1 EMPLOYMENT TAX INITIATIVES Jody Stamback Sr. Stakeholder Liaison Small Business/Self-Employed Division December 9, 2010

2 National Research Program First employment tax NRP since 1984 Three years – 6,000 taxpayers Examinations began March 2010 Taxpayers chosen by random selection

3 NRP Objective Obtain data about trends for major categories: –Worker classification –Fringe benefits –Information reporting (Forms 1099) –Officer compensation

4 Backup Withholding Applies to Forms 1099 and reportable payments No TIN – immediate backup withholding TIN mismatch – payer action required Possible employer liability

5 Backup Withholding Pilot Findings Consequences of failure to backup withhold not generally understood Businesses may not understand CP2100 Notice IRS considering changes and/or improvements

6 Worker Classification Independent Contractors Employees

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8 Fringe Benefits Cash, property, or services in addition to regular wages Taxable unless specifically excluded by Internal Revenue Code Subject to withholding and Reportable on Form W-2 in year provided

9 Accountable Plans Payments under accountable plans excludable from wages Requirements –Business connection –Substantiation –Return of excess

10 Payroll Professionals Tax Center Employment tax forms and publications American Recovery and Reinvestment Act: payroll impact Retirement plan guidance - how to correct common errors Worker classification guidance IRS hotlines and toll-free numbers

11 Treasury Proposes Eliminating FTD Coupons Proposed Regulations issued 8/19/10 would eliminate paper coupons for federal tax deposits after 12/31/10 Electronic Federal Tax Payment System (EFTPS) is an alternative –Visit –Call

12 Tax Return Preparer For purposes of obtaining a preparer tax identification number (PTIN) only, a tax return preparer is any individual who is compensated for preparing, or assisting in the preparation of, all or substantially all of a federal tax return or claim for refund.

13 Target Implementation Timeline PTIN sign-up begins September 15 Testing available June 1 September 15 December January 31 Searchable database available PTIN revoked if competency test not passed PTIN renewals begin CE requirement begins - TBD

14 In preparation for the 2011 filing season: –If you file 100 or more individual or trust returns, are you enrolled and accepted to e-file? Do you have an Electronic Filing Identification Number?  If yes, file your customers’ returns electronically  If no, the first step is to enroll to participate in IRS e-file. Visit IRS.gov, and click on the e-file logo Preparer E-File Mandate