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Home > FMS Policies and Procedures CA > Pay and File Taxes on Behalf of Consumers > State Withholding Tax Returns and Payments

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.