Form 4669 explained: What businesses need to know about this US tax form

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  1. Introduction
  2. What is Form 4669?
  3. Who needs to file Form 4669?
    1. When businesses might need to file Form 4669
  4. How to file Form 4669
    1. Additional tips
    2. Compliance factors
  5. When do I need to file Form 4669?

Form 4669, known as "Statement of Payments Received", serves a very specific role in the United States tax code. This form is used to document income for which no federal income tax has been withheld. It captures key information that can affect both the entity distributing the funds, referred to as the payer, and the person or entity receiving the funds, referred to as the payee.

Understanding the nuances of Form 4669 as well as the filing process is key both to ensuring that your business remains compliant with tax regulations and to minimising the risks associated with tax withholding. While it's always wise to work with a qualified tax professional, familiarising yourself with key facts is a great place to start. Here's a quick rundown of everything you need to know about Form 4669: what it is, when your business might need to file it, and how the filing process works.

What's in this article?

  • What is Form 4669?
  • Who needs to file Form 4669?
  • How to file Form 4669
  • When do I need to file Form 4669?

What is Form 4669?

Form 4669, otherwise known as "Statement of Payments Received", is a document that the Internal Revenue Service (IRS) uses in the United States to record and verify payments from which income tax, Social Security tax and Medicare tax have not been withheld by the employer. Essentially, this form serves as a way for the IRS to document the taxes that should have been withheld by the employer.

Typically, IRS staff fill in the form during an audit or investigation into an employer's tax practices. Employment taxes account for nearly 70% of the revenue collected by the IRS, as of 2016. Form 4669 can be key for employers in certifying that employment tax-related information is correct.

Who needs to file Form 4669?

Form 4669 is required when an employer hasn't withheld the appropriate tax amounts from an employee's wages. The following entities or individuals may need to file Form 4669.

  • Employers
    Employers are responsible for withholding the necessary taxes from their employees' wages, and if they discover that they failed to do so, they must file Form 4669. This form allows the employer to report the omission and resolve the discrepancy with the IRS.

  • Employees
    In some cases, an employee may receive Form 4669 from their employer as an acknowledgement of the tax amounts they failed to collect. While employees are not typically responsible for filing this form, they are required to sign it to confirm that the under-withholding or lack of withholding occurred.

  • Tax professionals
    Accountants or other tax advisors may initiate the filing of Form 4669 if they discover that their clients have not correctly withheld taxes from employee wages.

  • IRS auditors
    During an IRS audit, if the IRS learns that Social Security, Medicare or Railroad Retirement Tax Act (RRTA) taxes have not been collected adequately, the IRS auditor will require the business to file Form 4669. The form is a record of the discrepancy and provides the IRS with the information to proceed with further action, which could include penalties or additional audits.

When businesses might need to file Form 4669

Businesses will need to file Form 4669 if it's discovered that they've made a payment from which they haven't withheld the required federal income tax. Here's a closer look at some scenarios where this might occur.

  • Errors discovered in employee payments
    Form 4669 is often used in the context of employee compensation. When an employer realises that they have failed to withhold the necessary taxes from an employee's wage, they need to complete and submit this form to the IRS. Submitting Form 4669 to the IRS upon discovering withholding errors is considered a form of voluntary compliance. While it isn't technically required, failing to do this can expose the business to penalties in the future.

  • Errors discovered in non-wage payments
    Discovering that the necessary taxes have not been withheld from other types of payment, such as payments to contractors or landlords, is another reason that businesses may need to file Form 4669. Again, filing Form 4669 proactively upon discovering any errors is considered a best practice by many businesses and may protect them from complications later on.

  • IRS audit uncovers withholding errors
    In some cases, an IRS audit may trigger the need for Form 4669. Auditors may flag missing or insufficient withholding amounts and could request that a business submit the form as a corrective action.

How to file Form 4669

Here's an overview of the steps involved in filing Form 4669.

  • Initiating the process: Issuing Form 4669
    If a business has distributed any kind of income without withholding the required federal income tax – whether that's salaries, rent or other types of payment – it will need to issue Form 4669 to the payee in question. Typically, this entails completing the form with all pertinent details, such as the amount of payment, the type of income and the tax year when this payment occurred. Once the form is complete, the business must send it to the payee promptly, either by post or electronically, depending on IRS rules.

  • Payee acknowledgement: Completing and returning the form
    After the employer has sent the form, the payee is required to fill in their section of the form, which confirms that they've received the income listed and are aware that no federal taxes have been withheld from their payment. The payee must then sign and date the form before returning it to the employer. To expedite the process, businesses should set a deadline and explicitly communicate the timeline and requirements to the payee.

  • Final step: Submitting to the IRS
    Once the employer receives the signed form, it serves as an official acknowledgement from both parties that certain tax amounts were not withheld. At this point, the employer has the option of submitting this form to the IRS. While this is not mandatory, keeping an accurate record of such transactions is important for compliance and auditing purposes. If you choose to submit it to the IRS, the form should be included when you file your regular payroll tax returns or as otherwise directed by IRS guidelines.

Additional tips

  • Keep digital records: Maintaining a digital copy of all completed Form 4669s will make it easier to retrieve details during any potential audits or enquiries.

  • Consult a tax advisor: Given the complexity – and potential penalties – associated with tax withholding, consulting a tax advisor may be beneficial to understanding your responsibilities and next steps.

  • Be aware of timelines and deadlines: To avoid penalties, including financial penalties, make sure you know the IRS timelines or deadlines that may apply to this form.

Compliance factors

Form 4669 comes with specific obligations and rules. Here are some aspects to consider when filing this form.

  • Accuracy
    The form must contain accurate information about the uncollected tax amounts. Any inaccuracy can lead to further complications, including penalties and potential legal action.

  • Timeliness
    File the form promptly. Failure to do so may trigger further consequences, such as accruing interest on the unpaid taxes.

  • Employee confirmation
    Form 4669 is only considered complete when it includes the employee's signature confirming acknowledgement of the tax discrepancy. If the employee refuses to sign, the employer should make a written statement to that effect and attach it to the form.

When do I need to file Form 4669?

Filing Form 4669 at the right time is important for compliance and mitigating risks. Here's a closer look at the timelines for filing Form 4669.

  • No universal deadline
    Form 4669 doesn't come with one deadline that applies to all situations. The timing largely hinges on the circumstances of why you're filing, and it will vary based on factors such as what kind of payment you've failed to withhold taxes on.

  • Post-discovery filing
    Businesses should take action as soon as they discover that they have failed to withhold the appropriate taxes. The quicker you file Form 4669, the less likely you are to incur penalties.

  • Audit trigger
    If you are required to file Form 4669 in accordance with an IRS audit, the auditors will typically provide a specific deadline. This deadline is non-negotiable, and failing to meet it can result in significant penalties or even legal action.

  • Fiscal year considerations
    Your business's fiscal year may also influence the timing of filing. If the fiscal year is about to close, it's advisable to file Form 4669 before this happens. This will allow you to reconcile your financial records more accurately and avoid carrying a tax issue over into a new fiscal year.

  • Penalty prevention
    Filing Form 4669 in a timely manner can help prevent or limit additional financial repercussions of withholding errors, an offence for which penalties – ranging from fines to more serious action – can accrue over time.

  • Tax return deadlines
    If you discover that missed withholding is affecting an already-filed tax return, you may need to file an amended return. Different deadlines might apply depending on the type of return being amended, and Form 4669 should be filed prior to or along with the amended return.

  • Interaction with Form 4670
    For cases in which the payee does not sign and return Form 4669, the payer might need to issue Form 4670, "Request for Relief of Payment of Certain Withholding Taxes". Similar to Form 4669, the timing for filing Form 4670 will depend on the specific situation.

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