IRS issues guidance regarding the retroactive termination of the Employee Retention Credit; Businesses and government entities must report nonemployee compensation; Backup withholding; Who is an employee webinar; Firefighter Issues; De Minimis fringe benefits
Internal Revenue Service (IRS) sent this bulletin at 01/18/2022 04:11 PM EST
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IRS issues guidance regarding the retroactive termination of the Employee Retention Credit The Internal Revenue Service issued guidance for employers regarding the retroactive termination of the Employee Retention Credit. The Infrastructure Investment and Jobs Act, which was enacted on November 15, 2021, amended the law so the Employee Retention Credit applies only to wages paid before October 1, 2021, unless the employer is a recovery startup business. Notice 2021-65 applies to employers that paid wages after September 30, 2021 and received an advance payment of the Employee Retention Credit for those wages or reduced employment tax deposits in anticipation of the credit for the fourth quarter of 2021 but are now ineligible for the credit due to the change in the law. The notice also provides guidance regarding how the rules apply to recovery startup businesses during the fourth quarter of 2021. Businesses and government entities must report nonemployee compensation Businesses, including government entities and charities, which pay nonemployee compensation of $600 or more must use Form 1099-NEC, Nonemployee Compensation to report these payments to the IRS. Generally, payers must file Form 1099-NEC by January 31. For 2021 tax returns, there is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions. Backup withholding Backup withholding is the payer's requirement to withhold taxes from payments not otherwise subject to withholding. Nonemployee compensation may be subject to backup withholding if a payee has not provided a Taxpayer Identification Number (TIN) to the payer, or the IRS notifies the payer the TIN provided doesn’t match IRS records. The current backup withholding tax rate is 24%. A TIN can be one of the following numbers:
For more information, watch Backup Withholding on IRSvideos.gov. Who is an employee webinar is posted to IRS Video Portal Thank you to those who attended the live webinar in December, but if you missed it, the recording of the Who is an Employee Webinar will help you determine which workers you should treat as employees. Topics include:
Worker classification issues: Firefighters Tax laws generally apply to firefighters in the same manner as for other types of workers. If the work firefighters do is subject to the will and control of the payer, under the common-law rules, they’re employees for Federal tax purposes, even if you call them volunteers. The determination whether workers are common-law employees or independent contractors is made by applying the same standards used for other workers. See IRS Publication 15, Employer’s Tax Guide PDF, for more information on determining whether a worker is a common-law employee. Similarly, it doesn’t matter if the firefighter is full-time, part-time, or if they’re paid on a “call basis” monthly, hourly, etc. If a worker is a common-law employee, any amounts paid that are not exempt under a special provision are wages subject to withholding for Federal income tax, Social Security, and Medicare that are reported on Form W-2. It doesn’t matter what the payments are called if the worker is a common-law employee. Employers are responsible for withholding on these wages and filing Form 941. For more information, see Issues for Firefighters. De Minimis fringe benefits In determining if a benefit is de minimis, you should always consider its frequency and its value. The essential elements of a de minimis benefit are that it is occasional or unusual in frequency and is so small that accounting for it is unreasonable or impractical. It also must not be a form of disguised compensation. De minimis benefits are excluded under Internal Revenue Code Section 132(a)(4) and include items not specifically excluded under other sections of the Code. These items include:
Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount. For more Information see De Minimis Fringe Benefits. If you have a technical or procedural question relating to government entities, please visit IRS.gov/fslg. For employment tax and account related questions, call the Business and Specialty Tax Line at 800-829-4933. For guidance on the technical aspects for filing information returns through the Filing Information Return Electronically (FIRE) System call Technical Services Operation at 866-455-7438. |
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