Transcript Internal Revenue Service Office of Federal, State and

Federal, State and Local
Government Specialist
Donna Richard
Internal Revenue Agent
512-499-5033
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Internal Revenue Service
State Agencies
County Governments
Federal Agencies
Municipal Governments
School Districts
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FSLG
FIELD OPERATIONS

FSLG Group (Area) Managers
– 8 Areas (Groups)
– 10 FSLG Specialists Per Group

FSLG Specialists
– About 80 FSLG Specialists Nationwide
– Each State has at least one Specialist
assigned to it
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OUTREACH AND AUDIT

Conferences

Compliance Checks

Examination
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HOT TOPICS
•Section 218 Agreements
•Required Federal Return Filings
•Fringe Benefits
•Worker Classification
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FSLG
HISTORICAL OVERVIEW

1951 Section 218 of the Social Security
Act Allowed State and Local
Governments to participate in Social
Security

1987 IRS Started Collecting FICA from
State and Local Governments
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REQUIRED FILINGS
Form 941
Form W-2
Form 1099
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Types of Payments/Services
Reported on the FORM
1099-MISC ( By Box)
Rents – Box 1
 Other Income – Box 3
 Backup Withholding (BWH)– Box 4
 Medical/Health Care Payments – Box 6
 Non-employee Compensation – Box 7
 Gross Proceeds to Attorneys – Box 14

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Information Needed From
Payee

Secure Form W-9
– Upfront when services contracted
– Put in Vendor File




Provides correct name/TIN combination
Provides information to determine whether payee
is subject to backup withholding or not
Provides perjury statement with signature
Limits risk and liability for government entity
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Who Does NOT Get 1099-MISC?


Employees
Corporations
Except: Attorneys or
Medical or Health Care Service Providers

Businesses that provide you with:
– Merchandise Inventory
– Equipment, supplies, parts only*
*Parts provided with services are reportable
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Who Does NOT Get Form
1099-MISC?
Contd….
Exempt Organizations IRC §501(c)(3)
 Governmental Entities

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Failure to Secure a Vendor’s Social Security
Number or Taxpayer Identification Number
May Subject Your Agency to
BACKUP WITHHOLDING.” (IRC 3406)
28%
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CP 2100 FROM IRS:

Notice tells Payer their responsibility for
backup withholding and could be subject
to civil penalties on the listed payees

Notice provides details of payees with:
– Missing TINs, and/or
– Incorrect Name/TINs, and/or
– Not currently-issued payee TINs
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Never assume an entity is
incorporated!
LC – Limited Company
LLC – Limited Liability Company
LP – Limited Partnership
LLP – Limited Liability Partnership
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FEDERAL STATE AND
LOCAL GOVERNMENTS
FRINGE BENEFITS
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WHAT IS A FRINGE
BENEFITS?

ANY PROPERTY, SERVICE OR
CASH (Other than Salary, Provided
by Employer)

TAXABLE UNLESS EXCLUDED
SPECIFICALLY BY LAW
– Example: Medical Premiums IRC
106
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TAXABLE FRINGE BENEFITS:
INCLUDE in Employee’s wages
and on W-2 (Never on 1099MISC)
 Subject to Federal Withholding,
Social Security and Medicare
 Even if benefit is received by/for
spouse or child of employee

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NON-TRAVEL FRINGE
BENEFITS:
Clothing/uniforms
 Cell phones
 Awards
 Bonuses

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AWARDS ARE TAXABLE
CASH PRIZES OR
AWARDS are always
taxable
 PERFORMANCE AWARDS
are always taxable
 NON-CASH:

– Use Fair Market Value
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AWARDS EXCEPTIONS:

Certain Awards transferred to Charities
– Pulitzer, Nobel Peace Prize

Certain Employee Achievement
Awards
– Length of Service, Safety - Not Cash

Nominal Holiday/Special Occasion
Awards
– Coffee mugs, plagues, etc.
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TRAVEL-RELATED FRINGE
BENEFITS:

Per Diem Allowances
– for lodging, meals and/or incidentals
– for business related travel
– while away from home
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MEAL ALLOWANCES WHILE
TRAVELING ON BUSINESS:

MEALS AWAY FROM HOME:
– OVERNIGHT

Accountable Plan - Not taxable
– NOT OVERNIGHT

Taxable as wages
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MEAL ALLOWANCES WHEN
NOT TRAVELING:

Meals with business meetings – NOT taxable if:
clear business setting
 directly related


Employer buys you lunch – Taxable as wages
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EMPLOYER-PROVIDED
VEHICLE:
HOW DOES EMPLOYEE
ACCOUNT FOR PERSONAL
USE?
 Personal Use is taxable
 Verified Business Use is not taxable
 Employee can reimburse Employer
for personal use

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VALUING PERSONAL USE THREE RULES:
Automobile Lease Valuation
Rule*
 Cents-Per-Mile Rule
 Commuting Rule

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Non-Taxable Fringe Benefits:
No additional cost service
 Qualified employee discounts
 Working condition fringe
 De minimis fringe
 Qualified transportation
expenses
 Qualified Moving Expense
Reimbursements

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REMEMBER:

If the benefit is taxable:
– Determine the Value of the benefit
– Include it in Wages and W-2
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Independent Contractor
vs.
Employee
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How do you make this
determination?
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Employee or Independent
Contractor?

Determine the Worker’s Status

Who has the right to control the worker?
– 3 Categories of Evidence
Behavioral Control
 Financial Control
 Relationship of the Parties

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Right to direct and control

The right to direct and control
the means and details of the work
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BEHAVIORAL
RELATIONSHP:

IF the firm provides instructions:
– on how to do the job,
– what hours to work, what days, etc. ,
– the worker is most likely an employee.
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FINANCIAL CONTROL:

If the firm provides an office,
– all office supplies, computer
– and other business equipment to the
worker,
– the worker is an employee.
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RELATIONSHIP OF THE
PARTIES:

If the firm provides benefits:
– health insurance, life insurance,
– retirement benefits, 40l(k) plan, 403(b)
– the worker is an employee.
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INDEPENDENT
CONTRACTOR




Offers services to public
Operates own business
Bills for services
Doesn’t have to personally perform
work
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COMMON
MISCONCEPTIONS:

EMPLOYEES CAN BE:
Part-time workers
 Temporary workers
 Probationary period
 Workers who say they are
Independent Contractors

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State Laws

Worker may be an employee for
Federal Law purposes and
an independent contractor for State
purposes,or vice versa.
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Dual Status Worker – 1 Entity


Employee
–
–
–
–
Independent
Contractor
– Janitorial Services
– Compensation on
Form 1099-MISC
Accountant
Wages on Form W-2
Withhold FITW
Withhold FICA
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Elected And Appointed
Officials

Examples of Elected and Appointed Officials
–
–
–
–
–
–
–
Mayor
City Attorney
Judge or Justice of the Peace
Building Inspector
Board Members
Road Commissioner
Animal Control Officer
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Elected And Appointed
Officials

Employee
–
–
–
–
–
Position established by law
Duties defined by statute
Performs duties as a public official
Responsible to the public
Paid out of governmental funds
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LOOK AT THE FACTS
No single fact provides the answer
 Weigh all of the evidence

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Sources Of Information





Publication 15, “Circular E, Employer’s Tax
Guide”
Publication 15-A, “Employer’s Supplemental Tax
Guide”
Publication 15-B, “Employer’s Tax Guide to Fringe
Benefits”
Publication 963, “Federal-State Reference Guide “,
Catalog #21843B
Taxable Fringe Benefit Guide (IRS.GOV)
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IRS CONTACTS:
IRS INFORMATION
1-800-829-1040
 CUSTOMER ACCOUNT
SERVICES
877-829-5500

1-
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QUESTIONS
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