Backup Withholding

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…
Continue Reading Administration Proposes W-9 Requirement for More Reportable Payments

On October 14, 2020, the IRS posted Tax Tip 2020-136 entitled, “Helpful information for taxpayers on backup withholding.”  This particular Tax Tip serves as a great reminder for payers making payments for which backup withholding is required, especially if they are unaware of the troubling consequences of noncompliance.
Continue Reading IRS Posts Tax Tip on Backup Withholding

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.  Owners, corporate officers, and employees who are responsible for remitting such taxes may also be found to be personally liable for the failure to pay over trust fund taxes and, as the following described cases indicate, they may face criminal prosecution for such failures. 
Continue Reading Justice Department Continues Criminal Prosecutions in Employment Tax Cases

On November 14, 2019, the IRS announced that it has redesigned Notices CP2100 and CP2100A with the goal of providing more information to affected payers. These Notices are used to alert payers that the IRS received Forms 1099 containing incorrect or missing Taxpayer Identification Numbers (TINs) for payees and that the payer may need to contact payees regarding their name and TIN information and/or backup withhold at a rate of 24% as a result. Payments potentially subject to backup withholding are reportable payments, such as interest (including tax-exempt interest), dividends, broker and barter exchange transactions, rents, royalties, nonemployee compensation, payments made in settlement of payment card and third party network transactions, and certain payments from fishing boat operators.
Continue Reading The IRS Introduces More Informative Backup Withholding Notices for Payers

The Treasury Inspector General for Tax Administration released a partially redacted report on May 20 asserting that the IRS has failed to take steps to address nearly $2 billion in discrepancies between withholding reported on withholding tax returns and withholding reported on information returns.  The TIGTA report found that 7,265 taxpayers reported nearly $925 million in withholding on Forms 1099 and W-2G in 2016 but failed to file a Form 945, Annual Return of Withheld Federal Income Tax.  In the same year, another 3,163 taxpayers reported $760 million more in withholding on Forms 1099 and W-2G than they reported on the Form 945.  Conversely, the report found 3,527 taxpayers who reported a total of $241 million more in withholding on the 2016 Form 945 than they reported on Forms 1099 and W-2G.
Continue Reading TIGTA Chides IRS for Lax Non-Payroll Withholding Enforcement

Dan Lauer, an IRS executive for SBSE, told an audience at the American Payroll Association’s Capital Summit on March 25 that the Service is launching a program in the summer of 2019 to pursue backup withholding failures.  Backup withholding is required under section 3406, and the current backup withholding rate is 24%.  Generally, backup withholding applies when a payor makes a reportable payment to non-corporate payees and does not possess the payee’s TIN.
Continue Reading IRS Targets Backup Withholding Compliance

The Justice Department has again demonstrated its willingness to prosecute corporate executives for failing to remit employment taxes.  On March 22, 2019, the Department of Justice issued a press release to announce that the U.S. District Court for the Eastern District of North Carolina sentenced a North Carolina man to 30 months in prison, restitution of $1.686 million, and three years of supervised released following completion of his sentence.  The executive served in various official capacities for OneCare, Inc., a mental health service provider, including as the corporation’s President.  From 2010 to 2013, OneCare withheld, but failed to pay over, employment taxes in the amount of almost $1.7 million.  On May 2, 2018, the executive was charged with, among other charges, one count of Willful Failure to Collect or Pay Over Tax.  He ultimately entered into a plea agreement that required him to plead guilty to a single count of Willful Failure to Collect or Pay Over Tax.
Continue Reading Justice Department Continues Aggressive Enforcement for Trust Fund Tax Failures

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…
Continue Reading IRS Releases Withholding Guidance