The definition of wages for purposes of income tax withholding and for the Federal Insurance Contributions Act has often been a point of contention. The Supreme Court recently reversed an appellate decision and held that severance payments to employees who were involuntarily terminated were taxable wages for FICA purposes.
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Reporting & Filing Requirements
Help for Self-Employed Clients Who Owe Taxes They Cannot Pay
In tax practice, CPAs occasionally encounter self-employed clients who have difficulty keeping up with their quarterly estimated tax payments. The problem of making adequate estimated tax payments is particularly difficult for the self-employed because they generally do not have taxes withheld and remitted to the government, as do most employees with wages reported on Form W-2.
Severance Payments Subject to FICA Withholding
The Supreme Court, reversing a decision of the Sixth Circuit, held that severance payments to terminated employees are subject to FICA withholding.
Director Fees May Be Subject to Self-Employment Tax
The Tax Court in Blodgett, T.C. Memo. 2012-298, provided useful information to determine corporate directors’ income classification when the initial answer may be unclear.
Supreme Court Rules Severance Payments Are Subject to FICA
The Supreme Court held in an 8–0 decision that severance payments to terminated employees are taxable wages for FICA tax purposes.
0.9% Medicare Surtax Final Regulations Issued
Regulations contain guidance for employers and individuals on the implementation of the tax, including the requirement to file a return reporting the tax, the process for employers to make adjustments of underpayments and overpayments of the tax, and the processes for employers and employees to file claims for refund for an overpayment of the tax.
Delegating Authority Does Not Allow Taxpayer to Avoid Responsible Person Status
The Fourth Circuit held that a taxpayer who was chairman of the board and vice president of a company with actual authority over the company’s financial affairs could not avoid responsible person status by delegating her authority to control the company to her husband.
Withholding Rules for U.S. Citizens and Resident Aliens Working for a U.S. Employer in a Foreign Country
For income tax withholding purposes, the wages of U.S. citizens and resident aliens include all remuneration for services performed as an employee for an employer, regardless of whether the services are performed in the United States.
Heightened Emphasis on Worker Classification
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.
Final Rules Released on 0.9% Medicare Surtax
The IRS issued final regulations governing the 0.9% Medicare surtax. The regulations contain guidance for employers and individuals on the implementation of the tax.
Additional 0.9% Medicare Tax on Earned Income
Beginning in 2013, individuals must pay an additional 0.9% Medicare tax on earned income above certain thresholds.
Final Regs. on Indoor Tanning Tax
The IRS issued final regulations on the 10% excise tax that has been in effect for amounts paid for indoor tanning services since July 1, 2010.
Totalization Agreements: Taking Exception to Social Security
A totalization agreement is intended to eliminate dual social taxation and to provide additional benefit protection for workers who have worked in both the United States and another country.
Options for Compliance With Worker Classification Rules
Determining proper classification of workers, either as independent contractors or employees, can be subjective and a challenge for employers.
Indoor Tanning Tax Final Regulations Issued
The IRS issued final regulations on the 10% excise tax on amounts paid for indoor tanning services.
Off-Duty Officer Pay Is Subject to Self-Employment Tax
The applicability of self-employment tax to amounts paid to off-duty police officers continues to create questions for CPAs.
Employment Tax Liability of Third-Party Agents Subject of Prop. Regs.
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.
IRS Issues Guidance on 0.9% Additional Medicare Tax
The IRS issued proposed regulations concerning the 0.9% Medicare surtax, which took effect Jan. 1, 2013.
Tax Treatment When Employees Surrender Paid Time Off to Benefit Others
There are various types of PTO donation and leave-sharing programs, not all of which are disaster-related. The tax treatment to the donating employee differs based on the type of program.
IRS Issues Withholding Tables for American Taxpayer Relief Act
The IRS issued newly revised percentage withholding tables to implement the rates that will be in effect this year now that the American Taxpayer Relief Act has been enacted.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
