On April 16, 2024, the IRS issued fact sheet FS-2024-13 providing answers to frequently asked questions  about the tax treatment of work-life referral services provided to employees under an employer’s work-life referral program. The FAQs clarify that, under certain circumstances, the value received from work-life referral services provided to employees through a work-life referral program can be excluded from federal income and employment taxes as a “de minimis fringe” benefit.

A work-life referral program is an employer-funded fringe benefit that provides referral services to eligible employees, with such services being restricted to “informational and referral consultations that assist employees with identifying, contacting, and negotiating with life-management resources for solutions to a personal, work, or family challenge.” For example, work-life referral services include assisting employees with answering questions about finding child or elder care, obtaining legal guidance, or eligibility for government benefits. Work-life referral services also include assisting employees with completing paperwork and basic administrative tasks that help direct the employee to appropriate providers of the underlying life-management resources.

Work-life referral programs are often incorporated into an employer’s employee assistance program (“EAP”) or may otherwise be bundled with other types of services or programs offered by the employer.  These programs may be available to a majority of an employer’s employee population, but in practice, the programs are used infrequently, on a short-term basis, and only when an employee faces one of the particular challenges the program is designed to address.

Takeaways

By definition, a work-life referral program is an employer-funded fringe benefit offered to employees, and so the value received (if any) from such program by an employee qualifies as gross income, unless excludable under a specific provision of the Code.

Fact sheet FS-2024-13 clarifies that the value received from work-life referral services can be excluded from an employee’s gross income for employment tax purposes, but it is important to note that the conclusion reached in the fact sheet applies only to the limited informational and administrative work-life referral services provided to an employee. In other words, the IRS has not indicated that the actual life-management resources or other services that the employee is referred to and then may receive through an employer EAP or through another employer program qualify as de minimis fringe benefits.  Accordingly, employers should carefully consider whether services provided to employees beyond referral services through their EAP or other programs qualify as de minimis fringe benefits or might otherwise qualify for exclusion under another provision of the Code, such as those for health benefits. 

On March 9, 2023, the U.S. Department of Treasury released the Greenbook (formally known as the General Explanation of the Administration’s Revenue Proposals) for FY 2024 to explain revenue proposals included in the Administration’s budget.  One proposal is to increase the number of hours required to be worked by an individual for the employer to be eligible for the Work Opportunity Tax Credit (WOTC).

Continue Reading Treasury Greenbook Includes Proposal to Alter Work Opportunity Tax Credit

As we have been discussing in recent blog posts, the Treasury Department released its Fiscal Year 2024 General Explanations of the Administration’s Revenue Proposals, commonly called the “Green Book,” on March 9, 2023. This year’s Green Book includes a proposal that both employers and employees are likely to embrace: an enhanced tax credit for employers that provide childcare.

Continue Reading Administration Proposes Increased Childcare Tax Credit for Employers

On March 9, 2023, the U.S. Department of the Treasury released the Greenbook (formally known as the General Explanations of the Administration’s Revenue Proposals), to explain the revenue proposals included in Administration’s budget.  One proposal in the Administration’s budget would increase the additional Medicare tax rate by 1.2 percentage points for high-income taxpayers.  

Self-employment earnings and wages are subject to employment taxes under either the Self-Employment Contributions Act (SECA) or the Federal Insurance Contributions Act (FICA). Both SECA and FICA taxes apply at a rate of 12.4 percent for social security tax on self-employment earnings and wages (capped at $160,200 in 2023) and at a rate of 2.9 percent for Medicare tax on all self-employment earnings and wages (not subject to a cap).  In the case of FICA taxes, the employee and employer each pay half of the taxes imposed on wages.

Continue Reading Treasury Greenbook Includes Proposal to Raise the Additional Medicare Tax Rate for High-Income Taxpayers

Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals.  For the second year in a row, the Green Book addresses the treatment of “on-demand” pay arrangements also known as “daily pay” or “earned wage access programs.”  These arrangements permit employees to access a portion of their earned wages in advance of the employee’s normal pay date. 

These programs raise potential tax concerns because, depending upon the program design, the employee could be considered to be in “constructive receipt” of their wages as soon as they earn them.  This creates payroll withholding and depositing obligations for employers regardless of whether the employee actually receives a wage payment.  In addition, the program can cause uncertainty regarding how to properly calculate the required FICA tax and income tax withholdings when the employee elects to receive a payment of earned wages.  For this reason, some programs (which are often app-based) are structured as loans or attempt to avoid the constructive receipt issue by requiring the payment of a small fee when the earned wages are paid.

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On February 28, 2023, the Supreme Court decided Bittner v. United States—a rare Supreme Court foray into Financial Crimes Enforcement Network or FinCEN reporting of foreign bank and financial accounts under the Bank Secrecy Act (“BSA”).  The BSA is codified under Title 31 (Money and Finance) of the United States Code rather than Title 26 (the Internal Revenue Code) so the section references in this post are to Title 31.  At issue was how to calculate penalties for nonwillful violations of the BSA’s recordkeeping and reporting obligations for foreign transactions and accounts.  By a narrow 5-4 majority, the Supreme Court held that the penalty for a nonwillful violation of the reporting requirements shall be assessed on a per-form basis rather than a per-account basis, a result favorable for those taxpayers with nonwillful failures.

Continue Reading Supreme Court Limits Penalties for Nonwillful FBAR Failures in <em>Bittner </em>Decision

This afternoon, in Announcement 2023-2, the IRS announced that brokers are not required to report additional information with respect to dispositions of digital assets until the IRS and Treasury issue final regulations under sections 6045 and 6045A.  The Infrastructure Investment and Jobs Act of 2021 (the “Act”) amended sections 6045 and 6045A to clarify and expand the rules regarding the reporting of information on digital assets by brokers.  These provisions of the Act were intended to increase tax compliance through additional information reporting regarding transactions involving digital assets.

Continue Reading IRS Delays Gross Proceeds Reporting, Basis Reporting, and Transfer Statements between Brokers on the Disposition or Transfer of Digital Assets until Final Regulations are Issued

Today, in Notice 2023-10, the IRS announced a delay in the new reduced reporting threshold for section 6050W applicable to third-party settlement organizations (TPSOs).  Section 9674(a) of the American Rescue Plan Act of 2021 amended section 6050W(e) to provide that, for returns for calendar years beginning after December 31, 2021, a TPSO is required to report payments in settlement of third party network transactions with respect to any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the aggregate number of such transactions.  Prior to the change, the threshold was $20,000 and 200 transactions. 

Continue Reading IRS Publishes Last Minute Reprieve for Implementation of New Form 1099-K Reporting Threshold