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The document discusses the requirements for small employers to report wages and taxes using Form 944, which is for those with an annual liability of less than $1,000. It highlights the importance of withholding taxes as mandated by 26 U.S. Code § 3402 and details the data entry needed for tracking employee wages and sick leave. Additionally, it references the CPA Journal's insights on federal tax reporting adjustments.

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9 views2 pages

Response 1week 4

The document discusses the requirements for small employers to report wages and taxes using Form 944, which is for those with an annual liability of less than $1,000. It highlights the importance of withholding taxes as mandated by 26 U.S. Code § 3402 and details the data entry needed for tracking employee wages and sick leave. Additionally, it references the CPA Journal's insights on federal tax reporting adjustments.

Uploaded by

ericopetu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Discussion Week 4-Topic 1

Ashley Abraham
For this assignment, I focused on small company employers that must report on
wages, tips, and other compensation paid to an employee by filing the required form to IRS.
The form filed by the small employer is Form 944, designed to file and pay those whose
annual liability for social security, Medicare, and withheld federal income taxes is less than
$1,000 once a year. In form 944, the employer’s annual federal tax return the following asked
to report: wages, federal income tax withheld, taxable social security wages, sick leave
wages, and calculated according to 2021 percentages (About Form 944, Employer’s Annual
Federal Tax Return | Internal Revenue Service, n.d.). The topic focused on is Income tax
collected at the source, 26 U.S. Code § 3402.
According to 26 U.S. Code § 3402, the requirement of withholding is
“every employer making payment of wages shall deduct and withhold upon such wages a tax
determined by tables or computational procedures prescribed by the Secretary” (26 U.S. Code
§ 3402 - Income Tax Collected at Source, n.d.). The data entry will help small employers
identify employees by their first name, last name, employer id, wages, number of sick days,
and start date. The purpose of a sick day according to 26 U.S. Code § 3402. o.2.C is paid to
an employee according to a plan to which the employer is a party and constitutes
remuneration or payment for any period during which the employee is temporarily absent
from work on account of sickness or personal injuries (26 U.S. Code § 3402 - Income Tax
Collected at Source, n.d.).
According to 26 U.S. Code § 3402. o.3, “If a payee requests that an annuity or
any sick pay be subject to withholding under this chapter, the amount to be deducted and
withheld under this chapter from any payment to which such request applies shall be an
amount” (26 U.S. Code § 3402 - Income Tax Collected at Source, n.d.). Sick leave is a topic
that requires judgment. Therefore the data entry included a section to observe the sick day
accumulated by each employee. According to CPA Journal, employers do the following
journal entry when reporting federal tax “Most settlements with the IRS involve routine
adjustments to federal taxable income: an increase or decrease in taxable income, a decrease
in a federal credit for employment-related expenses, or an increase in the amount required to
be deducted or withheld from wages for federal income tax purposes” (Brodeur, 2022) (para.
6).
The data entry excel file is attached

References

26 U.S. Code § 3402 - Income tax collected at source. (n.d.). LII / Legal Information

Institute. https://www.law.cornell.edu/uscode/text/26/3402

About Form 944, Employer’s Annual Federal Tax Return | Internal Revenue Service. (n.d.).

https://www.irs.gov/forms-pubs/about-form-944

Brodeur, G. L. (2022). Flat Sum’ Settlements. CPA Journal, 92(3), 64–67. https://0634ssf98-

mp02-y-https-www-proquest-com.prx-keiser.lirn.net/scholarly-journals/flat-sum-

settlements/docview/2654399290/se-2

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