Examination Issues. Resources. Public Employers Toolkit

Transcription

1 Tax Exempt Government Entities IRS Examination Issues Examination Issues Public Employers Toolkit Resources Publication 963 Federal State Reference Guide Publication 5137 Fringe Benefit Guide Publication 15-A Employer s Supplemental tax Guide Publication 1281 Backup Withholding Publication 15 Employer s Tax Guide (Circular E) IRS.gov IRS Video Portal at Examinations Why our entity? How long will it last? What will they look at? What will they look for? Will it cost? What are our rights? 2 3 1

2 Examination Issues Common Issues Employment Taxes Fringe Benefits Worker Classification Information Return Civil Penalties Backup Withholding Taxes Retirement Plan Deferrals Employment Taxes FICA OASDI 6.2% X 2 No Pension or FICA Alternative Plan Miscoded-changed positions Medicare 1.45% X 2 Continuing Employment Exception Miscoded- rehired Income Tax Withholding Invalid Exemption International Employee Employment Taxes Additional Wage Payments To Employees: Stipends Off-Payroll Payments Non Accountable Plan Fringes Paid from Grant Monies Payments for Volunteer Work Extended Day or Event

3 Fringe Benefits Fringe Benefits Fringe Benefits Employer Provided Vehicles Group Term Life Insurance Educational Reimbursements Cafeteria Plans Uniform Reimbursements & Allowances Meals & Lodging Travel & Transportation General Considerations Code Section 61 Is there an exception? Follow the Rules Accountable Plan Provisions Business Connection Adequate Accounting Timely return of excess Employer Vehicle Use Several methods available Most methods have limitations Reconsider/recalculate yearly Listed property-substantiation Uniforms Specifically required as a condition of employment Not worn or adaptable to general usage as ordinary clothing

4 Worker Classification Worker Classification Worker Classification Workers may be: Independent Contractors Employees Resources Pub 1779 Pub 963 Pub 15 Employee or Independent Contractor? Codified Elected Officials Public Officers Common Law Right to Direct and Control Court Cases Dual Status Workers Common Law Categories of Evidence: Behavioral control Financial control Relationship of the parties

5 Worker Classification Special provisions for Reclassifications: IRC 3509 rates Classification Settlement Program (CSP) Voluntary Classification Settlement Program (VCSP) Delinquent Forms 1099 (found in exam) $260 for failure to file AND $260 for failure to furnish AND Consider Backup Withholding Tax Common Failures Caused by: Changed system- coding lost Old input-never verified Name changed over years Extraneous account payments Misunderstanding 1099 Rules

6 Different Form 1099 Types MISC (Payment for non-employee services, rent, royalties, gross proceeds to attorneys etc ) 1099-S (sales or easements of property, also condemnations) 1099-INT (interest paid on RE tax refunds, bonds, settlements, etc.) Issue for Payments of $600 or more in a year Use Form W-9 Information to determine need to file Form 1099 at year-end Name Taxpayer Identification Number Type of Entity Indicates if payee is exempt See Taxpayer Identification Number (TIN) Matching at 17 Who gets a Form 1099-MISC? 18 Limited Liability Company (LLC) unless they are incorporated Sole Proprietorships, Partnerships, Disregarded Entities, Trusts, Estates Corporations do not get a 1099 unless for: Legal services or gross proceeds Medical services 6

7 Backup Withholding Tax What is it? Withholding on vendor payments Payor is responsible to withhold When will it apply? Missing TIN (anything but 9 numerals) Incorrect TIN (notified by CP2100 notice) Backup Withholding Notice Backup Withholding Tax CP 2100 Notices- What should you have done? Compared the notice with your records Determine if a B-notice was required? 1 st B notice (F W-9 in response) 2 nd B notice (L 147C or SS card in response) Begun Backup Withholding when required Backup Withholding Tax Questions on Notices and BUWH Information Reporting Program Customer Service call site is (866) mccirp@irs.gov This information can be found in Pub

8 Some Specific Issue Areas Election Workers-Special Rules Mass Senior Work Off Program Student Workers-Special Rules Injured on Duty Pay and Supplemental Pay Retirement Incentives Cash-In-Lieu-Of Options International Workers and Vendors Sample Town Examination Sample Town had a 2016 examination by the IRS, expanded to include 2017 for the same issues. The findings were: 4 board members were paid $2000 each on F employees were rehired after retiring and hadn t paid Medicare-each earned $15K Uniform allowances of $1000 for 10 firefighters made under a non-accountable plan. 15 forms 1099-MISC were not filed Of those, 2 had no TIN and totaled $20K Sample Town Examination At the closing conference the following assessments were proposed: CSP agreement for Board member reclassifications -1 year only tax $ Medicare tax on 2 employees $870 X2 years Uniform for 10 firefighters $2,790 X2 years Forms 1099-MISC were not filed-$7,800 X2 years BUWH- $5,600 x2 years Total $34,

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