Professional employer organizations (PEOs) provide comprehensive payroll, benefits, and human resource outsourcing solutions to unrelated third-party employers. PEOs are often also referred to as employee leasing companies or "co-employers." The model for providing those services, which has been relatively consistent for many decades, may change significantly because of recent legislation that will bifurcate PEOs into two categories.
IRS Disagrees With Tax Court on Ability to Designate Employment Tax Payments as Income Tax Withholding
The IRS announced in that it will not follow a Tax Court holding that an employer may designate payments of its employment taxes to the income taxes of specific employees.
With the passage of the Patient Protection and Affordable Care Act, which provided for an increase in the Medicare tax rate for certain high earners who are members of the ERISA "top hat" group, and recent discussions about the status of Social Security and Medicare funding, it is appropriate to review the rules in Sec. 3121(v)(2) governing FICA taxation.
Final regulations contain rules on the liability for employment taxes when an employer designates an agent under a “service agreement” to pay its employees and to satisfy its employment tax obligations instead of following normal IRS procedures to designate an agent.
Worker classification has been a major concern for many years. While it is clear that government agencies recognize that worker misclassification is a significant problem, how to classify workers remains unclear.
Determining proper classification of workers, either as independent contractors or employees, can be subjective and a challenge for employers.
The IRS released proposed regulations under Sec. 3504 that would govern the liability for employment taxes when an employer designates an agent under a “service agreement” to pay its employees and to satisfy all employment tax obligations.
When a corporation fails to remit the withheld taxes to the government, the IRS looks through the corporation to the individual or individuals who are responsible for the failure.
A number of technical questions are involved in determining status as an employer for federal employment tax purposes when a foreign business sends individuals to work in the United States.
This article reviews the common law principles and authoritative guidance available to distinguish when workers are employees and the Section 530 safe-harbor provisions.