Year-End Tasks

Issue Forms W-2

Policy:

By January 31 of each calendar year, F/EA submits Forms W-2 to consumers’ employees for wages earned in the previous calendar year. A employee receives an individual form W-2 for each employer for whom they work, as a distinct employer/employee relationship exists for each employer/employee relationship.

Forms W-2 are produced per Internal Revenue Code Section 3504, Revenue Procedure 70-6 and Revenue Procedure 2013-39. Each Form W-2 shows Federal and State taxable wages earned in the calendar year by the employee from the employer.

By March 31 of each calendar year, F/EA or the reporting agent submits Forms W-2 to the Social Security Administration electronically per specifications published by the Social Security Administration in Publication EFW2, Specifications for Filing Forms W-2 Electronically. Forms W-2 are submitted to State Department of Revenue by <<March 31>> of each calendar year per <<State>> Electronic W-2 specifications (<<or via paper, depending on the state process>>.

<<Three times annually (see Policy and Procedure document 3.5), F/EA submits Change Request Forms to consumers to collect updated contact information for workers. This information is important for completion of year-end responsibilities to ensure that employees receive forms W-2 and that those who qualify receive any FICA refund checks>>.

A reconciliation of Forms W-2 is performed using separate processes as outlined in separate Policy and Procedure documents:

Reconciliation of FICA and FIT Returns (941) and Payments, performed quarterly
Reconciliation of FICA, FIT and SIT payment to General Ledger, performed monthly
Reconciliation of W-2 report to Forms 941 for calendar year, performed annually (see Policy and Procedure document <<X>>).

Procedure:

Prior to December 31 of each calendar year, F/EA staff update workers address information per received Change Request Forms. Address updates are made in the Payroll System for each affected workers.
F/EA balances and reconciles Form W-2 reports to State Withholding Tax returns and Forms 941
<<Insert process to do this>>
<<Control Sheets are used for reconcilations>>
<<Insert who reviews and signs off on control sheets before Forms W-2 are mailed to workers>>
Prior to January 31 of each calendar year, F/EA mails Forms W-2 to each workers to whom wages were paid as part of the program in the preceding calendar year
Forms W-2 are populated as follows (with applicable tax and wage information for each workers)
After mailing forms W-2 to consumers, <<Payroll Staff Title>> e-mails <<Customer Service Staff Title>> to notify that Forms W-2 have been mailed to consumers

Customer Service Unit staff are notified because workers and consumers may begin calling with questions about Forms W-2

9. Prior to March 31, F/EA submits an electronic file of Forms W-2 to the Social Security Administration via their Business Services Online portal

10. A file of electronic Forms W-2 is produced per Social Security Administration publication EFW2

11. The file is uploaded to the Social Security Administration

12. After uploading the file, the F/EA receives a Transmittal Confirmation receipt

13. <<Staff Title>> saves Transmittal Receipt confirmation to <<File Path>>

14. Transmittal Receipt confirmation is saved for a minimum of 7 years per File Retention Policy

15. Also prior to March 31, reporting agent submits an electronic file of Forms W-2 to the State Department of Revenue in the required format

16. After submitting the file, a Transmittal Confirmation receipt is received

17. <<Staff Title>> saves Transmittal Receipt confirmation to <<File Path>>

18. Transmittal Receipt confirmation is saved for a minimum of 7 years per File Retention Policy

Internal Controls:

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification. The methods of internal control utilized by F/EA in are:

Separate reconciliations are performed throughout the year to ensure that values reported on Forms W-2 are correct.
Pre-numbered Control Sheets are used to perform W-2 Reconciliation processes prior to issuing Forms W-2 to workers.
Prior to mailing Forms W-2, <<Staff Title>> and <<Staff Title>> review, sign and date Control Sheets.
Control Sheets are stored for a minimum of 7 years per File Retention Policy.
Transmittal Confirmation receipts for electronic files of Forms W-2 submitted to the IRS/SSA and State DOR or equivalent are provided by the reporting agent to the <<Staff Title>>
- <<Staff Title>> stores e-mail Transmittal Confirmation receipts for a minimum of 7 years per File Retention Policy.

Issue Form W-2c as Required

Policy:

F/EA issues Form W-2c for any Forms W-2 that were previously issued and must be corrected. Common reasons for issuing a Form W-2c include:

Incorrect workers Social Security Number
Incorrect workers name
Incorrect wages
Incorrect withholdings

Forms W-2c must be submitted to the workers listed on the Form W-2. Corrected data, as shown on the Form W-2c, must be submitted to the Social Security Administration and the State Department of Revenue.

Whether or not the corrected W-2 data is submitted to the Social Security Administration and State Department of Revenue using the applicable W-2c process depends on when the error on the original W-2 is identified and the corrected W-2 issued. If the original W-2 data has not yet been submitted to the Social Secutiy Administration or the State Department of Revenue when the error is identified and the W-2c provided to the workers, the F/EA does not need to use the Social Security Administration or State Department of Revenue W-2c process. Rather, the F/EA can correct the data and submit corrected data to the Social Security Administration and State Department of Revenue with the F/EA's initial submission of W-2 data. This approach to correcting data is usually used after Forms W-2 have been issued to workers but before W-2 data has been submitted to the SSA or State.

If W-2 data has already been submitted to the Social Security Administration or State Department of Revenue when the error is identified, the F/EA uses the Social Security Administration's W-2c filing process and the State Department of Revenue's filing process.

In 2016, Forms W-2c can be effectively filed using the Social Security Administration's Business Services Online portal and following onscreen steps to submit W-2c data.

Each state has an approach to accepting W-2c data.

Procedure:

<<Insert F/EA Process>>

Internal Controls:

<<Insert F/EA Internal Controls>>

Refund Over-Collected FICA to Workers and Employers (or the State Client)

Policy:

Per IRS regulation, household employees are only liable to pay Social Security and Medicare taxes (commonly referred to as FICA) if they earn wages from a single employer over a certain amount in the calendar year. Per IRS Publication 15, Circular E, in 2019, that amount is $2,100.

F/EA must withhold the employee’s portion and calculate the employer’s portion of Social Security and Medicare from every paycheck made because F/EA will not know in advance if the employee will meet the threshold to be liable for FICA taxes for the calendar year. At year-end, prior to issuing forms W-2 and filing the fourth quarter Form 941, F/EA reviews employer/employee wages for the calendar year. Any employees who earned less than the FICA threshold in gross wages from a single employer are identified.

All adjustments for refunded FICA must be made using Form 941-X. A separate Form 941-X must be filed for each quarter in which FICA was withheld that is ultimately refunded. A Schedule R for Form 941 must accompany each Form 941-X showing the corrected wages and taxes only for those employers impacted by FICA refunding for the quarter.

Procedure:

Immediately after the final payroll of a calendar year, F/EA identifies any employees who earned less than the FICA threshold for the calendar year in any employer/workers relationship
Remember that the FICA threshold must be tested for each employer for which an workers works
<<Insert process to create this report>>
Run a report of gross wages paid by employer to each workers for the calendar year working for an employer in a calendar year
For those employees who earned less than the FICA threshhold for a single employer, run a detailed payroll report showing their gross wages and FICA liabilities by quarter
Collect the information for affected employees for Quarter 1
Complete Form 941-X as follows:

Date discovered errors: 12/31/YYYY
Part 1, check Box 1 to apply the overdeposit to a future return (fastest way to get money)
Check Box 2 to get a check from the US Treasury (slow way to get money)
If you choose this method, F/EA can only correct overreported amounts on this 941-X and F/EA must complete a separate 941-X if F/EA is also correcting overreported amounts.
Part 2, check Box 3 and 3.a
Column 1 = F/EA's originally filed Form 941 less amounts for employees impacted by FICA Refunding

Column 2 = the amount originally filed on Form 941 for the quarter

Line 6: F/EA gross wages stay the same. The workers were still paid. It’s the Social Security and Medicare wages that will be adjusted. Yes, workers were paid, but the wages were not Social Security or Medicare Taxable.
Column 3 = the difference. This will also be F/EA's total amount for employees impacted by FICA refunding.
Line 8 – take it through like the other lines.

Column 4 is the sum of F/EA total workers and employer refunded SS tax for the quarter

Line 10 – take it through like the other lines.

Column 4 will also be the sum of F/EA total workers and employer refunded Medicare tax for the quarter
Lines 10 – 18 follow the remaining instructions on Form
The amount in line 18 is the amount of FICA refunded for the quarter
Half of this amount will be sent as a refund to the individual employees (their share of FICA)
Half of this amount will be refunded to the employer (almost always, this means refunding to the state)

Complete Section 21 to explain how you find the errors.

<<Staff Title>> makes appropriate corrections in payroll system for each employer/workers budget and in F/EA general ledger.
Participant budgets may be affected for the employer portion of FICA.
This complete 941-X process is completed for each quarter in the calendar year.

Also complete a Schedule R to accompany each Form 941-X. The Schedule R should include ONLY those employers affected by refunded FICA in the quarter for which the Form 941-X is filed.

List each employer that had an employee for whom refunded FICA applies for the quarter.
The Schedule R should list the employer's EIN and the wages paid and tax liabilities assuming FICA refunding has already taken place - that is show the wages and taxes on the Schedule R as though the employer did not pay the wages or have the liability for the taxes for which a FICA refund is now do.
Attach the Schedule R to the 941-X for the quarter and submit to the IRS.

Internal Controls:

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

This process is performed by the F/EA Accounting department. Payroll Department staff are not authorized to record FICA refund values.
Using a detailed report, the F/EA Accountant records employer and workers FICA refund amounts in <<control document>>
1. These values are used to reconcile to the applicable tax forms
The F/EA Accountant reconciles FICA refund payments that are sent to workers per the normal bank reconciliation process
1. Any uncashed checks are processed per the uncashed check process
All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.

Report Abandoned Property to State Division of Abandoned Property

Policy:

F/EA reviews uncashed checks monthly. After <<one year>>, any checks that have not been cashed are removed from the bank reconciliation uncashed checks list (Account <<99999>>) and accounted for in General Ledger Account <<99999>> (See Policy and Procedure X.X).

F/EA conducts a due diligence process to try to connect uncashed checks with payees prior to submitting them to the Division of Abandoned Property. For all payees with uncashed checks at least one year old are sent a notice by first-class mail to the payee's last known address at least <<60>> days prior to filing a report and turning over assets to the Division of Abandoned Property. Each notice includes a voucher that the payee is asked to complete, sign and return to the F/EA. The voucher asks the payee to certify that they never received the check in question and requests that the payee specify an address where a replacement check should be sent. Each voucher includes identifying information so that the F/EA can match the signed voucher to the uncashed check(s) and payee. The voucher must be signed by the payee for the F/EA to process it. F/EA only re-issues checks for returned, signed vouchers.

If after <<60>> days the payee has not contacted the F/EA to claim the uncashed check, F/EA submits each uncashed check value to the State Division of Abandoned Property in the payee's name using the Division's specified process.

This process is regulated by <<Insert State Statute or Reference to Regs>>

Procedure:

Each month when F/EA Accountant performs Program Operating Account Bank Reconciliation any uncashed checks <<180 days or older>> get moved to GL Account <<99999>>
For any check <<180 days or older>>, F/EA attempts to contact the payee
<<Note: Customer Service Unit is not authorized to have contact with workers. For this reason, the F/EA accounting unit handles all communication with workers regarding uncashed checks>>
F/EA Accountant isolates all checks written to workers that are <<180 days old or older>>
F/EA Accountant copies and pastes/imports this check data to spreadsheet at <<File Path>>
F/EA Accountant verifies each payee’s address in the Payroll System and <<enters address information into the spreadsheet>>
F/EA Accountant opens letter template saved here <<File Path>>
Complete mail merge from Uncashed ck issue spreadsheet for uncashed ck letter for each workers with a check outstanding for 180 days or more
This process will populate each letter with:

Consumer number
Check Date
Type of Check (Payroll check, refund check etc.)
Worker Address
Today’s date
Worker Name
Uncashed Check Number
Uncashed check amount

<<Insert image of letter template. Letter template may include a 'voucher' that can be returned with a payee signature saying that the original check was never received and should be re-issued to X address.>>

10. All letters are mailed to workers

11. Some letters will be returned as “undeliverable”

12. After undeliverable letters are received, F/EA Accountant or <<Staff Title>> try to contact workers by phone to verify their addresses

13. Verify mailing address with each workers

14. Record that call is made in <<Customer Service System>>

15. pdate address in Payroll System

16. After verifying or updating address with each workers, send each workers the uncashed check letter

17. When vouchers are returned to F/EA, F/EA Accountant logs the date the voucher was returned in the Outstanding Check Issue spreadsheet

18. For all workers in the spreadsheet for whom a voucher has been received, F/EA Accountant approves re-issuance of the check value by completing the "Re-Issued Check Requisition Form"

19. For each returned, signed voucher, collect the voucher and the Re-Issued Check Requisition form

20. Provide these forms to <<Staff Title>> for review

21. Each check gets one form with the Check Requisition and the Letter

22. <<Staff Title>> reviews all supporting documents and Check Requisition form

23. <<Staff Title>> initials and dates Check Requisition form in lower right corner

24. <<Staff Title>> reviews letter and Check Requisition form

25. If errors do not exist, <<Staff Title>> signs and dates the Check Requisition form

26. F/EA Accountant interoffice mails the Check Requisition forms to Accounts Payable Department

27. F/EA Accounts Payable Department issues checks

28. Issued checks are submitted to F/EA Accountant

29. F/EA Accountant reviews checks received from Accounts Payable Department

30. F/EA Accountant enters “Reissued” in column <<B>> of the Check Issue spreadsheet at <<File Path>>

31. F/EA Accountant enters the reissued check number in column <<R>>

32. Filter spreadsheet by column B = “Reissued”

33. Copy all lines with “Reissued” in column B

34. Paste results to bottom section of spreadsheet where reissued checks are stored

35. <<Staff Title>> puts checks in envelopes

36. Seals envelopes

37. Delivers checks to outgoing mail box

38. Checks are mailed

39. By November of the calendar year, uncashed checks are reported to abandoned property for checks that are 3 years old or older

40. F/EA Accountant provides report of uncashed checks 3 years or older to F/EA Controller for reporting

41. F/EA Controller completes <<State Issued Report of Abandoned Property>>

42. If any payment is due to transfer the unclaimed property to the Division, F/EA Controller will make payment and submit original report and payment to Division of Abandoned Property

43. Copies of payment and <<State Issued Report of Abandoned Property>> are provided to <<Staff Title>>

44. Copies of payment and <<State Issued Report of Abandoned Property>> are scanned and saved to <<File Path>> for a minimum of 7 years per File Retention Policy

45. <<Insert process to appropriately update General Ledger and reconciliation documents>>

Internal Controls:

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

On a monthly basis, as part of the Bank Reconciliation process, uncashed checks are reviewed and flagged
<<The Customer Service Unit is not permitted to contact workers. The unit is only permitted to talk to consumers and representatives per program rule>>
- For this reason, the F/EA Billing Department performs all communication with workers regarding uncashed checks.
All vouchers requesting a re-issuance of a previously uncashed check must be signed by the payee.
<<Staff Title>> reviews all signed voucher and Check Requisition form prior to re-issuing a previously uncashed check
- <<Staff Title>> initials and dates Check Requisition form in lower right corner
The <<Staff Title>> reviews supporting documents and signs the Check Requisition Form prior to F/EA Accounts Payable Department issuing replacement checks
All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.

Issue Forms 1099-MISC

Policy:

Independent contractors that are used in the participant-directed program must be issued Forms 1099-MISC when they meet certain criteria. The F/EA issues Forms 1099-MISC to contractors and submits copies of the Forms 1099 and Form 1096 (or electronic equivalent) to the IRS. Copies of Forms 1099 and Form 1096 (or electronic equivalent) are submitted to the state Department of Revenue (or equivelent) depending on state rules.

Forms 1099-MISC should be filed per instructions and rules for the form, which can change from year to year.

Not withstanding other Form 1099-MISC instructions, Forms 1099-MISC will generally be issued to independent contractors by the F/EA under the following circumstances:

the participant uses the services of a self-employed individual and the individual is paid $600 or more per year by the participant (or consumers) for those services.
the participant uses the services of a nonprofit or government organization and that entity is paid $600 or more per year by the participant (or consumers) for those services.
the participant purchases health or medical services from any organization, including a corporation. Qualifying health and medical services include services provided by physical & occupational therapists and nurses.

Forms 1099-MISC generally must be submitted to payees by January 31 of the year following the tax year reported on Form 1099-MISC.

The F/EA submits to the IRS copies of all Forms 1099-MISC and a completed Form 1096 by February 28 of the year following the tax year reported on Form 1099-MISC. If the F/EA issues 250 or more Forms 1099-MISC, Forms 1099 must be filed electronically by the IRS. In this case, a Form 1096 is not required. Electronic Forms 1099-MISC are due to the IRS by March 31

Procedure:

<<Insert procedure to determine which payments/contractors qualify to receive a Form 1099-MISC and how that is tracked.>>
<<Insert procedure to produce paper Forms 1099-MISC>>
<Insert procedure to mail Forms 1099-MISC to payees>>
<<Insert procedure to either create the electronic form 1099 for the IRS, or to create the 1096 MISC.>>
<<Insert procedure to submit Forms 1099 and Form 1096 (or electronic equivalent) to the IRS.>>
<<Insert procedure to create Form 1099 info per state requirements and to submit to the state.>>

Internal Controls:

<<Insert internal controls to track which payees get Forms 1099.>>
<<Insert internal controls to ensure that data on Forms 1099 is correct.>>
<<Insert internal controls to ensure that Forms 1099 are submitted to payees by January 31 and to the IRS and State by applicable due dates.>>