Route To: Partners Managers Staff File LIST OF SUBSTANTIVE CHANGES AND ADDITIONS PPC's Payroll Tax Deskbook Twenty second Edition (December 2015) Highlights of This Edition The following are some of the important update features of the 2015 Edition of PPC's Payroll Tax Deskbook. Information Reporting Forms for Health Care Coverage. This edition has been updated for the latest guidance on the health care information reporting requirements. The Deskbook includes detailed information on the applicable large employer reporting requirements under IRC Sec. 6056 and line by line guidance for completing Form 1095 C and Form 1094 C. Also included is guidance on minimum essential coverage reporting under IRC Sec. 6055 and line by line guidance for completing Form 1095 B and Form 1094 B. Certified Professional Employer Organizations (PEO). A new IRS program allows qualifying PEOs to become certified PEOs that are solely liable for their customers employment taxes. A certified PEO is also treated as the sole employer of some of its customers employees. This edition includes a new discussion about the necessary requirements for a PEO to become certified. Increased Penalties. For returns due after 2014, certain penalties are adjusted for inflation annually. Additionally, several information reporting penalties were increased with 2015 legislation. The Deskbook s chapter on penalties has been updated for the increased amounts and inflation adjustments. Worker Classification. Worker classification continues to be an area of IRS focus. This edition has been updated for the latest guidance from the IRS and includes a discussion on recent Department of Labor guidance on the economic realities test used to determine whether a worker is an employee or an independent contractor for purposes of the Fair Labor Standards Act. Benefits for Same sex Spouses. This edition includes an updated discussion on benefits provided to same sex spouses in light of the recent Supreme Court decision in Obergefell v. Hodges. myras. A new discussion has been added discussing the recently created individual retirement accounts known as myras. Coverage includes the requirements and tax treatment of myras. CHAPTER 2 Basic Principles of Employer Liability 1. This edition provides an update on how to access new employer tools available when using the E Verify program, including a guide for employers and a free webcast. Key Issue 2A 2. Information has been added about the new Form I 9 desktop widget the USCIS has made available through its website. 3. A new multistate employer notification form has been released for use in new hire reporting for multistate employers. Information on the new form and updated requirements for submission has been included. Key Issue 2A Key Issue 2A prlp15sub 1
CHAPTER 4 Employee Leasing and Third party Service Providers CHAPTER 5 Principles of Worker Classification CHAPTER 6 Common Law Control Rules CHAPTER 9 Special Classes of Exempt Employment CHAPTER 10 Basic Principles of Compensation and Fringe Benefits CHAPTER 11 Cafeteria Plans, and Dependent Care, Educational, and Adoption Assistance 1. Clarification has been added on how a reporting agent can revoke an existing authorization granted by the prior filing of a Form 8655 with the IRS. 2. A key issue has been added to this chapter that includes detailed information on the new IRS program for certified professional employer organization status and its requirements. 1. This update includes a discussion of recent DOL guidance on the economic realities test employers should use to determine whether a worker is an employee or independent contractor for DOL purposes, including FLSA provisions. 2. Further developments have been provided on the Tax Court decision in SECC Corp. and its impact on worker classification. A Chief Counsel Notice expresses the IRS s opinion on the court s ruling and provides instructions for IRS attorneys going forward. 1. The discussion of Form 8919 is expanded in this edition to include information about the determination letter process after a Form 8919 has been filed by a worker. 1. This chapter has been updated to include discussions of two recent decisions concerning whether charter school employees and medical residents are exempt from FICA taxes. 1. Employers generally can gross up wages to absorb employee payroll taxes. This edition includes a caution to employers for a Chief Council Advice that determined the employer was not entitled to a refund for employment taxes overpaid on grossed up wages. 2. An example has been added to illustrate the calculation to use when grossing up an employee s bonus if the OASDI wage base has been exceeded. 3. After the Quality Stores decision, the IRS announced that it will reject all claims for refund of payroll taxes related to severance payments unless they qualify for the narrow exception provided. This update contains a discussion of the announcement. 4. A recent IRS memorandum provides guidance on the employment tax treatment of late payment penalties imposed for the failure to pay final wages on a timely basis. This edition includes a practice tip to help employers apply this guidance. 5. This edition has been updated for proposed regulations that would change the requirement to file a copy of a Section 83(b) election with the employee s tax return. 1. This key issue has been updated to clarify whether expenses indirectly related to dependent care can be reimbursed through a dependent care assistance program. Key Issue 4C Key Issue 4D Key Issue 5A Key Issue 5M Key Issue 6F Key Issues 9E and 9G Key Issue 10C Key Issue 10C Key Issue 10E Key Issue 10E Key Issue 10H Key Issue 11D 2
CHAPTER 12 Health Insurance, Life Insurance, and Retirement Plans CHAPTER 17 Tax Deposit Rules FITW and FICA CHAPTER 18 The Earned Income and Work Credits CHAPTER 20 Form 941 (Employer s Quarterly Federal Tax Return) 1. This chapter includes an updated discussion on benefits provided to same sex spouses in light of the recent Supreme Court decision in Obergefell v. Hodges. 2. Updated guidance on employer payment plans and the potential for penalty assessment have been included in this key issue. 3. A discussion and an example have been added on how an employer should correct a mistake in the treatment of Roth 401(k) contributions. 4. The chapter has a new discussion covering the recently created retirement accounts known as myras. 1. A discussion has been added to this key issue on a new IRS initiative called the Early Interaction Initiative, under which the IRS contacts employers that make substantially reduced payroll tax deposits. 2. The IRS has created an online calendar that can assist employers in tracking their payroll tax deadlines. This key issue has been updated with information about the calendar and where it is located. 3. Recent IRS guidance provides relief from penalties for not making tax deposits electronically for certain taxpayers that cannot obtain a bank account. A discussion on this guidance has been added in this edition. 1. Without new legislation, the work opportunity tax credit does not apply to wages paid to employees hired after 2014. This key issue has been updated to remind employers of the expiration of this tax benefit. 2. An alert has been added to this key issue regarding the transition relief provided to employers submitting Form 8850 to the state workforce agency (SWA) for individuals who were employed after December 31, 2013, and before January 1, 2015. 3. Information has been added to this key issue regarding the deemed extension of empowerment zone designations for designations that were in effect as of December 31, 2013. 4. Unless extended by Congress, the differential wage payment credit is no longer available for payments made after 2014 to qualifying employees performing military duties. This key issue has been updated to remind employers of the expiration of this tax benefit. 1. This key issue includes IRS Field Attorney guidance on applying the statute of limitations when the wrong employment tax return has been filed. 2. To request a refund of overpaid payroll taxes on an employee s behalf, an employer must have the signed consent of the employee. Information is provided on the proposed rules that allow employers to electronically obtain employee consent. Key Issue 12A Key Issue 12B Key Issue 12J Key Issue 12J Key Issue 17A Key Issue 17B Key Issue 17F Key Issue 18B Key Issue 18B Key Issue 18B Key Issue 18C Key Issue 20G Key Issue 20G 3
CHAPTER 21 Form 944 (Employer s Annual Federal Tax Return) CHAPTER 24 Form 940 [Employer s Annual Federal Unemployment (FUTA) Tax Return] CHAPTER 25 Form W 2 (Annual Wage and Tax Statement) CHAPTER 26 Form 1099 Annual Information Returns CHAPTER 27 Forms 1099 MISC, 1099 R, 1099 DIV, and 1099 INT 3. A new key issue has been added to provide guidance on filing a protective claim on Form 941 X. 4. The discussion about benefits provided to same sex spouses has been updated regarding changes due to the decision in Obergefell v. Hodges. 1. Information is provided about proposed rules that allow employers to electronically obtain employee consents to claim FICA refunds. 1. As in previous years, for 2015 some states will be credit reduction states for FUTA tax purposes. Therefore, employers in those states will be subject to higher FUTA tax rates. This key issue includes information on the 2015 credit reduction states. 2. A discussion has been added in this key issue as to whether underpayment interest accrues on FUTA taxes that were not deposited throughout the year. 1. Discussions throughout this chapter have been updated to reflect changes in the 2015 forms. 2. An alert has been added to this key issue regarding a change related to extensions of time to file Form W 2 with the SSA. Effective January 1, 2017, extensions of time to file Form W 2 with the SSA will no longer be automatic. 3. A discussion of the tax treatment and Form W 2 reporting of severance payments, or dismissal payments, made to an employee upon termination of employment has been added in this edition. 4. An alert has been added in this key issue regarding certain coverage provided under an expatriate health insurance plan not being subject to the Form W 2 reporting requirements. 5. This chapter includes an updated discussion on Form W 2 corrections attributable to providing benefits to same sex spouses in light of the recent Supreme Court decision in Obergefell v. Hodges. 1. Form 4419 was recently revised by the IRS. The changes to the revised IRS form are discussed in this edition. 1. Discussions throughout the chapter have been revised to include the latest guidance on FATCA compliance for Form 1099 reporting. 2. Clarification has been added to this key issue on the tax treatment and Form W 2 reporting of jury duty payments an employee receives from his or her employer. 3. An alert has been added to this key issue regarding the expiration of the exclusion for qualified charitable distributions from an IRA. Key Issue 20J Key Issue 20K Key Issue 21C Key Issue 24B Key Issue 24C Throughout chapter Key Issue 25A Key Issue 25B Key Issue 25I Key Issue 25J Key Issue 26C Throughout chapter Key Issue 27A Key Issue 27C 4
CHAPTER 28 Forms 1095 B (Health Coverage) and 1095 C (Employer Provided Health Insurance Offer and Coverage) 29 Form 8027 (Employer s Annual Information Return of Tip Income and Allocated Tips) 30 The Trust Fund Recovery Penalty 1. This key issue has been updated with the latest information reporting requirements for Forms 1095 B and 1094 B. 2. A discussion on how supplemental coverage under an HRA is reported by small employers has been added in this edition. 3. This key issue includes a discussion on IRS Notice 2015 68, which provides interim guidance on when an individual s date of birth can be used on Form 1095 B instead of his or her social security number. 4. A comprehensive example on completing Form 1095 B has been added in this update. 5. A discussion on correcting Form 1095 B has been included in this key issue. 6. This key issue has been updated with the latest information reporting requirements for Forms 1095 C and 1094 C. 7. Discussion on what qualifies as an offer of coverage to an employee, an employee s spouse, and dependents has been included. 8. Two comprehensive examples on completing Form 1095 C have been added in this update. 9. Guidance on the alternative reporting methods available for completing Forms 1095 C and 1094 C has been included. 10. Information on the affordability safe harbors that employers may use to report on the affordability of the health insurance coverage offered to employees has been included. 11. A key issue on correcting Forms 1095 C and 1094 C has been added in this edition. 1. An example and completed illustration have been added to show the allocation of tip income to employees using the hours worked method. 1. An alert has been added to inform practitioners of the Criminal Investigation Division s increased focus on employment tax cases. 2. The discussion on willfulness has been updated for a recent case where a responsible person s reliance on a co owner s past history of making delinquent tax payments was not an excuse for his failure to pay the taxes. 3. Letter 1153 notifies a responsible person of a proposed trust fund recovery penalty assessment. Information on several cases that deal with the proper execution of Letter 1153 has been added to this key issue. Key Issue 28A Key Issue 28A Key Issue 28A Key Issue 28B Key Issue 28B Key Issue 28C Key Issue 28C Key Issue 28D Key Issue 28F Key Issue 28F Key Issue 28G Key Issue 29E Key Issue 30A Key Issue 30B Key Issue 30D 5
31 Penalties 32 Garnishments, Levies, and Other Wage Attachments 33 International QRB IRS Rates and Allowances QRB Tax Law Tables and Summaries QRB Worksheets QRB Payroll and Information Forms 1. For returns due after 2014, certain tax penalties are adjusted annually for inflation. The penalty amounts in this chapter have been updated for the inflation adjustments. 2. This key issue has been updated for the revised list of private delivery services approved by the IRS and for guidance on determining the postmark date when these services are used. 3. Due to 2015 legislation, several information reporting penalties have increased. This edition has been updated for the increased amounts. 4. A discussion about a recent court case regarding an employer that failed to file Forms W 2 for two nonconsecutive years not being subject to an intentional disregard penalty has been added to this key issue. 5. A discussion about a Chief Counsel Advice that addresses the assessment of the preparer penalty for amended returns that are signed but not filed, or filed but not signed, has been added in this edition. 6. The Treasury Department has issued a final rule that exempts the preparer tax identification number (PTIN) records from certain provisions of the Privacy Act. Information about this rule has been included in this edition. 1. Additional information has been provided to explain how employers should handle multiple child support withholding orders. 1. Discussion of a court case addressing the source of earned income has been added to the section on foreign earned income. 2. This key issue includes clarification on payroll tax and withholding applicable to foreign students, scholars, teachers, and related individuals. Key Issues 31A, 31B, and 31G Key Issue 31A Key Issues 31B and 31C Key Issue 31B Key Issue 31G Key Issue 31G Key Issue 32D Key Issue 33B Key Issue 33E 1. All tables are updated to reflect the current amounts. Throughout QRB 1. All tables are updated for the latest IRS guidance. Throughout QRB 1. A new worksheet has been added to assist restaurant Worksheet 205 employers with the tip reporting and recordkeeping requirements. 1. All forms are updated to reflect the most recent version available when this Deskbook was published. Throughout QRB 6