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EMPLOYMENT TAX INITIATIVES

Jody StambackSr. Stakeholder Liaison

Small Business/Self-Employed Division December 9, 2010

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National Research Program

• First employment tax NRP since 1984

• Three years – 6,000 taxpayers

• Examinations began March 2010

• Taxpayers chosen by random selection

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NRP Objective

• Obtain data about trends for major categories:– Worker classification– Fringe benefits– Information reporting (Forms 1099)– Officer compensation

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Backup Withholding

• Applies to Forms 1099 and reportable payments

• No TIN – immediate backup withholding

• TIN mismatch – payer action required

• Possible employer liability

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Backup WithholdingPilot Findings

• Consequences of failure to backup withhold not generally understood

• Businesses may not understand CP2100 Notice

• IRS considering changes and/or improvements

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Worker Classification

• Independent Contractors

• Employees

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Fringe Benefits

• Cash, property, or services in addition to regular wages

• Taxable unless specifically excluded by Internal Revenue Code

• Subject to withholding and

• Reportable on Form W-2 in year provided

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Accountable Plans

• Payments under accountable plans excludable from wages

• Requirements

– Business connection

– Substantiation

– Return of excess

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Payroll Professionals Tax Center

• Employment tax forms and publications

• American Recovery and Reinvestment Act: payroll impact

• Retirement plan guidance - how to correct common errors

• Worker classification guidance

• IRS hotlines and toll-free numbers

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Treasury Proposes Eliminating FTD Coupons

• Proposed Regulations issued 8/19/10 would eliminate paper coupons for federal tax deposits after 12/31/10

• Electronic Federal Tax Payment System (EFTPS) is an alternative– Visit www.eftps.gov– Call 800-555-4477

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Tax Return Preparer

For purposes of obtaining a preparer tax identification number (PTIN) only, a tax return preparer is any individual who is compensated for preparing, or assisting in the preparation of, all or substantially all of a federal tax return or claim for refund.

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Target Implementation Timeline

2010 2011 2012 2014

PTIN sign-up begins

Sep

tem

ber

15

Testing available

June

1

Sep

tem

ber

15

Dec

emb

er 3

1

2013

Janu

ary

31

Searchable database available

PTIN revoked if competency test not passed

PTIN renewals begin

CE requirement begins - TBD

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• In preparation for the 2011 filing season:

– If you file 100 or more individual or trust returns,

• are you enrolled and accepted to e-file?

• Do you have an Electronic Filing Identification Number? If yes, file your customers’ returns electronically

If no, the first step is to enroll to participate in IRS e-file. Visit IRS.gov, and click on the e-file logo

Preparer E-File Mandate