Utah State Tax Commission

Withholding Tax Workshop

Table of Contents

Electronic Funds Transfer

If you have been approved to file and remit periodic taxes using EFT, do not file quarterly or monthly paper-based returns. The EFT filing takes the place of the paper filing. For more information, refer to Pub 43, Withholding Tax Electronic Funds Transfer.

The only time a paper return should be submitted is when there is a problem and the tax payment cannot be remitted electronically. Amended returns (TC-96A) may not be filed electronically. Once the original EFT has been completed for a period, all other adjustments to that period must be made using an amended return. EFT may not be used to file the Utah Annual Withholding Reconciliation Return, TC-96R.

Determining Amount of Utah Income Tax Withholding

In this example we use a fictitious employer named ABC Stores. The business is new and the owner has hired two employees. The employer is a quarterly filer. Using the following information, our exercise will take you through the completion of the quarterly returns, the correction of a return, and the required reconciliation returns for the calendar year 2005.

ABC Stores has a semi-monthly payroll, and files returns and remits payroll taxes quarterly.

Employee Name	Marital Status	Gross Pay	Allowance Claimed
John Beard	Single	$650	1
James Round	Married	$1,200	3

In our example the owner has not purchased a computerized accounting system so he needs to determine the amount of Utah taxes to withhold from each employee's pay period. The withholding amounts are determined by using Publication 14, Withholding Tax Guide, with an effective date of Jan 1, 2007.

You must find the correct payroll period in the withholding tables. The payroll periods are in bold print in the upper left - hand corner of each page. Make sure that you are on the correct page for the payroll period and employee's marital status. The semi-monthly payroll tables are located on pages 14 and 15.

Go down the left hand column until you find the range the employee's taxable wages amount falls into. Then go across the line until it intersects with the column corresponding to the number of withholding allowances claimed on the employee's federal form W-4. This is the amount to be withheld from the employee's taxable wages.

The withholding amount each pay period for John Beard is $25, and for James Round $53, for a total of $78.00. Since there are 6 pay periods in a quarter, the total withholding is $468.00.

Withholding Amount	Number of Pay Periods	Total Withheld
$25.00	6	$150.00
$53.00	6	$318.00
Total Quarterly Payroll Withholding		$468.00

The $468.00 of withholding is reported and remitted using the TC-96Q, Employer's Income Withholding Quarterly Return which is shown below.

The amount withheld -- $468.00 -- is entered in block 1. Since we are sending payment for the full amount of the withholding due, the same amount is entered in block 2. The only time these two amounts would be different is if the taxpayer were to only pay a portion of the tax due. Payment of less than the amount due may result in penalty and interest.

Notes:

1. Make sure you are using the correct coupon for the tax period you are filing. In our example above, we are filing the first quarter of 2007 return that was due April 30, 2007. Had ABC used a return for another period, the tax and payment would post to the wrong period.
2. Be sure to sign and date the coupon.
3. Send the payment with the coupon. The license number and reporting period should be entered on the "for" or "memo" line on the check. This will insure that the payment is credited to the proper license should the check be separated from the coupon.
4. Another convenient method of paying your taxes is Payment Express. This Internet payment system allows you to pay by credit card (MasterCard, American Express, or Discover), or E-check that is a debit transfer from your checking or savings account. The taxpayer pays a tiered fee based on the amount of tax when using a credit card. The E-check convenience fee is $1.00 regardless of the amount of tax.

If the employee's wages remain the same and they do not change their W-4 information, the withholding amounts will be the same for the next three quarterly returns. So the total withholding for the year will be $1,872. This amount will be reported on the year-end reconciliation return. The reconciliation return will be discussed in the year-end reporting module.

However, in the third quarter, ABC's bookkeeper transposed the withholding amount and reported and paid $486 instead of the correct amount of $468. The bookkeeper finds the mistake two weeks after submitting the return and needs to correct the error.

Correcting Errors

To correct the error, the bookkeeper uses form TC-96A, Employer's Income Withholding Amended Return. When the amended return is filed, the original return information is reversed and the information is replaced with corrected amounts from the amended return. The amended return may be used to increase or decrease the amount of tax reported on the original return. The amended return that ABC submits will look like this:

The tax period being amended must be entered on the return. Since the mistake was made in the third quarter, the period will be Jul-Sep 2007. Next enter the correct amount of withholding, or $468, in block 1. The incorrect tax that was paid with the original return is entered in block 2. So the bookkeeper would enter $486. Finally, the amount of the $18 overpayment is entered in block 3.

Note:

1. Refunds are not automatic. Taxpayers may choose to apply the refund to the next reporting period or have it refunded to them. Applying the refund may not be a good option, in that many taxpayers forget the overpayment and file and pay the correct amount for the fourth quarter. Without instructions from the taxpayer, the credit on the third quarter will stay with the license until the taxpayer's reconciliation return posts to their license. All licenses with a credit balance are then reviewed before any refunds are returned to the taxpayer. The review may not happen until June or July.
   
   
2. Taxpayers who want the credit refunded to them should send a written request. Do not write a note on the amended return, send a separate piece of correspondence. The written request needs to include the withholding license number, the amount and period of the overpayment, a telephone number, and be signed by one of the officers. The request may be mailed or faxed to the Tax Commission.

Credit Balances Utah State Tax Commission 210 N 1950 W Salt Lake City, UT 84134 Fax: (801) 297-7574

Had the bookkeeper made a mistake and under paid the tax, the amount of the underpayment would be entered in block 4. An underpayment of tax would result in assessment of penalty and interest, which is discussed later.

A check for the amount of tax due and any penalty and interest should be sent with the amended return. Enter your license number and the period on the memo/for line on the check. This will ensure that the payment is quickly and properly credited to correct license.

If you do not feel comfortable with the calculations after reviewing the penalty and interest section, you may pay the tax and leave the penalty and interest. The Tax Commission will calculate the penalty and interest and mail you a bill. You will have 30 days from the date of the billing to pay the amount listed. If you pay the full amount within the 30 days, no additional interest is assessed.

At the end of the year, ABC Stores have filed four quarterly returns. They are now ready to close their books for the year and do their reconciliation and year-end reporting.

Top of Page