FICA Withholdings on SAR-SEP Contributions

[Guest Denise S. Prince]

What are the requirements for FICA withholdings on SAR-SEP contributions? The salary reduction portion? The employer contribution portion?

If this is required and has not been done, what correction program would you recommend?

Thanks!

[mbozek]

Employee salary reduction is subject to FICA tax the same as a contribution to a 401(k) plan. Employer contributions are exempt from FICA tax. The employee is subject to a 3 yr statute of limitations for the failure to pay FICA tax. The employer has liability for both the employee and employer FICA contribution if the employee fails to pay the tax and the S/l expires. There is no s/l for collecting back FICA tax from the er because the er does not file a tax return for remitting FICA tax with the IRS. I dont know if the IRS has a correction program for collecting back FICA tax because this is not part of a qualified plan requirments. You should consult with a tax specialist.

[jpod]

There is, in fact, a 3-year period of limitations on the assessment of back FICA taxes for an employer who has timely-filed Forms 941.

As to what to do, the 941 instructions give you a good explanation of how to correct past under-withholding, under-reporting, and under-depositing of employment taxes.

[mbozek]

Do you have a cite to that statement? I thought that the 941 was not considered a tax form that starts the 3 yr s/l for back taxes but was similar to a 1099.

[jpod]

cite = Code Section 6501(a) and (B)(2).