Federal Committee Report Offers Some Payroll Recommendations
The Information Reporting Program Advisory Committee (IRPAC) has released its recommendations on a wide range of tax administration issues, including some payroll-related items. A few of the recommendations are highlighted below.
TIN masking. IRPAC recommends that the IRS develop guidance to allow filers to not display the entire nine digit tax identification number (TIN) on Forms 1099, 1098, 5498 and W-2 that are sent to recipients. In order to move forward with this recommendation, IRPAC suggests the IRS take the following actions:
1. Work with the Social Security Association, tax filers, state agencies, and practitioners to come to agreed upon masking criteria.
2. Involve state agencies to understand the impact to their processes if the employee's Social Security number (SSN) is masked on information reporting tax returns.
3. Start to formulate outreach programs and media materials to fully inform the public of their responsibilities with respect to their SSNs and ensuring its accuracy in their tax filings.
4. Continue to look at other additional and alternative ways to assist with ramifications of identity theft and how the Service may be able to be more effective in combating the issue.
5. Work with IRPAC in a consultative role with the Privacy, Information Protection and Data Security office to help prioritize any other forms that could be placed under this guidance.
Tax treaties. A “decision tree” web link should be made available that would allow educational entities such as universities and school board districts, as well as state agencies, to follow a decision making process that would lead them to the correct tax withholding of income for a non-resident alien scholar. Since tax treaties cannot be substantively changed or altered, either quickly or easily, this recommendation works within existing laws to enhance compliance in an easy to use format. The IRS lead for this project is Lowell Hancock. Mr. Hancock believes that a decision tree can be provided and he is working on having one designed. Depending on actual implementation date, this issue may be a carry-over item to 2009 (though at this time it is not anticipated to be so). The addition of this tool on the web site will assist employers to easily navigate a complex issue to ensure compliance with non-resident alien scholars.
1099-R instructions. The reporting instructions for 1099-R Box 2a, Taxable Amount, and Box 2b, Taxable Amount not Determined, with respect to traditional and SEP IRA distributions lack clarity and appear conflicting which results in different Form1099-R reporting results by IRA custodians/trustees/issuers. IRPAC has requested the IRS to clarify the Form 1099-R reporting instructions for Boxes 2a and 2b without recommending specific completion instructions, and since clarity is the issue, have the IRS determine how the future instructions will be written.
Form 944. Make the 944 program voluntary instead of mandatory. Increase publication of the requirement clarifications made by IRS, including wording in Publication 15 and the instructions for Form 944. Allow new businesses to file Form 941 for the first two years of operation until a full look-back period is established. Clarify the instructions for Form SS-4, Application for Employer Identification Number, to address an online application process regarding the question in Box 14, “Do you expect your employment tax liability to be $1,000 or less in a full calendar year?” (A “yes” answer indicates that the taxpayer will be determined to be a Form 944 filer.) Provide an alternative mechanism for bulk filing of Form 944 electronically (other than XML) that is similar to the way the SSA allows online preparation and submission of Forms W-2, Wage and Tax Statement.
Form 941X. IRPAC recommends that the final version of the 941X and all other adjustment forms be released at least 6 months prior to the tax year for which they must be used to allow for programming and process changes. IRPAC also recommends that the IRS release the new XML scheme as soon as possible.
Form W-4 NR. Create a new Form W-4 NR that is specifically designed for the non-resident alien status. Reference to the new form can be placed on the existing Form W-4 where the instructions are currently located for non-resident aliens. The new form will contain all instructions that are currently housed in multiple locations that are not related to this form. An alternative would be to enhance current Form W-4 to more easily accommodate the non-resident alien status. This could be done through development of a specific instruction document for the non-resident alien employee or through better placement of the existing instructions through the use of an index in the existing Form 8233 instructions. IRPAC will carry over this issue for resolution in 2009.
Death payments. Eliminate the inconsistency between the instructions for Forms 1099-R and 1099-MISC by clarifying that payments to a death beneficiary from a nonqualified deferred compensation plan are wages and as such are reportable on Form 1099-MISC. The payments may also be reportable on Form W-2, in accordance with the instructions for Form W-2, if the payment is made in the calendar year of death.
Source: IRS News Release IR-124; 2008 IRPAC Report.
Reprinted with permission. © CCH
Federal Committee Report Offers Some Payroll Recommendations The Information Reporting Program Advisory Committee (IRPAC) has released its recommendations on a wide range of tax administration issues, including some payroll related items. A few of the recommendations are highlighted below. TIN