites on behalf of any participant employers who have employees who live in a state other than the participant's state of residence.

Procedure: 
  1. <<insert the procedure for determining an workers's state of residence.>>
  2. <<Insert the procedure for determining if an workers is non-resident.>>
  3. <<Insert the procedure for managing non-resident workers taxes.>>
Internal Controls: 
  1. <<Insert internal controls for ensuring that non-resident employees are identified.>>
  2. <<Insert internal controls for ensuring that non-resident workers taxes are appropriately filed and paid.>>

Producing F/EA Schedule R for Form 940

Policy: 

F/EAs must file Schedule R with their Forms 940. Vendor Fiscal/Employer Agents that operate in Self-Directed (also known as Participant-Directed and Consumer-Directed) programs operate under Section 3504 of the Internal Revenue Code and must file a Schedule R with their aggregate Form 940.

Schedule R (Form 940) is used to allocate the aggregate information reported on Form 940 to each participant employer.  For purposes of Schedule R (Form 940), the Internal Revenue Service refers to employers represented by agents as their 'clients'.  

When the F/EA serves 15 or more employer clients, complete as many Continuation Sheets for Schedule R as necessary.  Attached Schedule R (Form 940) and any Continuation Sheets to the aggregate Form 940. F/EA should file Schedule R and Form 940 together with the Internal Revenue Service.