Withholding Tax Workshop

Section 3 – Payroll Withholding Example

Electronic Funds Transfer (EFT)

If you have been approved to file and pay withholding taxes using EFT, you must still file quarterly returns. See Publication 43, Withholding Tax Electronic Funds Transfer.

Determining Amount of Utah Income Tax Withholding

This exercise will follow Bob, the owner of ABC Stores, as he:

Completes his quarterly returns
Corrects a return
Files the required reconciliation returns for the calendar year 2009

ABC Stores is a new business with two employees. The employer, Bob:

Has a semi-monthly payroll
Files returns quarterly
Remits payroll taxes monthly

His employees’ information is as follows:

Employee Name	Marital Status	Gross Pay	Allowance Claimed
Jane Watson	Single	$625	1
Joe Foster	Married	$800	2

For our example, we will assume these employees make the same wage each pay period and keep the same withholding allowances through the year.

Bob has not purchased a computerized accounting system so he needs to calculate how much to withhold from each employee's paycheck using Publication 14, Withholding Tax Guide.

He finds the correct withholding tables based on the employee’s marital status and payroll period. This is noted in bold print in the upper left-hand corner of each table.

Once he finds the correct table, he finds the range of the employee's taxable wages in the left-hand column. He follows the line across until it intersects with the column of withholding allowances claimed on the employee's federal form W-4. This is the amount to be withheld.

The withholding amount each pay period is $16 for Jane Watson and $15 for Joe Foster for a total of $31. Since there are 2 pay periods per month, the total withholding payment each month is $62.

Employee Name	Pay Period Withholding Amount	Pay Periods Per Month	Total Monthly Withholding
Jane Watson	$16	2	$32
Joe Foster	$15	2	$30
	$31		$62

Since ABC Stores pays monthly, Bob enters $62 on his January 2009 TC-941PC, Payment Coupon for Utah Withholding Tax, and sends it to the Tax Commission by February 28.

He sends another coupon with payment of $62 by March 31, and a third coupon with $62 payment by April 30. Bob records the payments on his Monthly Payer worksheet included in his withholding packet.

At the end of the quarter, Bob prepares his Utah Withholding Return (TC-941) for first quarter 2009. He checks the amounts on his Monthly Payer Worksheet and:

Enters the total wages he paid his employees for the quarter on line 1 of form TC-941, Utah Withholding Return ($8,550).
Enters his total federal withholding for the quarter on line 2 (this example will use $2,137).
Enters the total Utah withholding for the quarter on line 3 ($186).
Signs the return.
Makes a copy for his records.
Mails the return by the due date.

Bob repeats this process for the next three quarters. Since the employee's wages and W-4 information did not change, ABC's total withholding for the year will be $744. This amount will be reported on the year-end reconciliation return (see Section 4, Year-End Reporting).

Reminders:

Use the correct payment coupon for the tax period you are filing. Since the form is preprinted, using a payment coupon for another period will post the payment to the wrong period.

Be sure to sign and date the coupon.

Send the payment with the coupon. Write your license number and reporting period on your check in case it is separated from the coupon.

You may pay your taxes online using Payment Express. This Internet payment system accepts eChecks (debit transfers from your checking or savings account) or credit cards (MasterCard, American Express, or Discover). You will be charged a $1 convenience fee for an eCheck or a tiered fee for a credit card (depending on payment amount).

Correcting Errors

In the third quarter, Bob misread the withholding amounts. He reported and paid $198 instead of the correct amount of $186. He finds the mistake two weeks after submitting the return.

To correct the error, Bob resubmits a Utah Withholding Return (TC-941) with the correct amounts and checks the amended box (see below). When the amended return is filed, the original return information is replaced with corrected amounts from the amended return. ABC Stores' amended return look like this:

The tax period being amended must be entered on the return. Since the mistake was made in the third quarter, the period will be Jul-Sep 2009. Next enter the correct amount of withholding ($186) on line 3.

Note:

Refunds are not automatic. Taxpayers may apply an overpayment to the next reporting period or have it refunded. If you apply the refund to another period, be sure to file and pay the correct amount for that period. If you do not specify how you want the overpayment handled, the credit will remain on your account until your reconciliation return posts and your account is reviewed (June or July each year).
You must request a refund in writing. Do not write a note on the amended return, but send a separate piece of correspondence with your return. Your letter must include your:
- withholding license number
- amount and overpayment period
- telephone number
- signature (or another of the corporate officers)

The request may be mailed or faxed to the Tax Commission.

Credit Balances
Utah State Tax Commission
210 N 1950 W
Salt Lake City, UT 84134
Fax: (801) 297-7574

If Bob had underpaid the tax, he would be assessed penalties and interest on the owing tax amount (see Section 5-Penalties and Interest). He would have to pay the outstanding tax amount with all penalties and interest when he sends his amended return. If he paid with a check, he would include his license number and the tax period to ensure the payment is credited quickly and properly.

If you do not feel comfortable calculating penalty and interest, you may pay the tax only and wait to receive a bill from the Tax Commission. You must pay the amount listed within 30 days from the bill date to avoid additional interest.

At the end of the year, ABC Stores has filed four quarterly returns. Bob is ready to reconcile and report his year-end information.

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