Instructions For Form 941 - Employer'S Quarterly Federal Tax Return - 2016 Page 7

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For 2016, the rate of social security tax on taxable wages
subject to Additional Medicare Tax withholding if paid in
is 6.2% (.062) each for the employer and employee or 12.4%
excess of the $200,000 withholding threshold.
(.124) for both. Stop paying social security tax on and
For more information on what wages are subject to
entering an employee's wages on line 5a when the
Medicare tax, see the chart, Special Rules for Various Types
employee's taxable wages (including tips) reach $118,500 for
of Services and Payments, in section 15 of Pub. 15. For more
the year. However, continue to withhold income and
information on Additional Medicare Tax, visit IRS.gov and
Medicare taxes for the whole year on wages and tips even
enter “Additional Medicare Tax” in the search box.
when the social security wage base of $118,500 has been
Once wages and tips exceed the $200,000 withholding
reached.
threshold, include all tips your employees reported during the
quarter, even if you were unable to withhold the employee tax
line 5a (column 1)
of 0.9%.
x    .124
line 5a (column 2)
line 5d (column 1)
x     .009
line 5d (column 2)
5b. Taxable social security tips. Enter all tips your
employees reported to you during the quarter until the total of
the tips and wages for an employee reach $118,500 for the
5e. Total social security and Medicare taxes. Add the
year. Include all tips your employee reported to you even if
column 2 amounts on lines 5a–5d. Enter the result on line 5e.
you were unable to withhold the employee tax of 6.2%.
Your employee must report cash tips to you by the 10th
5f. Section 3121(q) Notice and Demand—Tax
day of the month after the month the tips are received. The
Due on Unreported Tips
report should include charged tips (for example, credit and
Enter the tax due from your Section 3121(q) Notice and
debit card charges) you paid over to the employee for charge
Demand on line 5f. The IRS issues a Section 3121(q) Notice
customers, tips the employee received directly from
and Demand to advise an employer of the amount of tips
customers, and tips received from other employees under
received by employees who failed to report or underreported
any tip-sharing arrangement. Both directly and indirectly
tips to the employer. An employer isn't liable for the employer
tipped employees must report tips to you. No report is
share of the social security and Medicare taxes on
required for months when tips are less than $20. Employees
unreported tips until notice and demand for the taxes is made
may use Form 4070 (available only in Pub. 1244), or submit a
to the employer by the IRS in a Section 3121(q) Notice and
written statement or electronic tip record.
Demand. The tax due may have been determined from tips
Don't include allocated tips on this line. Instead, report
reported to the IRS on employees' Forms 4137, Social
them on Form 8027. Allocated tips aren't reportable on Form
Security and Medicare Tax on Unreported Tip Income, or
941 and aren't subject to withholding of federal income,
other tips that weren't reported to their employer as
social security, or Medicare taxes.
determined by the IRS during an examination. For additional
information, see Rev. Rul. 2012-18, 2012-26 I.R.B. 1032,
line 5b (column 1)
available at
x     .124
Deposit the tax within the time period required under your
line 5b (column 2)
deposit schedule to avoid any possible deposit penalty. The
tax is treated as accumulated by the employer on the “Date
of Notice and Demand” as printed on the Section 3121(q)
5c. Taxable Medicare wages & tips. Enter all wages,
Notice and Demand. The employer must include this amount
tips, sick pay, and taxable fringe benefits that are subject to
on the appropriate line of the record of federal tax liability
Medicare tax. Unlike social security wages, there is no limit
(Part 2 of Form 941 for a monthly schedule depositor or
on the amount of wages subject to Medicare tax.
Schedule B (Form 941) for a semiweekly schedule
The rate of Medicare tax is 1.45% (.0145) each for the
depositor).
employer and employee or 2.9% (.029) for both. Include all
tips your employees reported during the quarter, even if you
6. Total Taxes Before Adjustments
were unable to withhold the employee tax of 1.45%.
Add the total federal income tax withheld from wages, tips,
and other compensation (line 3), the total social security and
line 5c (column 1)
Medicare taxes before adjustments (line 5e), and any tax due
x     .029
under a Section 3121(q) Notice and Demand (line 5f). Enter
line 5c (column 2)
the result on line 6.
7–9. Tax Adjustments
For more information on tips, see section 6 of Pub. 15.
Enter tax amounts on lines 7–9 that result from current
5d. Taxable wages & tips subject to Additional
quarter adjustments. Use a minus sign (if possible) to show
Medicare Tax withholding. Enter all wages, tips, sick pay,
an adjustment that decreases the total taxes shown on line 6
and taxable fringe benefits that are subject to Additional
instead of parentheses. Doing so enhances the accuracy of
Medicare Tax withholding. You are required to begin
our scanning software. For example, enter “-10.59” instead of
withholding Additional Medicare Tax in the pay period in
“(10.59).” However, if your software only allows for
which you pay wages in excess of $200,000 to an employee
parentheses in entering negative amounts, you may use
and continue to withhold it each pay period until the end of
them.
the calendar year. Additional Medicare Tax is only imposed
on the employee. There is no employer share of Additional
Current quarter's adjustments. In certain cases, you must
Medicare Tax. All wages that are subject to Medicare tax are
adjust the amounts you entered as social security and
-7-
Instructions for Form 941 (Rev. 1-2016)

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