Employers and employees, be aware that you could be receiving name/SSN no-match letters at home from the SSA {Social Security Administration} – learn what it means and how to respond to such a letter. Information contained in this article is from the General Ledger – the Complete Newsletter for Professional Bookkeepers, published by the American Institute of Professional Bookkeepers.
The SSA started sending out name/SSN no-match letters again in March of this year to employer and employee or self-employed at home. The new notices have one mismatch per letter and are called “Decentralized Correspondence” (DECOR). SSA wants to make sure that a worker’s earnings are posted to the right account. Exception: SSA will not be sending no-match letters for tax years 2007-2009.
SSA recommends responding to a no-match letter as follows:
- check your records to see if there is a discrepancy in the records submitted to SSA,
- ask the employee to check his/her records to determine if the information was accurately recorded/reported,
- instruct the employee to contact the SSA to resolve any discrepancy.
- provide the employee a reasonable amount of time to resolve the discrepancy (“reasonable” is not defined, but the “suggested” period is 120 days, the period used by E-Verify – but circumstances can change this); and
- document your efforts to resolve the matter.
There is no specific guidance on your obligations for responding to a no-match letter from the SSA, Immigration and Customs Enforcement (ICE) or Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC). But OSC offers some general guidance for setting up a response plan:
- Keep in mind that name/SSN no-matches can result from typos, misread numbers, name changes, etc.
- Check no-matches against your personnel records.
- Inform the employee of a no-match notice and request and confirm the name/SSN in your personnel records.
- If the employee confirms your records as correct, advise the employee to contact SSA to correct and/or update his or her SSA records.
- Give the employee a reasonable period of time to work out a reorted no-match with the local SSA office.
- Periodically meet with or contact the employee to findout about and document the status of his/her efforts to resolve the no-match.
- If the employee offers to supply a document that may resolve the no-match, review it carefully.
- Submit employer or employee corrections to the SSA.
Follow the same procedures for all employees, regardless of citizenship or national origins. Failure to do so may spark discrimination lawsuits against your company.
OSC also offers some don’ts:
- Don’t use the receipt of a no-match notice alone as a basis to terminate, suspend or take any other adverse action against the employee.
- Don’t try to immediately re-verify the employee’s employment eligibility – e.g., don’t ask the person to hand in a new I-9 solely because of a no-match letter.
- Don’t require specific I-9 documents to deal with the no-match letter.
- Don’t require the employee to provide a receipt of a request for an SSN or name change. (OSC points out that SSA receipts may not always be obtainable.)
Key Point: A no-match letter recipient is not required to respond. But if you don’t, the SSA may share the information with the IRS or Justice Department.
To avoid getting a no-match letter, use SSA’s:
- SSN Verification Services (SSNVS) at www.ssa.gov, click on Business Services Online, second link, far left; or
- Employer Verification (TNEV), an automated telephone service that allows registered users to verify names or SSNs over the phone without talking to an agent – call 800-772-1213 and at the prompt say “Employer SSN Verification”.
Federal law prohibits using SSNVS or TNEV for work authorizations – use it only to verify a current employee’s SSN.
I hope you’ve found this article helpful – if so, please take a moment to leave a comment and feel free to share this information with others on your favorite social media site.
A payroll tip about who the IRS may hold liable for 941 tax payments.
Are you the bookkeeper or accountant for your company? Are you a signer on any of the company bank accounts? What about your client’s accounts? Do you sign on any of them? If so, you may be held responsible by the IRS for underpaid 941 liabilities. Sounds scary, but it can be true.
How is it possible that can be true? The IRS says the federal income tax and the employee’s portion of social security and medicare taxes withheld is a trust fund. It is to be deposited according to the schedule they have determined for your company. The IRS cannot collect this tax from the employee, even if the employer does not pay the tax to the government.
To protect the government when the tax has not been paid, Internal Revenue Service Code 6672 subjects “all responsible persons” for withholding and payment of taxes to a penalty equal to the amount of taxes due. The penalty is imposed on anyone who is required to collect, administer and pay over the tax and who willfully fails to so.
Two requirements must be met. First you must be a “responsible person”. The IRS considers a responsible person anyone who has authority to make business decisions for the company, not just owners of companies. If you pay the company bills and sign the checks, then you are making business decisions. You process payroll and sign checks, make the 941 tax deposits and file the 941 quarterly returns, you are making business decisions.
The second requirement for the penalty to be imposed would be if you willfully failed to pay the tax due. You withheld the money from the pay checks that you signed, but rather than paying the tax liability, you decided to pay a supplier, or a utility, or another vendor. Once you have done that, you have met both requirements and are subject to the penalty imposed by I.R.S. Code 6672.
Once the IRS determines that a tax is due, forms 4180 and 4183 are completed by an agent, which identifies the responsible person in the company. In 1993 the IRS determined that secretaries, bookkeepers (nonaccountants), and charitable volunteers are not subject to I.R.S. Code 6672. Accountants, however, are still held accountable.
What can you do as an employee? Advise your employer of the penalties he will face for not paying the taxes due. If possible, don’t be a signer on any accounts. You don’t want to be personally responsible for the company you are working for.
What can you do as an owner? Pay your taxes on time. Pay them before you pay your other vendors. It’s not your money once you have paid your employees.
QuickBooks, by default, offers a single account called Payroll Expenses in your Chart of Accounts and all of the pre-programmed Payroll Items for wages and taxes are assigned to that one single account. When a business owner runs a Profit & Loss Report, when QuickBooks is set up in this manner, the report doesn’t really provide him with any real idea of how much he paid in wages vs. taxes because it’s all just lumped together in a single amount.
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I find this to be very frustrating because it means that you have to run additional reports and perform additional calculations in order to determine very basic information.
Previously, we covered creating a more functional Payroll Liabilities section on your Chart of Accounts, so that you could quickly and easily see not only the total of your payroll liabilities; but also the individual amounts that you owed for each specific payroll liability at a glance.
Today, we are going to discuss creating a more meaningful Payroll Expenses section, so that you can see how much you paid in wages vs. taxes; without having to run additional reports or perform additional calculations.
Before we begin to get to work, I will recommend that you contact your accountant or tax preparer before you start this process, they may want to help you to take this one step further – such as dividing wages and taxes between Cost of Goods Sold for your field workers and Payroll Expenses for your in-house office staff, which we are not going to cover in this post.
NOTE: Always make a backup of your QuickBooks file before making any changes to your file!
Step 1 – Determine What New Accounts to Create in Your Chart of Accounts
Start by looking at your current Payroll Item List {Lists menu –> Payroll Item List} to see how things are currently setup and to plan how you want to set up the Payroll Expenses section of your Chart of Accounts.
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From this list, we can see that we have Salary and Hourly Wage items, bonuses, Worker’s Compensation, and taxes – perhaps we want our Payroll Expenses section to contain Sub-Items for:
- Salary
- Wages
- Bonuses
- Vacation
- Sick
- Taxes
- Federal Unemployment {FUTA}
- Medicare Company {M-CARE}
- Social Security Company {FICA}
- State Unemployment {SUI}
- Employee Training Tax
- Workers Compensation
Step 2 – Create New Sub-Accounts of Payroll Expenses
The first thing we want to do is add Sub-Accounts to our Payroll Expenses section for Salary, Wages, Bonuses, Vacation, Sick, Taxes & Workers Compensation. To do this:
- from the Lists menu –> choose Chart of Accounts –> click the Account button at the lower left corner –> choose New –> click into the radio button next to Expenses and then click the Continue button.
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- In the Account Name field, type in Salary
- Click into the box in front of Sub-account of, to select it, and then from the drop down list choose Payroll Expenses. Click the Save & New button.
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- Create sub-accounts for Wages, Bonuses, Vacation, Sick, Taxes & Workers Compensation.
Step 3 – Create Sub-Accounts for Taxes
Once you have the Sub-Account created for Taxes, next you create additional sub-accounts to track specific payroll taxes that your company pays; Federal Unemployment, Medicare, Social Security, State Unemployment, and Employee Training Tax. To do this:
- from the Lists menu –> choose Chart of Accounts –> click the Account button at the lower left corner –> choose New –> click into the radio button next to Expenses and then click the Continue button.
- In the Account Name field, type in Federal Unemployment
- Click into the box in front of Subaccount of, to select it, and then from the drop down list choose the Taxes subaccount below Payroll Expenses.
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- Click the Save & New button
- Create accounts for Medicare, Social Security, State Unemployment, and Employee Training Tax.
- Click Save & Close when you finish creating the last account.
When you are finished, your Chart of Accounts Payroll Expenses section should look similar to the screenshot below:
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Step 4 – Map Existing Payroll Items to the New Payroll Expense accounts
Go back to your Payroll Item List {Lists menu –> Payroll Items List} and beginning with the first item in the list, edit it {usually double-clicking on the item will open the Edit window}, click the Next button until you reach the Expense Account window and then from the dropdown menu, select the correct Payroll Expenses sub-account. For example, I chose to edit the Salary – Designer item and then chose the Salary sub-account of Payroll Expenses. See the screen shot below.
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When you have finished, review the Expense Account column in the Payroll Item List to make sure that you have accurately assigned your payroll items to the proper sub-accounts. Do not skip this step!
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Your more detailed Profit & Loss Payroll Expenses section
Now when you run a Profit & Loss Report, you can easily see the details that make up your total payroll expenses without having to drill down or run additional reports and perform additional calculations.
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A note to accounting professionals. I realize that many of you don’t want to see all of the details that your clients may want and/or need to see when you run the same reports – don’t forget that QuickBooks provides a Collapse button at the top of the Profit & Loss as well as the Balance Sheet Report which allows you to see just the totals for the main or parent accounts in these reports.
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We hope that you find this post – and other related posts; to be helpful.
