Section 3406

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

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

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