1099 Tax Software Blog

The Affordable Care Act (ACA) or Obamacare has generated a new collection of tax forms that employers, insurers and individuals will be required to file each year.  At this point, the published forms are draft versions, but the IRS assures us that they will have the final forms and instructions available by the filing deadline.  That deadline for filing will be January 31 of each year, similar to W-2 and 1099 filing deadlines.  Although the forms should be available, the filing and reporting requirements will not be mandatory for tax year 2014, but will be required for tax year 2015.

Form 1095-A

The first form is 1095-A, which is filed by all Health Insurance Marketplaces, including a copy being provided to individuals who purchased a qualified health plan through the ACA Marketplace.  Because having health insurance is mandatory, those who purchase a plan through the Marketplace may be entitled to a tax credit.  According the IRS draft instructions, the copy of 1095-A can be used by individuals to:

• Allow them to obtain the premium tax credit, if they qualify
• Reconcile advance payments of the credit on their returns
• File an accurate tax return

This information is also furnished to the IRS so that they have the information on all family members in each household that enrolled in a qualified plan.

Some of the key information on the form includes:

• Health policy coverage dates
• Amount of advance credit payments made
• Total amount of premiums paid
• The method used to compute the amount of premium tax credit available

The Premium Tax Credit

The premium tax credit is available to individuals who purchased health coverage through the Marketplace and meet certain criteria such as:

• Not eligible for employer of government health plans
• Are within certain income limits (explained below)
• Cannot be claimed as a dependent by another person
• Do not use filing status Married Filing Separately

Some individuals may choose to receive the credit in the form of reduced payments to their insurer while others will wait to get is as part of their tax refund.  One of the reasons for form 1095-A is to allow those who receive the credit as premium deductions to accurately file their taxes.  The total premium tax credit depends on the size of the household and income.  The general formula for eligibility is between 100% and 400% of the federal poverty level, for example:

• $11,490 (100%) up to $45,960 (400%) for one individual.
• $15,510 (100%) up to $62,040 (400%) for a family of two.
• $23,550 (100%) up to $94,200 (400%) for a family of four.

Households with lower incomes than this range could possibly be eligible for Medicaid and would not need the credit or qualify.  The amount of the credit is determined by income level, with lower income households receiving a larger tax credit than high-income households.  All that is certain is that individuals will now have another form to pay attention to in filing their taxes, but there may be some refund available that makes it worth the effort.

Another new tax form required for entities that provide health coverage for individuals under Obamacare is Form 1095-B.  This form is used to verify that an individual has ‘minimal essential coverage’ under the mandates of the Affordable Care Act (ACA).  This coverage is referred to as the individual responsibility requirement under ACA, which requires either purchasing or receiving health coverage, or face paying a penalty.  Although ACA is a health care directive, the penalty and coverage verification have been left to the IRS as the agency with the ability to both track and collect the penalty using tax returns.

The penalty aspect of ACA was controversial, but this is the way that Obamacare mandates that every individual have coverage.   The penalty is minimal the first year, but increases steadily each year to equal the cost of mid-level health plan in the Marketplace.  This form, submitted by the entity that provides the coverage, will demonstrate that a taxpayer had fulfilled the requirement and would avoid the penalty.  Therefore, anyone who receives a copy of this form should retain it to verify that they have complied with the mandate.

The types of coverage that could be reported on the form include:

• Small Business Health Options Program
• Employer sponsored coverage
• Government-sponsored program
• Individual market insurance
• Multi-employer plans

 

The form is actually filed by the entity that provides the coverage, and then the Responsible Individual (Policy Holder) listed in Part I will receive a copy of the form for their records.

Part II is for Employer Sponsored Coverage, and Part III is for other Issuers or Coverage Partners.

Part IV has multiple spaces for Covered Individuals where there may be several family members under the same plan.

There are also boxes that indicate the number of months of coverage for the calendar year.  There is an additional form that must be filled out for employers that provide coverage, the 1095-C, which I will discuss in another article.

Form 1094-B

Form 1094-B is simply the transmittal form that will accompany all 1095-B forms that are filed by one employer or provider of coverage.  For instance, if an employer provides coverage they would send separate 1095-B forms for each employee, but only one 1094-B as the transmittal form.  It is simple to fill out and poses no real challenges for the filer.

If you administer an ERISA 203 employee benefit plan, you are required to file IRS Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits. The form provides information about plan participants who no longer work for the company and who have deferred vested benefits. It also covers instances where the benefits were transferred from another plan, paid out benefits, and corrections to previous filings. The IRS passes the information along to the Social Security Administration, which reports it to new filers when they apply.

Filing Requirements

Plan administrators subject to ERISA Section 203 vesting standards must file Form 8955-SSA, This doesn’t include annuity contracts or custodial accounts as long as they were issued before Jan. 1, 2009, the employee stopped contributing before that date, the terms can be enforced without employer involvement, and the participant is fully vested. If you sponsor a plan for a church, government agency or other exempt institution, filling the form is voluntary. If you are ending the plan, you must file the form when you file Form 5500. You have to file Form 8955-SSA by the end of the seventh month following the last day of the plan year, although extensions are possible.

The rules about participant reporting differ between single- and multiple-employer plans. For single-employer contributions, file the form for participants that separate during the plan year and are entitled to a deferred vested benefits. If more than one employer contributes, report entitled participants that have incurred two successive one-year breaks in service. In either case, omit participants who’ve received some or all of the benefit, have returned to service or have forfeited their benefits. However, report when plans stop paying before all benefits have been paid out. In cases of transferred plans, both the old and new administrators must fill out portions of 8955-SSA.

Filling out the Form

In Part I:

• Plan year
• Voluntary or mandatory filing
• Amended filing, extended filing

In Part II:

• Plan name, number and sponsor and trade name
• Sponsor’s employer identification number and address
• Care of, in case you want a third party to receive mail for the plan
• Plan administrator’s name, address and EIN
• Any change to the administrator’s name or EIN
• Number of entitled participants who separated during the plan year or separated in the previous year but weren’t reported
• Affirmation that the administrator provided an individual statement to each entitled participant
• Signature of plan administrator

In Part III:

• Plan name, plan number and sponsor’s EIN
• Filing code:

o   A: participant not previously reported

o   B: modify previous information

o   C: transfer

o   D: participant no longer entitled to deferred benefits

• For each participant:

o   Participant Social Security number, name, and whether or not the information is complete

o   Type of annuity

o   Benefit payment frequency

o   Amount of periodic payment

o   Account value

o   Previous plan EIN

Penalties

Failure to file can get expensive. The IRS assesses $1 per day per participant for delayed filings, up to $5,000. If you fail to notify the IRS about a change to the status of the plan, the penalty is $1 a day up to $1,000. Failure to send individual statements to participants before the filing deadline will cost you $50 each.

You can reduce the filing burden by buying Form 8955-SSA software or having a service bureau produce and file the forms for you. The IRS encourages you to file the form electronically.

The IRS has this rule: every penny of income any citizen receives must be reported. Period.

There isn’t a dispensation for yard sale income, there isn’t a dispensation for renting your camper to your brother-in-law.

And there isn’t a dispensation for gambling proceeds.

It doesn’t matter the source of the gambling winnings. Whether it is $1.00 in a scratch-off or $1 million at the slots, the IRS wants you to report it on line 21 of your 1040 form.

Now, a lot of that reporting is left to the individual to declare, meaning there is no “official” record of the prize (think turning in a $5 winning lotto ticket at the gas station – no one takes your social security number before they hand you a $5.00 bill.) The IRS is counting on the honesty of the taxpayer here.

However, under certain circumstances, like how much you won and where you won it, there needs to be a form W2G issued, and taxes must be withheld.

The form W-2G is a lot like a W-2, at least in terms of the reason it exists. It reports income to the IRS and lists amounts withheld for taxes. It doesn’t look exactly the same – the boxes are different – but it serves the same purpose.

Who gets a W-2G? Here are the requirements:

• $1,200 or more (not reduced by the wager) from a bingo game or slot machine.
• $1,500 or more (reduced by the wager) from a keno game.
• More than $5,000 (reduced by the wager or buy-in) from a poker tournament.
• Lottery, raffle winnings and other winnings (except those listed above) that are $600 or above, as long as they are at least 300 times the wagered amount.

Withholding is 25% of winning amount if the winner is cooperative and provides their social security number. If they don’t, and the winnings are at the levels listed above, the organization will withhold and send to the IRS 28%, a so-called “backup withholding”.     For most taxpayers, their “true” tax rate (not their bracket) is less than this, so this does not represent any type of savings. In fact, reporting the withholding will likely get them a refund of all or part of the amounts withheld.

At tax time the taxpayer gives the W-2G(s) to their tax preparer, so that the amounts won can be included in income. They should also bring along their proof of losses. Losses can be deducted on Schedule A, up to the amount of winnings, which offsets the winnings for tax purposes. If you have enough losses to offset your entire winnings, and you are able to file schedule A, then any withholding would theoretically come back to you when you file your taxes (ask your tax preparer to explain the “ins and outs” of this.) Proofs of losses can include receipts, losing tickets, diaries or logs of bets made, dates, locations and amounts, or statement printouts from casinos that show wins and losses.

When an individual makes a jump from being a salaried individual to a retired individual, then she or he does so with a huge drop from the amount of salary per month to the amount of pension per month. Hence, many people start planning from retirement quite early, putting away a little bit of money and investing it in avenues which will yield them a continuous stream of money when they need it later. In the United States, financial institutions provide for what is known as “individual retirement plans”, which provide for tax benefits on retirement savings. It is an investing implement which is employed to earn and allocate resources for retirement savings.

The term IRA (Individual Retirement Account) has come to describe both individual retirement accounts as well as the wider set of individual retirement arrangements in general includes an individual retirement account; a safekeeping account arrangement with the sole objective of benefits to taxpaying individuals and/or their beneficiaries; and an individual retirement endowment, by which the taxpaying individuals buy and acquire an endowment contract from a life insurance company.

Eventually, earnings on the IRA are taxed as income, although the tax rate is lesser. IRAs have come to become valued tax management tools for individuals, as the IRA allows for the benefit of tax deductions in the working years, along with a lower tax rate in the retirement years.

Understanding the IRS Form 5498

If, as a salaried individual, you own an IRA, then your account’s issuer or executor is supposed to report your contributions to the same account that you do each year to the IRS (Internal Revenue Service). The information so submitted is given in on the Form 5498. A twelve-monthly document that is supplied by the institution that manages your IRA account, this Form 5498 not only reports info about IRAs but also the other arrangements preferred due to tax-savings such as HSA, MSA and ESA plans.

The arrangement is to be filed with the IRS and delivers independent validation to the same as to what amounts the individual contributed in which accounts.A copy of the same document also exists with the individual whose IRA account it is. Apart from the above the form also reports the FMV (fair market value) of the same group of accounts as on December 31^st of that accounting or fiscal year and also if the taxpayer is supposed to be undertaking some minimal amounts of distributions for the particular year.

Essentially, the Form 5498 exhibits traditional IRA contributions made by the individual during the previous tax year.

Why the receipt of IRS Form 5498?

The Federal law and the IRS requires the IRA account executor or custodian to report deductible and non-deductible contributions, re-characterizations, conversions and roll-overs made to the individual’s traditional, SIMPLE, SEP or Roth IRA during the given tax year. For each IRA account, the individual shall receive one form. Basically you as a taxpayer have received the IRS form because you executed a roll-over or a regular contribution to your IRA account during the year, which includes shifting monies from a Roth IRA to a traditional one (and vice versa), moving and shifting contributions made earlier from a Roth IRA to a traditional IRA (or vice versa), and/or making a contribution to an SEP IRA.

When will I receive the IRS Form 5498?

There are 2 mailings of the IRS Form 5498. One must be postmarked by the 31^st of January of the following year, covering all current year contributions from 1^st  January – 31^st December of the previous year. The 2^nd mailing is due 31^st May of the subsequent year, covering all prior year contributions made from 1^st Jan– 15^th April (or whenever the tax filing time limit is).

Why am I receiving the Form 5498 now?

Since in the first mailing the Form 5498 is sent out by 31^st Jan to individuals, it will be mandatory for them to undertake some minimal distribution (RMDs) through the year. And since it is finally filed with the IRS by 31^stMay,the Form allows the taxpayers to make contributions so as to be able to report the same before the filing. The Form is sent after 15^th April because confirmation happens only after that date, and hence is sent out after that.

What is RMD?

RMDs are minimal amounts that an individual with a superannuation plan should draw out annually beginning with the year that she or he reaches 70.5 years of age or the year in which he/she retires, whichever is later.

If the individual fails to draw out the required amount of funds, the IRS fine sthem with a 50% tax on that amount. RMD increases as you get older.

Receipt of Form 5498 after filing IT return

In general, if the contribution quantities stated in Box 1, 2, 3, 4, 8, 9 or 10 of the Form 5498 do not match with your records, contact the IRS on the telephone number provided on the form.

Checking Box 11 on the Form 5498

Box 11 on the Form is basically checked if the individual is at least 70 ½ years or above in the current year. Checking the box is an alert to individuals that they are to start undertaking any requisite minimum distributions from their TIAA-CREF traditional, SEP or Roll-over IRA accounts before 1^st April of the year subsequent to the year they turn 70 ½.

Purpose of Form 5498 to individual

The copy of the Form 5498 you receive is only for your information and personal records. Do not attach it to your tax return. You won’t need to attach a copy of it to your income tax return.

What is the tax effect of IRS Form 5498?

There are no tax consequences or effects until and unless requisite minimum distributions are made from the account.

IRA contribution limits

Normally, contributions are based on the earned or received income, which includes all the taxable salaries from occupations. However, the phased-out income levels could additionally lower the contribution limits.

Which contributions on my IRA accounts are deductible on my IT return?

Contributions to traditional IRA are generally deductible, within certain restrictions –

· If neither your spouse nor you are an active participant in an company backed retirement plan for the year.

· If either your spouse or you are an active participant, and if your modified adjusted gross revenue is at the minimum
o   $70,000 (filing jointly and married),
o   $10,000 (filing separately and married), or
o   $50,000 (single),
Then your capacity to make deductible contributions to a traditional IRA phases out completely.

· If you are not an active member but your spouse is, you file a joint tax return, and your modified adjusted gross revenue is at the least $160,000, then your ability to make deductible contributions phases out completely (but not your spouse’s).

Contributions to a Roth IRA are not deductible. SEP IRA contributions are deductible if you’re self-employed, but cannot be done under an employer-managed IRA.

Excess contribution to IRA withdrawn later still reported on Form 5498

Federal Law requires the original contribution is required to be reported on the Form 5498 by your IRA custodian, even if it was removed later. The excess contribution is required to be reported separately by the individual on the Form 1099-R for the particular year in which it was removed.

Determining non-deductible and taxable amounts on Form 5498 and reporting them

Form 8606 is to be filed to determine the taxable amount of a Traditional or Roth IRA due to conversion. If you have remitted nondeductible IRA contributions and received distribution from non-deductible funds, converted or re-characterized IRA funds, or if you have received Roth IRA distributions, then you’re required to complete Form 8606 with the original amounts.Your conversion, re-characterization and quarterly statement have the info necessary to complete this form. Part II of Form 8606 lists out the detailed instructions. Additionally, participants should report any non-deductible contributions included in Box 1 on Form 8606.

Form 8606 is also used to report conversions to balance out the distribution on Form 1099-R. Failure to complete Form 8606 may result in fines.

Re-characterization of traditional IRA to Roth IRA

The custodian of the retirement plan is required to report the original contribution to the traditional IRA on Form 5498, even though it was re-characterized. The amount that was re-characterized into your Roth IRA after being removed from the traditional one is reported separately on Form 1099-R.

Reporting of excess contribution not withdrawn

Any excess contributions included in Box 1 should be reported on Form 5329 by the individual.

Crosschecking the Form 5498 with IT return

• Box 1, Form 5498 – contributions to a traditional IRA (includes all contributions to a traditional IRA designated for the preceding tax year, and does not include contributions to Roth IRA)
• Line 32, Form 1040 – deductible traditional IRA contributions
• Line 1, Form 8606 – non-deductible traditional IRA contributions
• Box 10, Form 5498 – contributions to a Roth IRA designated for preceding tax year.
• Line 28, Form 1040 – contributions to SIMPLE and SEP IRA (for self-employed individuals; for an employer-managed IRA, contributions are shown in Box 12, W-2, “F” – SEP IRAs, “S” – SIMPLE IRAs)
• Box 2, Form 5498 (roll-over contributions) should match with 1099-R Forms exhibiting direct and indirect rollovers both.
• Box 4, Form 5498 (Roth IRA conversions) should match 1099-R Forms and line 8, line 16 or line 21 of Form 8606.
• Box 2, Form 5498 SA (Totals of HSA contributions) must match with Box 12, Form W2, and Code “W” (Additionally, individual contributions must match with the sum shown on Line 25 of Form 1040).
• Box 1, Form 5498-SA (Archer Medical Savings Account contributions) must match with totals shown on Line 2, Form 8853.

Determining the basis of IRA

Basis for the first year of contribution to an IRA begins with zero. If its your first year of contribution, then you are required to review your life-to-date under-the-plan contributions. You can refer to your yearly IRS Form 8606 or the IRS Publication 590 to retrieve or calculate your basis.

Viewing Form 5498 online

You can view the form if you have signed up for the e-delivery option. They become available by 31^st January every year.

• Log in > Select Manage My Portfolio > Select “E-statements & Reports”
• If you are not registered, select “Register for online access” on the homepage and follow the instructions

Rollover contributions and Form 5498

Roll-overs occur when moneys are deposited into one IRA account after having removed it from removed from another within a period of 60 days. While this is reported on Form 1099-R, the recipient IRA must also report the receipt of the rollover on Form 5498. Reporting rollover contributions of the IRA on Form 5498 confirms to the IRS the quota of the distribution from your previous IRA, and hence it appears on Form 5498 as well.

Other information with respect to Form 5498

The instructions on Forms 1040/1040A, IRS Publication 590, and the IRA documents give the individual all other information required for reporting requirements for your IRA. Call the IRS office for additional info at the number given on their website (800-829-1040) or visit www.irs.gov.

Pension plans generally come under the purview of tax exemptions because they are essentially meant for the employee’s future benefit. When it comes to how the pool is invested, it’s easy for the employee, however hard it is on his pocket, to simply put in an amount every month and forget about it, knowing that they can’t touch it for years. However, it becomes the employer’s responsibility to see to it that even after the employee is no longer under the umbrella of the plan, his/her beneficiaries benefit from it. The following law and the subsequent documents were created out of the concern for pension plans to private workers and to safeguard their and their families’ interests.

The Internal Revenue Service (IRS) Form 8955-SSA is to be filled with respect to the United States’ Employee Retirement Income Security Act, 1974 (ERISA). The Act is a centralized federal law that establishes minimum standards and extensive rules for private industry workers’ pension plans, as well as the income tax effects of dealings associated with the workers’ benefit plans. The purpose of the Act is to protect the interests of the contributors and beneficiaries of the employee benefit plans by divulging necessary plan information to them, establishing standards for recognizing such benefits and providing for appropriate remedies.

So what is the Form 8955-SSA?

Form 8955-SSA is the official registration document required to be used by ERISA plans to report to the IRS the members who have left the plan and its services and have overdue benefits remaining in the vested plan even after their departure. The information then goes from the IRS to the Social Security Administration (SSA), which uses the information to reach out and inform applicants and/or their beneficiaries about the social security benefits that they may be entitled to and certain delayed benefits that might be payable to them due to vested interests in a retirement plan in which the applicant participated.

This Form is a standalone reporting form which is the nominated successor of the Form 5500 and is reported and filed to fulfill the requirements of the tax law which became effective subsequent to 31^st December, 2008.

Who has to file the Form 8955-SSA and when is it due?

Employers who are required to file the Form 5500, which is part of ERISA’s general reporting and disclosure charter, and who have contributors with deferred vested benefits are required to file Form 8955-SSA. The statutory due date for filing both forms, although filed separately, is the last day of the seventh month following the end of the plan year. Extensions of 2.5 months are allowable subject to filing Form 5558 by the same statutory date. Additionally, the Form 8955-SSA needn’t be filed for a year with no such information.

Is the filing of Form 8955-SSA necessary ever year?

Unless and until there is absence of information about the plan and employees to file, Form 8955-SSA has to be filed every plan year.

What’s in the Form 8955-SSA?

The IRS has already released a draft form this year with the tax form, instructions, or publication, which the IRS is providing for the plan administrators’ information as a courtesy. The information includes the plan name and number, information about the plan sponsor and administrator, number of participants who separated on a required basis as well as voluntarily, their details such as their entry codes, social security numbers, the amounts vested towards their benefit and their EINs. The codes indicate why the member is being shown under that category.

A copy of the draft plan has been put up on the IRS website, with clear instructions not to file the same as the IRS is yet to release the final form.

Who all qualify under Form 8955-SSA?

People can either be a part of a single employer or a multi-employer benefit plan. In general, for a single employer benefit plan (for which only one employer or plan administrator contributes), a member must be stated on the 8955-SSA Form:

• If a participant separates from and leaves the services under the umbrella of the plan during a plan year, and/or
• If a participant has separated from the plan and is permitted to a deferred vested benefit under it, and:

–        Was reported as delayed on another plan’s filing

–        Was previously stated in the plan and has been compensated or is no longer eligible

–        Was previously in the plan and whose information is being amended.

The above information must be reported and filed for the year succeeding the year of plan in which the participant left the plan, although earlier filing can be done as well.

For a multi-employer benefit plan, a member must be stated on the 8955-SSA:

• If he/she incurs two successive 1-year breaks in service, and
• If he/she is eligible for a deferred vested benefit under the provision.

The above information must be reported and filed for the year of plan in which the participant completes the 2^ndof the two consecutive 1-year breaks in service. Earlier filing and reporting may also be done.

Is a member eligible to be reported when he/she begins getting the benefit?

As mentioned earlier, if a member has stopped receiving a benefit but is still eligible for the overdue payment, in that case he/she is eligible for the delayed vested benefit.

Exclusions and deletions under Form 8955-SSA

A participant is not required to be reported before the required date of filing:

• If he/she has been paid a part of or the entire amount of the overdue assigned retirement benefit, or
• If he/she returns to provision covered by the plan and/or accumulates additional retirement assistances under the umbrella of the provisions, or
• If he/she forfeits all the overdue vested benefits.

The Form also allows plan administrators to delete detached participants who were formerly reported if their vested benefits were consequently dispersed in full. The best practice is to include previously reported separated participants to be included as deletions in the year, as it makes keeping records easier. The form also gives the plan sponsors the choice to include participants separating in the current year or in the former year, as mentioned above.

Transfer of deferred vested benefits and their reporting

In the event of the transfer of the vested interest plan of a participant from one employer to another, both the transferor and transferee plan administrators should report information regarding the member.

The transferor plan administrator is to report on Part III, Line 9, and Code D that the benefits of that certain member have been paid and he/she is no longer eligible. The transferee administrator is to report either on Part III, Line 9, and Code C (member already previously reported and the information has been received) or on Part III, Line 9, and Code A (no earlier reporting of member or information disclosure).

The “Special extension” box on Form 8955-SSA

This extension box is only to be checked for extensions in the event of disasters declared so by the government, or supporting the US Army in the Combat Zone.

Obtaining Form 8955-SSA

The Form 8955-SSA can be downloaded off the IRS website very easily, which is accessible 24X7. Employers can also order the Form by calling the 1-800 TAX-FORMS (1-800-829-3676) given on the IRS website or collect it in person from the local IRS office. Before plan administrators start filling the forms with the requisite information, they are encouraged to go through the through instructions on the IRS website regarding the filling of the form, the changes and amendments, and the information requirements for correct and hassle-free filing.

How and where to file Form 8955-SSA?

With the world going paperless day by day, electronic submission of documents not only saves time, money and resources but also helps maintain accuracy. Hence, the IRS and SSA encourage all plan administrators to file Form 8955-SSA electronically.

The IRS has also adapted a system for easing e-filing and permitting voluntary e-filing of the Form 8955-SSA, aptly called the FIRE, which is filing the returns electronically. The Form 4419, which is the application for the same, must be filled to request a definite TCC (control code for transmitter) for the transmission of the Form. A single TCC may be used for all client plans. All the instructions, numbers and forms can be easily found on the IRS website. The e-filing procedure at this point of time doesn’t require the any signature. However, it is prudent to ask the clients to review, sign and preserve a paper copy of the completed form for future reference. The physical copy of the Form 8955-SSA that is sent across to the IRS must have the signatures of the plan administrator and sponsor at the bottom of the first page. If both are the same individuals, then the plan administrator solely needs to sign.

Additionally, if there are any changes to the plan and/or the administrator, then they should be duly notified to the Secretary of Treasury. Additionally, they are also to be reported by the plan administrators on Form 5500 in the year of plan in which such change happens.

The completed Form 8955-SSA has to be sent to the official IRS address in Utah. Apart from the US mail services, employers can also avail of private delivery services designated by IRS to meet the timely filing deadline. Some of these designated services include some of DHL’s, FedEx’s and UPS’s services. For a complete list, the IRS website can be accessed. These private delivery services have to send the forms to a separate address of the IRS. The IRS website has all the required information including the addresses and the lists and instructions.

Who signs the Form 8955-SSA?

On the physical copy of the Form 8955-SSA, both the plan sponsor and the administrator need to sign at the bottom of the first page. If both are the same people, then the plan administrator solely needs to sign.

Finding information on third-party software providers

Right from the forms, specifications and the requirements of e-filing through the FIRE system and its processes to the SSA standards for testing barcodes, any and all information on and about third-party service providers can be accessed at the Form 8955-SSA Resources page on the IRS website.

Credentials needed to submit this sensitive information electronically and how to go about obtaining the same?

Plan sponsors and administrators rarely need such credentials. They are generally required only by the people who actually submit and transmit the electronic forms through the FIRE system. Transmitters are needed to create a unique FIRE account to obtain a TCC code for the e-filing transmissions. If they already own a FIRE account, all they need is an extra TCC code specially to be used for submitting Form 8955-SSA. However, administrators will need to setup a FIRE account and get a TCC if a third-party service provider isn’t employed.

Accepting scans, faxes or copies of signatures on Form 8955-SSA

The IRS accepts the above with original pencil signatures as well.

Listing of amounts in dollars on Form 8955-SSA

Rounding off an amount less than 50 cents to the lower amount and increasing an amount above 50 cents to the next dollar is allowable on the form and must be done so for all amounts.

Answering Question No. 8 on Form 8955-SSA with a “Yes”

The question asks if the administrator supplied each member with a statement regarding the material required in the 8955-SSA. An administrator may go ahead with a “yes” to the question if the abovementioned information was given to the member in any other form apart from a distinct statement, which is not required. He may also respond with a “yes” to the question if documents given to the participants include the plan name, the administrator’s address, the participant’s name and the nature, value and the type of overdue assigned benefit to which the member is titled.

Length of the Form 8955-SSA

Since Adobe doesn’t print forms which are more than 200 pages in length, the next option would be to go in for printing the form in lots or opt for the e-filing using the FIRE system.

Missing the deadline of filing for Form 8955-SSA

Submit all the required documentation and the form as soon as you can even if it is after the deadline.

Penalty along with the late filing of Form 8955-SSA

The late filing at that time attracts no penalties. If and when it is evaluated, the IRS will contact the required person.

Is there a defaulting filers program for all those who filed Form 8955-SSA later than deadline?

As of now, there exists no such program.

What are the likely penalties that need to be paid with respect to the filing of Form 8955-SSA?

The 4 possible penalties include situations where the administrator:

• Fails to file the yearly registration statement including all members; wherein the fine is $1 per member not reported per day multiplied by the number of days of failure continuation, upto a limit of $5000.
• Fails to report a change in plan status including name, address, or administrator change. The fine is $1 per member not reported per day multiplied by the number of days of failure continuation, up to a limit of $1000. The correct way to notify any changes is for the plan administrator to do so while completing the Form 5500 and 8955-SSA.
• Fails to give the plan member the Form before its submission or supplies him/her inaccurate information. The penalty for the same is $50 per failure per member which is levied on the person whose job is to provide the statement or who has submitted the inaccurate information.
• Files the Form 8955-SSA later than the prescribed date of filing including any documents he/she supplies for extension with reasonable cause. The fine levied is $25 per day of failure continuation.

The above fines are relaxed if and only if the administrator or the person responsible is able to show reasonable cause of failure to perform the task for which he/she is being penalized.

What’s different this year?

In 2012 (with the change continuing), the SSA decided that it would no longer process non-standard pages, i.e., it would accept nothing else, not even an attachment, apart from the form itself. Additional pages, which have been included in the Form from 2012 onwards, have been designated for extra use, with the request to not add or attach any spreadsheets or other non-standard formats.

Forms W-2 provide information to your employees, the SSA, the IRS, and state and local governments. Avoid making the following errors, which cause processing delays.

Do not:

1. Omit the decimal point and cents from entries.

2. Use ink that is too light to make entries. Use only black ink.

3. Make entries that are too small or too large. Use 12-point Courier font (which our software uses).

4. Add dollar signs to the money-amount boxes. They have been removed from Copy A and are not required.

5. Inappropriately check the “Retirement plan” checkbox in box 13.

6. Misformat the employee’s name in box e. Enter the employee’s first name and middle initial in the first box. his or her surname in the second box, and his or her suffix (optional) in the third box.

This is a common question.  You provided services to someone.  It may have been a small project like mowing the lawn, baby sitting and so on.  It may been been a one time project that you performed for a local business such as computer work or moving boxes. You send the employer an invoice and they send you IRS Form W-9 and ask you to fill that out before you get paid.  Do you have to complete out Form W-9 in order to get paid?

IRS Form W-9 is titled “Request for Taxpayer Identification Number and Certification”.  Its a one page form that asks for the name of the individual or business, appropriate federal tax classification #whether individual/sole proprietor, C or S corporation, partnership, trust/estate, limited liability company or other#, address, account number and TIN (social security number for an individual or employer identification number for a business).  The form also asks for the signature of the U.S. person and date.

An employer will request Form W-9 from independent contractors so they can report the payments to the IRS at the end of the year.  Generally, IRS Form 1099-MISC is completed by the employer and submitted to the IRS and State tax agencies only if the amount of payments made to that contractor exceeds $600 for services on an annual basis.  It is common to request the W-9 in advance just in case an independent contractor breaks that minimum threshold in the future.

An independent contractor will know if the employer reported anything to the IRS if they receive a copy of Form 1099-MISC by the end of January.  Regardless of the amount of money the employer pays an independent contractor, it is the employer’s responsibility to acquire and have on file a completed and signed Form W-9 from every independent contractor.

Employers use Form W-9 to collect the TIN of any U.S. person they plan to engage in a business activity with.  Form W-8 is used for foreign entities or individuals and Form W-7 is for individuals who become U.S. residents for tax purposes but who are not eligible for a social security number.

If an employee does not complete Form W-9 and return it to the employer, the employer may be required to do backup withholding which means that 28 percent of your check will be forwarded to the IRS. An employer must apply backup withholding if the employee fails to provide a TIN or provides a TIN that is incorrect.  The IRS has established a TIN matching program that enables Form W-9 requestors to verify TINs with the IRS for information returns 1099-B, DIV, INT, K, MISC, OID and PATR.

W-2 forms are a type of information return that documents wage earnings. Wage earnings are earnings paid by employers to workers who are considered employees by the Internal Revenue Service. These earnings are separate from non-wage earnings that are paid to contractors or freelancers.  Non-wage earnings are reported with 1099 forms.

W-2 forms are first sent by employers to the Social Security Administration, where they are processed and sent to the IRS.  W-2 forms are also sent to employees for their own tax information and returns. An employee will receive one W-2 form for each company that he or she worked for during the year. There is usually more than one copy provided so that the employee can keep the information for record keeping purposes and also submit copies to the federal and state revenue services.  Employers are required to submit W-2 forms to employees by February 2nd and to the SSA by March 2nd.

Employers are required to know how to fill out W-2 forms for each employee. The W-2 form has 20 boxes that record income related information and it also includes identifying information on the employee and employer. Here are the first 10 boxes with a short explanation of the information included in each one.

1. Wages, tips, and compensation – the total payment that the employee received during the year minus pre-tax contributions.
2. Federal income tax withheld – any income taxes withheld from the employee’s earnings.
3. Social security wages – the full amount of the employee’s income that is taxed for social security.
4. Social security tax withheld – the amount of social security tax withheld from the employee’s earnings.
5. Medicare wages and tips – the full amount of the employee’s wages and tips that are taxed for Medicare.
6. Medicare tax withheld – the amount of Medicare tax withheld from the employee’s earnings.
7. Social security tips – any tips that the employee earned.
8. Allocated tips – tips that are allocated to an employee based on IRS rules for tip reporting.
9. Advanced EIC (earned income credit) payment – the amount of payment advances given to the employee.
10. Dependent care benefits – the amount deducted from wages for dependent related care such as day care.

W-2 forms have 10 more boxes that cover other types of income documentation.  W-2 form preparation can be quite time consuming by hand. It is much easier and faster to prepare W-2 forms by using information return software.

International students are non US resident aliens.  Typically they receive some type of income whether it be a stipend, scholarship or fellowship to come to the United States and student.  Consequently, they may receive IRS Form 1042-S and/or Form W-2 depending upon their income type.

SSA Form W-2:

The W-2 form is known as a Wage and Tax Statement and while the form itself is created by the Internal Revenue Service (IRS) the Social Security Administration (SSA) handles the paper and electronic filing. If you are employed in the United States, for any period of time, the employer must report your earnings to both you and the Internal Revenue Service (IRS).

By law, Copy B of the W-2s must be mailed to the recipient no later than January 31.  If you haven’t received a W-2 by mid February, then you would want to contact your employer because its possible they dont have your correct address on file.  The recipient, in this case, the foreign student, will be required to include a copy of each W-2 from with your federal and state income tax forms.

The IRS computer system will match the income paid with what they have received from the employer.

Different kinds of taxes are withheld by employers. The W-2 form has boxes for reporting withholding of Federal Income Tax (Box 2), Social Security (Box 4), Medicare Tax (box 6), State Income Tax (box 18) and local income tax (box 21). Some individuals who received form W-2 will find that all of these boxes have amounts in them, others will find only some or none of the boxes showing tax withheld.

Form 1042-S

Form 1042-S is used to report income paid to a non-resident regardless of whether the payment is taxable. The form has a number of purposes, but mainly used to report scholarship or fellowship income.

It can be used to report wages exempt under a tax treaty, wages earned as an independent contractor, royalties, and scholarship or fellowship grants.

By law, 1042-S forms must be issued by March 15. Many international students receive both form 1042-S and form W-2; some students will receive only form W-2.

The Universities are required to mention only Taxable portions of their scholarships in the Form 1042-S .

Example:

Say, a university paid $26,000 as scholarship split as

Tuition and Fees: $15,000

Educational Tools: $5,000

Room and Boarding: $6,000

1042-S contains only $6000, which are considered non educational expenses, and this amount will be taxed. Usually for students the taxes on non educational expenses is 14% and for other Non Resident Aliens its 30%

Hope you found the information helpful!