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Tax Blawg

Tax Talk for Tax Pros

Introduction

Welcome to TaxBlawg, a resource for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention. The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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Posts in Employment Tax.

The Quality Stores employment tax refund case was argued before the Supreme Court on January 14, 2014.  An explanation about the issue at stake can be found in prior Taxblawg.net postings.  Although the outcome of the case remains in doubt, the possibility of a taxpayer victory means that employers should start thinking about the need to satisfy an important prerequisite to qualify their claims for refund.

Employment (FICA) taxes have both an employer and an employee component. A taxpayer victory in Quality Stores will enable both employers and terminated employees to recover their ...

For companies that have implemented employee layoffs in the past several years and made severance payments to terminated employees, the prospect of eligibility for federal tax refunds for any FICA taxes withheld from such payments took another step forward with the Sixth Circuit’s January 4th denial of the government’s petition for rehearing en banc in United States v. Quality Stores (Civil No. 10-1563, 6th Cir. 2012).

The rehearing petition was filed after a government loss in September of last year in which the appellate court affirmed a lower court’s decision that ...

 
The American Jobs Act submitted to Congress this week calls for a temporary payroll tax cut and a temporary credit for increased payroll.  The specific tax breaks in the proposal include:
 

  • For 2012, the employee's portion of Social Security tax would be 3.1%; the employer's portion would also be 3.1%, up to the first $5 million of wages paid by the employer.  The tax on self-employed workers would be reduced to 6.2%.
  • From October 1, 2011 through December 31, 2012, the proposed bill would provide a payroll tax credit to offset the employer portion of Social Security tax due to wage increases ...
Categories: Employment Tax
The IRS allows employers that determine that they are not in compliance with various employment and income tax laws to step forward and be accountable by entering into an agreement with  the IRS.  Generally, the agreements are structured so that the taxpayer is better off than if the IRS had identified the issue on exam.   While this assists the IRS in improving compliance without using scarce resources to uncover noncompliance, a recent  report by the Treasury Inspector General for Tax Administration ( TIGTA  ) found that the program lacked controls resulting in ...
Categories: Employment Tax

Last, year the IRS requested public comment on the continuing need for the high-low method for substantiating under IRC section 274(d), lodging, meal and incidental expenses incurred in traveling away from home. The IRS received no comments.

On July 19, 2011, IRS Announcement 2011-42 indicated that the IRS intends to discontinue authorizing the high-low substantiation method.  The IRS will publish a revenue procedure providing the general rules and procedures for substantiating lodging, meals, and incidental expenses incurred in traveling away from home (omitting the ...

Categories: Employment Tax

IRS's Small Business/Self-Employed (SB/SE) Division has issued an internal memorandum which provides that the trust fund recovery penalty may be imposed against third-party payroll service providers as well as the employer. IRC section 6672 imposes the TFRP on any person who: 1) is responsible for collecting, accounting for, and paying over payroll taxes; and, 2) willfully fails to perform the function.  This is also known as the 100% penalty because it is equal to the amount of the tax that was no collected and paid.

This appears to represent a major policy change by the IRS, which ...

Categories: Employment Tax

In February 2010, the IRS began a study to estimate the tax gap for underreported employment taxes and determine compliance rates for business taxpayers, the first study of its kind since 1984.  The National Research Project intended to be a comprehensive review of 6,000 taxpayers over a three year period.  The goal was data collection to find ways to reduce noncompliance and chip away at the current $345 billion tax gap of which underreported employment taxes account for $54 billion, almost one-fifth of the total of underreported liability. 

On July 7, 2011, the Treasury ...

Categories: Employment Tax

Beginning July 1 2011, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect. Thus, the FUTA tax rate, before consideration of state unemployment tax credits, is now 6.0%.

Under Code Sec. 3301(1), the 0.2% FUTA surtax expired on June 30, 2011. The surtax was part of the 6.2% gross unemployment tax rate that employers paid on the first $7,000 of wages paid annually to each employee (6% permanent tax rate, 0.2% temporary surtax). The surtax has been in effect in every year since 1976, when it was enacted by Congress on a temporary basis. Since legislation has not been ...

Categories: Employment Tax

Anxious tax departments can rejoice!  By a 87-12 vote, the Senate passed legislation repealing the Form 1099 provision, which was included in health care reform.

Currently, Forms 1099 are required for payments of more than $600 to unincorporated service providers.  The health care reform bill expands this requirement for 2012 to goods as well as services and applies to all types of vendors.  Senate passage of the bill, which previously cleared the House, sends the bill to President Barack Obama for his signature.  Once signed into law, the additional information reporting ...

Categories: Employment Tax

On March 29, 2011, the IRS published Notice 2011-28 which provides interim guidance on informational reporting to employees of the cost of their employer-sponsored group health plan coverage. This informational reporting is required under § 6051(a)(14) of the Internal Revenue Code. This provision was enacted as part of the Affordable Care Act to provide useful and comparable consumer information to employees on the cost of their health care coverage. This reporting to employees is for their information only, to inform them of the cost of their health care coverage, and does not ...

Categories: Employment Tax