Today, the IRS published proposed regulations addressing changes made by the Tax Cuts and Jobs Act of 2017 (the “TCJA”) to how an employee instructs an employer to withhold income taxes on his or her Form W-4 (Employee’s Withholding Certificate). The Form W-4 was redesigned for 2020 to reflect the TCJA changes to how income … Continue Reading
Over the last few years, the Justice Department has worked with the IRS to more aggressively prosecute cases involving employment tax noncompliance and the failure to remit trust fund taxes to the U.S. Treasury. Trust fund taxes are taxes withheld from the wages of employees such as federal income tax withholding and FICA tax withholding. … Continue Reading
Earlier this year, the IRS issued IR-2020-09, in which it announced the launch of a new and improved Tax Withholding Estimator. The Tax Withholding Estimator (the “Estimator”) is designed to help employees adjust their federal income tax withholdings by performing a “Paycheck Checkup.” The process also helps employees target the refund they want by adjusting … Continue Reading
The IRS recently released Notice 2020-3, which provides interim guidance on default federal income tax withholding rates applicable to certain periodic payments of deferred income. The Notice also provides clarity as to how the IRS will accommodate a change that affects the form used to elect federal income tax withholding from wages, but not the … Continue Reading
Treasury Assistant Secretary for Tax Policy David Kautter attended the AICPA National Tax Conference on November 13, 2019, and commented that significant TCJA-related guidance should be expected to be released before the end of 2019. Such guidance is likely to include proposed regulations addressing (1) federal income tax withholding under section 3402, (2) the executive … Continue Reading
Recently enacted California Assembly Bill 5 (“AB-5”) is a game changer for businesses that use independent contractors in California — and a warning shot for employers nationwide. Subject to exemptions for certain occupations and professions, AB-5 imposes a strict “ABC” test that appears to put a thumb on the scale of classifying workers as employees … Continue Reading
Although the facts are still unfolding, recent developments surrounding the collapse of payroll firm MyPayrollHR serve as a reminder to employers to regularly verify the actions of payroll service providers. This should be a routine practice, regardless of the provider’s reputation and the longevity of the relationship. In particular, employers should open their own EFTPS … Continue Reading
Reminiscent of Kermit’s lament, “it’s not easy to be green,” it has not been easy to be the Form W-4 since personal exemptions were eliminated by tax reform in 2017. Two days after unveiling its new Tax Withholding Estimator, which is discussed in our post of August 6, 2019, today the IRS released “the second … Continue Reading
Today, the IRS unveiled its new Tax Withholding Estimator to help employees complete the Form W-4 and ensure that withholdings are sufficient to cover their income tax liability. The new calculator was previewed in the draft 2020 Form W-4. (See earlier coverage.) A near-final draft 2020 Form W-4 is expected to be released soon. Currently, … Continue Reading
In 2017, the District of Columbia passed the Universal Paid Leave Amendment Act of 2016 (the “Act”), which called for the creation of a paid-leave program for private sector employees who work in D.C. Earlier this year, the D.C. Office of Paid Family Leave adopted final regulations to implement this new paid-leave program. One of … Continue Reading
On May 31, the IRS released a draft 2020 Form W-4 that addresses some, but not all, of the privacy concerns that led the IRS to abandon the redesigned form for 2019. According to an accompanying news release, the IRS anticipates releasing a near-final form in July to allow payroll processors and employers to begin … Continue Reading
On May 31, the IRS released a legal memorandum, ILM 201922026, regarding the information return obligations of a common law employer when it appoints a pay agent in the middle of a calendar year. In general, an employer may appoint a pay agent under section 3504 by using IRS Form 2678 (Employer/Payer Appointment of Agent) … Continue Reading
In 1987, the IRS released Notice 87-7 providing guidance on whether certain recipients of payments from employer deferred compensation plans, individual retirement plans, and commercial annuities are subject to federal income tax withholding under section 3405. The notice provided that: payors must withhold on periodic and nonperiodic payments under section 3405(a) or 3405(b), respectively, to payees … Continue Reading
On May 23, the IRS and Treasury released final regulations governing certified professional employer organizations (“CPEOs”). CPEOs were created by the Tax Increase Prevention Act of 2014, P.L. 113-295, which added new Code sections 3511 and 7705 that contain certification requirements for, and the federal employment tax consequences of, being a CPEO. The measure, passed … Continue Reading
On remand from the Eleventh Circuit, the Tax Court, in Romano-Murphy v. Comm’r, determined that the failure of the IRS to provide a pre-assessment appeals hearing invalidated the IRS’s assessment of trust fund recovery penalty under section 6672 and proposed levy to collect the same. In July 2006, the IRS sent a letter to the … Continue Reading
Consistent with its ongoing employment tax enforcement efforts, the Justice Department recently announced developments in two cases involving the failure to properly withhold and remit federal employment taxes from employee wages. On April 25, the Justice Department announced that Kae Wook Lee, the sole owner and CEO of Mona Lisa 7 Corporation, was sentenced to … Continue Reading
On April 11, 2019, the IRS announced the results of a national two-week education and enforcement campaign to combat employment tax crimes. Payroll taxes account for approximately 70% of all revenue collected by the U.S. Treasury. Given the significance of payroll tax collections to the federal government, IRS revenue officers across the country visited nearly … Continue Reading
On March 5, 2019, the U.S. District Court for the District of Maryland determined that an employee was potentially entitled to relief under section 7434(a) of the Internal Revenue Code when an employer purposefully reports a portion of their wages on Form 1099-MISC as income from self-employment rather than on the Form W-2. In Greenwald … Continue Reading
Earlier today, the IRS released new percentage method withholding tables for 2018 implementing the changes to major withholding provisions following the enactment of tax reform legislation. In the revised Notice 1036, the IRS provided new withholding tables utilizing the value of personal exemptions that would have existed in the absence of tax reform and the existing … Continue Reading
In a news release, the IRS today announced that it anticipates issuing initial withholding guidance to implement the changes under the tax reform bill in January 2018. Employers and payroll service providers are encouraged to implement the changes in February. In the release, the IRS indicated that the withholding guidance will work with the existing … Continue Reading
Earlier today, the Senate Finance Committee released legislative text of its version of the Tax Cuts and Jobs Act. Up until now, only “conceptual language” had been available. The text clarifies some of the provisions that we have previously discussed in our posts about the Senate bill (see earlier discussion here) and includes new information reporting … Continue Reading
In a much anticipated decision, the U.S. Tax Court ruled yesterday that “the business premises of the employer” can include an off-premises facility leased by the employer when its employees are on the road. The decision in Jacobs v. Commissioner addressed whether the employer (in this case, the professional hockey team, the Boston Bruins) was … Continue Reading
Last night, Republican leadership released a manager’s amendment to the American Health Care Act (AHCA) that would delay the repeal of the additional Medicare tax (AMT) of 0.9% imposed on certain high-income individuals from 2017 until 2023. The move is an effort to shore up Republican support for the bill in advance of an expected … Continue Reading
Facing likely defeat, Republicans have pulled the American Health Care Act, which would have made numerous changes to the information reporting provisions and employment tax provisions of the Affordable Care Act (ACA). The legislation would have also created a new information reporting requirement by adding Section 6050X to the Code. The House was scheduled … Continue Reading
