March 28, 2017
A recent Internal Revenue Service Office of Chief Counsel field attorney advice memorandum (FAA 20171201F) sounds a cautionary note for employers making use of a professional employer organization (PEO). The FAA holds a common law employer ultimately liable for employment taxes owed for workers it leased from the PEO. Under the terms of the employer’s agreement with the PEO, the PEO was required to deposit employee withholdings with the IRS and pay the employer share of payroll taxes to the IRS. Alas, that was not what happened.
The taxpayer did not dispute that it had the right to direct and control all aspects of the employment relationship and was thus was the common law employer with respect to the employees, but asserted that it was not liable for the unpaid employment taxes.… Read More
March 24, 2017
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) (earlier coverage). The legislation would have also created a new information reporting requirement by adding Section 6050X to the Code. The House was scheduled to vote on the legislation this afternoon, but Republicans have struggled to appease both conservative Republicans, who wanted a more completed repeal of the ACA, and moderate Republicans, who were concerned about the potential loss of coverage that could result from the legislation.… Read More
Employers Likely Need to Update Their Processes Based on New Requirements for Employer Refund Claims of FICA and RRTA Taxes
March 24, 2017
On March 20, the IRS released Rev. Proc. 2017-28, providing guidance to employers on employee consents used to support a claim for credit or refund of overpaid taxes under the Federal Insurance Contributions Act (FICA) and the Railroad Retirement Tax Act (RRTA). The revenue procedure requires the employee consent to contain, among other information, the basis for the refund claim and a penalties of perjury statement. In addition, it permits employers to request, receive, and retain employee consent electronically, and clarifies the “reasonable efforts” an employer must make, if it fails to secure employee consent, to claim a refund of the employer’s share of overpaid FICA or RRTA taxes.… Read More
March 24, 2017
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 vote late this afternoon or this evening. The delay comes three days after an earlier manager’s amendment moved up the repeal of the AMT from 2018 to 2017, and added a transition rule related to employer withholding of the tax. That change was also made in an effort to shore-up Republican support ahead of the House vote, which was originally expected to happen yesterday. … Read More
March 15, 2017
The IRS is engaging in negotiations with individual countries to implement country-by-country (CbC) reporting according to Douglas O’Donnell, Commissioner of IRS’s Large Business and International Division. In a March 10 speech at the Pacific Rim Tax Institute that, he clarified that the IRS is only negotiating with jurisdictions that have both an information exchange instrument and adequate information safeguards. Mr. O’Donnell did not provide a definitive timeline for those negotiations, but he said that they would be completed in a timely manner. The IRS’s approach to negotiating information exchange agreements is consistent with the United States’ existing approach to negotiating IGAs and related agreements under FATCA.… Read More
March 7, 2017
A House Republican bill, entitled the American Health Care Act, would repeal many provisions of the Affordable Care Act (ACA) but retain and expand the information reporting rules. Released on March 6, the proposal consists of two parts: (1) a bill drafted by the House Ways and Means Committee, to eliminate the ACA’s taxes and income-based subsidies, zero out penalties for the individual and employer mandates, and establish a new individual tax credit; and (2) a bill drafted by the House Energy and Commerce Committee, to freeze and reform Medicaid.
The Ways & Means bill would help taxpayers pay for health insurance by expanding health savings accounts, and by providing an advanceable, refundable tax credit—the “health insurance coverage” credit—for purchasing state-approved, major medical health insurance and unsubsidized COBRA coverage. … Read More
March 3, 2017
A taxpayer who willfully failed to remit federal employment taxes while in the process of pleading guilty to a nearly identical crime could not escape his above-the-guidelines sentence of 42 months’ imprisonment, the D.C. Circuit recently held. In United States v. Jackson, the taxpayer committed bankruptcy fraud in 2002 by diverting $373,000 from the company he ran to another one of his businesses, instead of remitting the federal tax withholdings from the wages of the company’s employees. For this crime, the district court imposed five years’ probation rather than imprisonment. But the taxpayer did not learn his lesson. While pleading guilty to this crime and before being sentenced in 2006, the taxpayer, from 2005 through 2009, failed to pay almost $600,000 in federal employment taxes that his other business had withheld from employee wages. … Read More
March 3, 2017
Recently, the Treasury released the Model 1B Intergovernmental Agreement (IGA) entered into between the United States and Ukraine. The IRS released the Competent Authority Agreements (CAAs) implementing the IGAs between the United States and the following treaty partners:
- Antigua and Barbuda (Model 1B IGA signed on August 31, 2016);
- Vietnam (Model 1B IGA signed on April 1, 2016).
Under FATCA, IGAs come in two forms: Model 1 or Model 2. Under a Model 1 IGA, the foreign treaty partner agrees to collect information of U.S. accountholders in foreign financial institutions (FFIs) operating within its jurisdiction and transmit the information to the IRS. … Read More
February 7, 2017
Recently, the IRS issued guidance for multinational enterprises (MNEs) with at least $850 million in annual revenue based in the United States that may have constituent entities subject to country-by-country (CbC) reporting requirements in foreign jurisdictions because of the effective date of CbC reporting in the United States. CbC reporting aims to eliminate tax avoidance by multinational companies by requiring MNEs to report certain indicators of the MNE’s economic activity in each country and allowing the tax authorities to share that information with one another.
In the U.S., MNEs make the CbC report on Form 8975, “Country-by-Country” report. The report contains revenue, profit or loss, capital, and accumulated earnings data for each country of operation. … Read More
February 3, 2017
Yesterday, the IRS and state tax agencies issued a joint warning to employers that the Form W-2 phishing scam that first affected large businesses last year has now expanded to other organizations, including chain restaurants, staffing companies, schools, tribal organizations, and nonprofits. The scam involves emails sent to payroll or human resources employees that appear to be from organization executives and request a list of all employees and their Forms W-2. Once the scammer receives the information, it can be used to file false tax returns and claim employee refunds.
According to IRS Commissioner John Koskinen, this is one of the most dangerous phishing scams the tax world has faced in a long time. … Read More