Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals. Among its proposals, the Green Book includes a new proposal that could signal stepped-up enforcement of section 409A, as well as a new tool for the IRS. Section 409A, adopted almost two decades ago, represented a significant shift in the tax treatment of non-qualified deferred compensation plans. Prior to its adoption, these plans often relied on traditional concepts of constructive receipt to determine when it was required that a plan participant recognize income. Section 409A overlaid those principles with significant new rules regarding the time that an election to defer compensation must be made, as well as limitations on the time and form of payment of deferred compensation.
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Administration Proposes W-9 Requirement for More Reportable Payments
Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals. Among its proposals, the Green Book suggests the expansion of the requirement to collect Forms W-9 to additional payments.
Under current law, payors are required to backup withhold…
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Treasury Stakes Out a Position on “On-Demand Pay” Arrangements
Last week, the Treasury Department released the “Green Book,” formally known as the General Explanations of the Administration’s Revenue Proposals. Among its proposals, the Green Book addresses the treatment of on-demand pay arrangements. These arrangements, which have recently grown in popularity, permit employees to access a portion of their earned wages in advance of the employee’s normal pay date. For this reason, they are often referred to as “earned wage access programs.”
One of the potential tax concerns with these arrangements has been that, depending upon the program design, the employee could be considered to be in “constructive receipt” of their earned wages. 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 third-parties designing the programs (which are often app-based) have sought either to structure the programs as loans or to avoid the constructive receipt issue by requiring the payment of a small fee when the earned wages are paid.
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FinCEN Releases Notice of Proposed Rulemaking on Beneficial Ownership Disclosure Requirements: Seven Things To Know
[This post was originally published as an Alert by Covington Financial Services.]
On December 7, 2021, the Financial Crimes Enforcement Network (“FinCEN”) invited public comment on its proposed rule (the “Proposed Rule”) implementing the beneficial ownership disclosure requirements of the Corporate Transparency Act (“CTA” or “Act”). Comments…
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IRS Releases Form 1042-S Data Integrity Tool to Assist Withholding Agents in Complying With Withholding and Reporting Obligations
The Internal Revenue Service recently released an online tool to help U.S. withholding agents comply with withholding and reporting obligations on IRS Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. Forms 1042-S are issued by withholding agents to non-U.S. beneficial owners of U.S. source FDAP income under Chapter 3 and to non-U.S. payees who receive U.S. source withholdable payments under Chapter 4. Given the complexity of the Form 1042-S, this tool provides withholding agents with an opportunity to screen their draft Forms 1042-S for errors prior to filing. The Form 1042-S Data Integrity Tool performs a quality review of data before IRS submission at no cost to the user.
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Infrastructure Bill Will Terminate Employee Retention Credit Retroactively
Section 80604 of the bipartisan Infrastructure Investment and Jobs Act (H.R. 3684) amends Section 3134 of the Internal Revenue Code to terminate the employee retention credit for employers subject to closure for COVID-19 effective October 1, 2021. The legislation, which passed the House on November 5 (after passing the Senate…
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IRS Issues Additional Guidance on Employee Retention Credit
Nearly 18 months into the pandemic, the IRS continues to issue guidance on the employee retention credit, a credit that was adopted in March 2020 and has been addressed in a number of articles on the Tax Withholding & Reporting Blog, most recently on August 3, 2021.
The latest guidance takes the form of Notice 2021-49 and Revenue Procedure 2021-33, which together address a range of topics, including how employers should treat cash tips for purposes of determining the amount of qualified wages, whether the credit may be claimed with respect to the same wages for which the employer receives the Code Section 45B credit, how the related individual rules work for determining qualified wages, and whether employers are required to file amended tax returns if they claim the employee retention credit retroactively. The Service has also outlined a safe harbor that employers may apply to exclude from gross receipts the amount of the forgiveness of any PPP loans or the amount of shuttered venue operator grants or restaurant revitalization grants.
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Bipartisan Infrastructure Bill Would Terminate Retention Credit Early for Most Employers
The bipartisan infrastructure bill introduced in the Senate earlier this week includes a provision that would end early the employee retention credit, which was codified in Section 3134 of the Internal Revenue Code by the American Recovery Plan Act earlier this year. The Section 3134 credit, which took effect on…
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Supreme Court Denies New Hampshire’s Challenge to Massachusetts Telecommuter Tax Rule; Convenience of the Employer Lives to See Another Day
The Supreme Court, today, denied New Hampshire’s motion for leave to file a bill of complaint challenging Massachusetts’ COVID-related tax regulations. The decision comes little more than a month after the Acting Solicitor General of the United States filed an amicus brief urging the court to deny the motion. In addition to New Hampshire, the decision will leave New Jersey and other states (nearly fourteen states had filed amicus briefs urging the Court to take the case) disappointed. The case was seen as an indirect threat to New York’s convenience of the employer rule, which operates similarly to the temporary regulations adopted by Massachusetts. See earlier coverage here and here.
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A Proposed Global Minimum Corporate Income Tax Rate
[This is a guest post by Ed McClellan and Thomas Reilly that was originally published on June 2, 2021, in Covington’s Global Policy Watch Blog.]
In mid-May, the Biden Administration officially threw its support behind a minimum global corporate income tax rate of at least 15%. The U.S. proposal would be limited to the world’s 100 largest companies – those with revenues of over $20 billion. The proposal would not depend on the company’s nationality (the U.S. has made clear that it would not support any proposals that discriminate against U.S. multinationals) and, since it would apply to digital services companies as well as to those selling tangible goods, would not be specific to any one sector.
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