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January 2014 Edition of ITG News

ITG News Home Page

  • Director’s message
  • Reporting Tribal (per capita) distributions on your 2013 tax return
  • Truncating payee social security numbers
  • Indian employment tax credit extended through 2013
  • Helpful hints for year-end reconciliation
  • Filing deadlines for Forms W-2 and 1099
  • Mailing Forms W-2, W-3, W-2C and W-3C
  • IRS tax volunteers
  • Outreach update
  • Pacific Northwest training opportunities
  • New Mexico training opportunities

 

Director’s message

I hope the New Year brings good things to you and Indian Country. This past year was busy with: advocacy, collaboration & consultation on proposed guidance on General Welfare Exemption, related general welfare refunds, Keepseagle settlements, contributions to retirement plans using fishing rights-related income & voluntary withholding on Alaska Native Corporations distributions; deployment of a more efficient FinCEN filing system; and participation in the annual White House Tribal Nations Conference.

ITG has worked diligently alongside Treasury, IRS Counsel & Interior, but your Tribal leadership’s involvement has been invaluable to such progress. We look forward to further strengthening that relationship in 2014 and beyond.

ITG is working hard to keep you informed by delivering training opportunities across Indian Country. As we progress into the New Year, we plan to use more virtual technologies to expand our outreach efforts, so stay tuned!

Remember – if you have any questions or comments, please don’t hesitate to contact your assigned ITG Specialist. As always, you can also send us an e-mail.

Sincerely,

Joe Kincaid
Acting Indian Tribal Governments Director

 

Reporting Tribal (per capita) distributions on your 2013 tax return

Note to Tribes: ITG encourages you to include this article when sending Tribal members their Form 1099-MISC.

If you are a member of a federally recognized tribe, you may receive taxable distributions from your tribe. The tribe must report these distributions to the IRS and to you on Form 1099-MISC.

If you are expecting a refund, make sure you correctly prepare your 2013 federal tax return to avoid a delay. Make sure you include information from your Form 1099-MISC.

Follow these instructions when filing your 2013 federal income tax return:

  • Use Form 1040; not Form 1040A or Form 1040EZ.
  • Enter tribal distributions from Form 1099-MISC, Box 3 on Line 21, Form 1040.
  • Include a description of the income in the space provided on Line 21.
  • Use the correct description to make sure your tax return goes through processing without delays. For paper or e-file returns, please enter one of the following descriptions on Line 21:
    • INDIAN GAMING PROCEEDS
    • INDIAN TRIBAL DISTRIB
    • NATIVE AMERICAN DISTRIB
  • Spell the descriptions exactly as listed above. For example, if you spell out DISTRIBUTION rather than using DISTRIB, the IRS may reject your return and delay your refund.

If you receive a notice, which would delay your refund, respond to it in a timely manner. Do not ignore it.

The IRS’s hard work to protect taxpayers from fraud and identity theft has sometimes delayed refunds for Tribal members. Although this diligence has affected everyone, ITG has gotten involved. Following these instructions, will help the IRS expedite your return – and any refund you should receive.

 

Truncating (shortening) payee social security numbers

Proposed regulations (REG-148873-09) create a new taxpayer identifying number known as an IRS truncated taxpayer identification number (TTIN).

The proposed regulations allow you to truncate or remove all but the last four numbers of a payee's social security number (SSN) on their statements when filing the Form 1098 series (except Form 1098-C), Form 1099 series and Form 5498 series.

A payee is any person who is required to receive a copy of the information set forth on an information return by the filer of the return. For some forms, the term payee will refer to beneficiary, borrower, debtor, insured, participant, payer, policyholder, recipient, shareholder, student, or transferor.

As an alternative to using a social security number (SSN), you can use a TTIN on their copy of these statements to identify the payee receiving the statement. The TTIN displays only the last four digits of their SSN using the format XXX-XX-1234 or ***-**-1234.

You can truncate a payee's identification number on the statements (including substitute and composite substitute statements) you give to them in paper or electronic format (usually designated Copy B).

If you truncate an identification number on Copy B, the other copies you give the payee should also include the truncated number.

Remember:

  • You may not truncate on any forms filed with the IRS (Copy A) or with state or local governments.
  • You cannot truncate your own identification number.
  • You cannot truncate a payee’s employee identification number (EIN).
  • These rules do not apply to Form W-2.

The proposed regulations implement an earlier pilot program set forth in Notice 2011-38, 2011-20 I.R.B. 785.

For instructions click here.

 

Indian employment tax credit extended through 2013

For taxable entities doing business in Indian Country: the American Taxpayer Relief Act of 2012 (ATRA) extended the Indian Employment Tax Credit (IETC) through 2013. You can use Form 8845 to calculate the income tax credit for 2013 and prior years. You may be eligible to claim the credit if you employ tribal members or their spouses on tribal lands.

Use these steps to compute the credit:

  1. Add each Qualified Employee’s current year Qualified Wages.
  2. Subtract their corresponding 1993 Qualified Wages.
  3. Multiply by 20 percent.

A Qualified Employee:

  • is an enrolled tribal member or their spouse;
  • performs at least 50 percent of their services on the reservation; and
  • lives on or near the reservation.

A Qualified Employee cannot:

  • be paid at a rate that would exceed $45,000 per year (2011 forward);
  • be 5 percent or greater owner;
  • be a family member or dependent of the owner;
  • perform services involving gaming activities; and
  • work in a building housing gaming activities.

Qualified Wages are wages and health insurance benefits you pay a Qualified Employee.

If you choose to use this credit, you cannot claim the wages and health insurance premiums as a deduction on your income tax return.

You may also be eligible for the Work Opportunity Credit and the Empowerment Zone Employment Credit, which were also extended through 2013 by ATRA.

For more information, see the Internal Revenue Code Section 45A or ITG’s Frequently asked questions page. You can also contact ITG.

 

Helpful hints for year-end reconciliation

Before you give your employees their Forms W-2 and before you file your fourth quarter Form 941, you should reconcile the amounts reported on these forms.

First, figure the total annual wages paid and the total federal tax withheld from all four quarters of Form 941. Next, compute the total wages and total tax withheld from all Forms W-2. Compare the respective amounts.

You can use the worksheet below to help you reconcile your Forms 941 and W-2 at year end:

  • Annual amounts from payroll records should match the total amounts reported on all Forms 941 for the year.
  • Total amounts reported on all Forms 941 for the year should match sum of same data fields shown in W-2/W-3 totals.
  • If these amounts do no match, recheck records and identify necessary adjustments.

a

b

c

d

e

f

(c-e)

Comparison Area

941 Line #

Form 941 
all four quarters

W-2
 W-3
 Box

W-2
total of all forms

Amount on W-3

Difference
columns c minus e

Compensation

Line 2

 

1

     

Federal Income Tax

Line 3

 

2

     

Social Security Wages

Line 5a
 Column 1

 

3

     

Social Security Tips

Line 5b
 Column 1

 

7

     

Social Security Tax

Line 5a + 5b
Column 2

 

 

     

Social Security Tax
Comparison Computation

Line 5a + 5b

divided by 2

 

4

     

Medicare Wages

Line 5c 
Column 1

 

5

     

Medicare Tax

Line 5c
 Column 2

 

 

     

Medicare Tax
 Comparison Computation

Line 5c
 divided by 2

 

6

     

If you find a discrepancy, you should review your payroll records and identify the necessary adjustments to the Forms W-2, 941, or both.

Here are a few scenarios to consider when you find that your Forms W-2 and 941 don’t reconcile.

If the wages are higher on Form 941:

  • Are you missing one or more Forms W-2?
  • Did you manually change any payroll items for one or more employees on your payroll software? If so, the payroll software may not have properly computed final wages.

If the wages are higher on Forms W-2:

  • Did you forget to include the tribal council member stipends on the Forms 941?
  • Did you manually change any payroll items for one or more employees on your payroll software? If so, the payroll software may not have properly computed final wages.
  • Did one or more employees’ wages not get reported on the Form 941 for any particular payday during the year?

If the wages match but the taxes don’t, check each employee's Form W-2 for the following:

  • Social security tax (box 4) is 6.2% of the social security wages (box 3).
  • Medicare tax (box 6) is 1.45% of the Medicare wages (box 5).
  • Federal income tax has obvious errors such as more tax than wages or zero withholdings when you believe federal income tax was withheld.

If you still cannot find the error(s):

  • Go through the payroll records of the employees who had one of the following:
  • The highest probability of errors
  • The highest wages
  • Payroll changes or manipulations during the year
  • If you had a temporary bookkeeper processing payroll, go through those pay period records to find possible errors.
  • If necessary, go through all payroll records, quarter by quarter, until you find the error on the Forms W-2, Forms 941 or both.

 

Filing deadlines for Forms W-2 and 1099

Form W-2

If you withhold any income tax, social security tax, or Medicare tax from an employee, you must file a Form W-2 regardless of the amount. You must also give the employee a copy. For employees with no withholding, you must file a Form W-2 and give the employee a copy when you pay $600 or more. You must file a paper copy (Copy A) and a Form W-3 with the Social Security Administration (SSA) by February 28, 2014. Those filing an electronic copy of Form W-2, which includes employers required to file 250 or more, have until March 31, 2014, to file with SSA.

You must also provide Copies B and C of Form W-2 to your employees by January 31, 2014.

Form 1099

If you pay a non-employee $600 or more per year for services, you must file a Form 1099 with the IRS. Like the Form W-2, you must file a Form 1099 paper copy (Copy A), along with a Form 1096, by February 28th. For electronic copies, including those required to file 250 or more, the deadline to file is March 31st. Finally, you must provide a copy of the Form 1099 (Copy B) to the payee by January 31st.

 

Mailing Forms W-2, W-3, W-2C and W-3C

How and where you mail these forms depends on your delivery method:

What

How

Where

W-2/W-3 U. S. Postal Service

Social Security Administration
Data Operations Center
Wilkes-Barre, PA 18769-0001

(for Certified Mail Use ZIP code 18769-0002)

Private Delivery Service (FedEx, UPS, etc.) Social Security Administration
Data Operations Center
Attn: W-2 Process
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997
W-2C 
Correction Forms
U.S. Postal Service Social Security Administration
Data Operations Center
P.O. Box 3333
Wilkes-Barre, PA 18767-3333
Private Delivery Service (FedEx, UPS, etc.) and Certified Mail Delivery Social Security Administration
Data Operations Center
Attn: W-2c Process
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997

If you are mailing Forms W-2/W-3 and/or W-2c/W-3c due to an examination, please contact your ITG Specialist for the correct mailing address.

Remember, you must e-file if you are required to file 250 or more Forms W-2 or W-2c. If you are required to e-file but fail to do so, you may incur a penalty.  

 

IRS tax volunteers

Help your tribal community by preparing taxes free of charge and become a volunteer with the Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) Programs.

 

Outreach update

Western area

Inter-Tribal Council of Nevada (ITCN) Annual Convention, November 4: The Western Area Group Manager addressed the ITCN Executive Board, made up of Tribal chairpersons from 26 Nevada tribes, during the 48th Annual ITCN Convention. This is the 13th consecutive year the Office of ITG has been represented at the meeting. Topics included Notice 2012-75 (General Welfare Exception); recent Tribal settlements; how to respond to refund delays and IRS notices with regard to individuals when they may be the victims of identity fraud; and how tribes can contact an ITG Specialist to request telephone training on tax subjects tailored to their needs. ITCN serves as a large political body for Nevada Tribes that promotes health, educational, social, economic, and job opportunity programs aimed at improving the well-being of community members throughout Nevada.

Telephone Training Tailored to Individual Tribes’ Needs: In order to meet the needs of Northern California and Northern Nevada tribes during a period of travel budget constraints, two ITG specialists from Northern California offered tax law training via teleconference. For each participating tribe, a specialist determined its specific training need, sent presentation materials in advance and delivered targeted 60-90 minute training sessions over the telephone on that material. Topics included loans to Tribal members, Tribal council payments and gasoline excise tax claims.

Southwestern area

Basic Employment Tax Training workshop, Western Navajo Local Governance Support Center, Tuba City, Ariz. ITG presented this training session December 10-11, 2013; 28 individuals attended representing 16 Navajo Nation Tribal Chapter Governments from the Western Agency. ITG specialists from the Phoenix and Tucson IRS offices presented topics such as defining employees vs. independent contractors, computing payroll taxes, federal tax deposits, tax return due dates, avoiding penalties, and completing various forms. During the workshop, ITG specialists offered participants compliance reviews as well as assistance with different issues.

Gaming Issues and Reporting Workshop in Tucson, Ariz. Thirty-two representatives from various tribes and tribal entities attended the workshop November 7, 2013. ITG specialists from the Tucson IRS covered topics such as required tax reporting for gaming-related payments/activities, completing various IRS forms, tax deposit schedules and avoiding penalties and interest.

Gaming Seminar in Flagstaff, Ariz. An ITG Specialist from the Mesa Office included Title 31 training at the Twin Arrows Casino in Flagstaff. Forty individuals attended the gaming seminar held in September. Covered topics included required tax reporting for gaming-related payments/activities, completing various IRS forms, tax deposit schedules and how to avoid penalties and interest.

Gaming Seminar in Prescott, Ariz. An ITG Specialist from the Tucson Office included Title 31 training at the Yavapai-Prescott Gaming office in June. Fifty-three individuals attended the seminar, which include topics such as required tax reporting for gaming-related payments/activities, completing various IRS forms, tax deposit schedules and how to avoid penalties and interest.  

Pacific Northwest - Anchorage, Alaska

ITG held an Advanced Payroll Topics Workshop at the IRS Anchorage office from December 9-12. Nineteen representatives from 14 tribal governments attended along with seven attendees from five village corporations and one regional nonprofit. Other presenters included the state of Alaska Department of Labor and Workforce Development. They provided a guest speaker from Wage and Hour Administration who discussed labor laws dealing with the payment of wages to workers. Another guest speaker from the Alaska State Troopers discussed fraud awareness. The workshop covered topics that included scholarships, loans to members, fringe benefits, and more.

ITG also gave morning presentations during the Bureau of Indian Affairs (BIA) Providers Conference held December 2-6 at the Dena’ina Civic and Convention Center. One hundred thirty four attended, receiving guidance on year-end filing requirements, Forms 1099 and 1096 and common errors.

If you would like ITG to provide training in your area of the country, please contact your ITG specialist.

 

Pacific Northwest training opportunities

ITG will be offering an Employment Tax/Information Returns workshop and a Gaming Information Return workshop for our Tribal customers in the Portland, Ore. area in May and/or June 2014.

Please provide us dates during these months that would be best and any topics you would like us to teach.

The general topics are:

  • Employment Tax/Information Returns Workshop – Day One
  • Advance Tax Topics – Day Two
  • Gaming Information Return Workshop  - Day Three

We will also set aside time to discuss any issues or problems you may have with the IRS.

You can e-mail Doug Wellington or call 360-905-1167; fax 360-693-8841.

Please let us know by March 1, 2014.

 

New Mexico training opportunities

End of Year Reporting Workshop: one-day workshop offered seven times, January 6-14, 2014
University of New Mexico West Campus
2600 College Blvd. NE, Rio Rancho, NM 87144  

Covered topics

  • Employment tax updates and changes for 2014
  • Preparing your final Form 941 and any delinquent returns
  • Preparing a 2013 end of year reconciliation to ensure all returns and Forms W-2 have been filed with the correct information

We will offer computers and the Internet to access the Social Security Administrations Business Services Online application. You will be able to prepare your 2013 Forms W-2 electronically, and ITG specialists will be available to assist you. Reconciliations are essential to prevent penalties and additional tax!

Gaming Information Return Workshop with Bank Secrecy Act refresher - offered twice!
IRS office, 5338 Montgomery Blvd. NE, Albuquerque, NM

  • March 4, 2014; 9 a.m. - 4 p.m.
  • March 6, 2014; 9 a.m. - 4 p.m.

Covered topics:

  • Required tax reporting for gaming-related payments/activities
    • U.S. Residents – W-2Gs, Forms 1099-MISC, 1096, W-9 and 5754
    • Foreign persons –Forms 1042, 4042-S and T, W-7, W-8BEN, and Pub 515
  • Tax deposit schedules
  • How to avoid penalties and interest
  • End of year reconciliation of Forms 945 to W-2G and 1099-MISC and various 1042 Forms
  • Tip compliance – Form 8027, TRDA and GITCA tip agreements
  • New FinCEN reports, adopting the new format
  • Title 31, the Bank Secrecy Act

E-mail Tiffany Zerangue or call 505-837-5633 for more information and to register.

Page Last Reviewed or Updated: 26-Mar-2014