Revised January 14, 2008

Utah State Tax Commission

Withholding Tax Workshop

Table of Contents

Year-End Reporting

Additional information on year-end reporting for withholding tax can be found in Publication 32, Annual Reporting of Forms W-2, W2c, 1099-R & TC-675R.

As you will recall, ABC Stores is a quarterly withholding tax filer. They have filed four returns for the year and are now ready to close out the tax year. Their bookkeeper has verified that the amounts reported and paid on the four quarterly returns match the total withholding for the year for their two employees. The quarterly amounts are:

Quarter
Amount Paid
January - March
$462.00
April - June
$462.00
July - September
$462.00
October - December
$462.00
Total Withholding Reported and Paid
$1,848.00

After verifying that the accounting system reflects the quarterly withholding amounts agree with the sum of the yearly withholding for their employees, ABC prints the employees' W-2 Wage and Tax Statements.

The total amount of Utah income withheld is the sum of each amount in block 17 of the employee W-2s. For our example: $576 + $1,272 = $1,848. This amount agrees with the amounts reported on ABC's four quarterly returns. The verified amount of $1,848 will be transferred to the annual reconciliation return.

Annual Reconciliation

The next step is to prepare the annual reconciliation return.

Paper Return

The state form is TC-96R, Employer's Income Withholding Annual RECONCILIATION Return. The reconciliation report is due on February 28. If February 28 falls on a weekend or holiday, the return is due on the next business day. ABC's completed form is shown below:

Things to remember:

  • Block 1 is the total number of W-2s. In our example ABC has two employees, so the number 2 is entered in this block.
  • Block 2 is the total Utah wages reported on the two employees W-2s, block 15 ($18,000 + $37,200 = $55,200).
  • Block 3 is the sum of the amount of state withholding tax reported on each employee's W-2, block 17. Caution: The sum of the income tax from the W-2s must agree with the amount of withholding tax reported on the quarterly returns.
  • Block 4 is the total amount of Utah withholding tax reported on the quarterly returns.
  • DO NOT use this form to pay additional tax or reduce the amount of tax. 

If the sum of the amounts reported on the quarterly returns do not agree with the W-2's you must find the error and make a correction. Always report the correct amount of wages paid in block 2 and withholding taxes paid for the tax year in block 3. The sum of the tax withheld and reported on the quarterly returns is entered in block 4.

If the annual reconciliation has not been filed on TC-96R, use the following method: When you reconcile, any discrepancy between the amounts reported on the quarterly returns (block 4) and the W-2s (block 3) must be corrected. If the error was made on one of the quarterly returns you make the correction by following one of the procedures below:

  1. Correction results in an overpayment . This means the amount withheld and reported on the quarterly returns was more than it should have been. To make the correction and reduce the amount of tax you must file an amended return (TC-96A) for the reporting period in which the error occurred.

If ABC reported the wrong amount in the third quarter (July through September), an amended return would be filed for that quarter to show the overpayment. Click here if you need to review how to complete an amended return (TC-96A).

The instructions for an amended return advise you to send a separate piece of correspondence to request a refund of the overpayment. However, in this situation you do not need to advise the Tax Commission to refund the overpayment. A report is automatically generated showing the credit balance. Shortly after the reconciliation and amended returns post to your license, the refund will be processed automatically.

  1. Correction results in additional tax due. If the correction results in an underpayment and additional tax is due, use the state form TC-96A, Utah Employer's Amended Income Withholding Return correcting the amount of tax reported for the quarter in which the error occurred. Payment of the additional tax must accompany the form, and penalty and interest will be assessed for the amount of the additional tax due. Click here if you need to review how to complete an amended return (TC-96A).

Please Note: If the reconciliation (form TC-96R) has already been filed with the Tax Commission and an error is found after the form is filed, the employer must file form TC-96RC to correct the annual reconciliation.

There is a $1,000 penalty for not filing the reconciliation return and W-2s.

The reconciliation return is due to the Tax Commission on February 28. However, it may be more convenient to file it at the same time you distribute the W-2s to your employees. This will prevent you from forgetting to file the return later.

If an employer changes business entities during the tax year, the withholding license for the old entity must be closed and a new license opened for the new entity. When this happens, a reconciliation return and W-2s must be submitted separately for each entity. For example:

An entrepreneur who had been doing business as a sole-proprietor changed to an S-Corporation May 1, 2006. The entrepreneur was a quarterly filer and had three employees. The withholding license for the sole-proprietor was closed April 30, 2006 . A new withholding license was opened on May 1, 2006 for the S-Corporation. The S-Corporation has the same employees and still files a quarterly return. The payroll records for each separate business entity reflected the following amounts:

Business
Entity
Number of
Employees
Total Wages
Paid
Withholding
Taxes Withheld
and Paid
Wages Reported on
Quarterly Returns
Sole Proprietor
3
$38,700
$1,800
$1,800
S-Corporation
3
$73,100
$3,400
$3,400

The sole-proprietor business entity's year-end reporting will include a reconciliation return and three attached, W-2 forms. The following amounts will be reported:

  • Reconciliation return (TC-96R)
    • A three in block 1. This is number of W-2 forms issued; one per employee.
    • $38,700 in block 2. This is the total wages paid to employees.
    • $1,800 in block 3. This is the sum of withholding taxes withheld from employee’s wages and reported in block 17 of each employee's W-2.
    • $1,800 in block 4. This is the total amount of withholding taxes reported and paid on two quarterly returns.
  • Three Wage and Tax Statements, form W-2. The sum of state income tax reported in block 17 of the three W-2 forms equals $1,800.

The S-corporation business entity will file its own separate reconciliation return and attach three W-2 forms. The following amounts will be reported:

  • Reconciliation return (TC-96R)
    • A three in block 1. This is number of W-2 forms issued; one per employee.
    • $73,100 in block 2. This is the total wages paid to employees.
    • $3,400 in block 3. This is the sum of withholding taxes withheld from employee’s wages and reported in block 17 of each employee's W-2.
    • $3,400 in block 4. This is the total amount of withholding taxes reported and paid on three quarterly returns.
  • Three Wage and Tax Statements, form W-2. The sum of state income tax reported in block 17 of each form equals $3,400.

Online Return

Annual W-2 information and TC-96R reconciliation returns can be filed online. The free online service, known as W-2 Online File Transfer, is available to all licensed withholding tax submitters.

Electronic filing is free, easy to use, available 24/7, and eliminates the need to prepare and mail paper submittals.

When filing electronically, the annual reconciliation report is due March 31. If March 31 falls on a weekend or holiday, the return is due on the next business day.

To get started, go to W-2 Online File Transfer and register as an Administrator. Following successful registration, a PIN will be sent by U.S. mail to the Administrator at the address entered in the registration application. The Administrator will use the PIN to log in and authorize other employees as Submitters. Then the Administrator and authorized Submitters can transmit annual W-2 and TC-96R reconciliation information to the Tax Commission.

For more information, call (801) 297-7626 or 1-800-662-4335, ext. 7626, or email emedia-wt@utah.gov.

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