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Issue Number:  2012-12

Inside This Issue

1. Proposed Regulations and FAQs Issued on Additional Medicare Tax
2. New on IRS.gov
3. FIRE system down until January
4. Employment tax reminders
5. Latest information on the VCSP
6. Technical guidance

A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status.

The threshold amounts are:

• $250,000 for married taxpayers who file jointly,
• $125,000 for married taxpayers who file separately, and
• $200,000 for all other taxpayers.

An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year.
The IRS and the Treasury Department have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS.

For additional information on the Additional Medicare Tax, see our questions and answers.

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• Corrected Pub. 509, Tax Calendars, includes two corrections to Table 2 on page 11, with regard to the semiweekly periods Apr 10-12 and Dec 28-31.
• Employers in Credit Reduction States Must Adjust their Unemployment Tax Liability on their 2012 Form 940 
• 2012 Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
• 2012 Inst. 940, Instructions for Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
• 2012 Form 940 (Schedule A), Multi-State Employer and Credit Reduction Information
• 2012 Form 940 (Schedule R), Allocation Schedule for Aggregate Form 940 Filers
• 2012 Form W-3, Transmittal of Wage and Tax Statements (Info Copy Only)
• 2012 Form W-3SS, Transmittal of Wage and Tax Statements (Info Copy Only)
• 2012 Form 1099-MISC, Miscellaneous Income (Info Copy Only)
• 2012 Inst. Form 1099-MISC, Miscellaneous Income
• 2012 Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530) (Info Copy Only)
• 2012 Inst. 1099-Q, Instructions for Form 1099-Q
• 2012 Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments (Info Copy Only)  
• Inst. Form 1099-H, Instructions for Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments

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The Filing Information Returns Electronically system is down for end of year changes and will not be available until Jan. 9. We apologize for any inconvenience.

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The Form 944 instructions have information for employers who want to opt in or opt out of filing the annual Form 944 vs. the quarterly Form 941.

The instructions also note that beginning with tax year 2012, employers who previously filed Form 944-SS or 944-PR will continue to file annually using Form 944.

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Two recent announcements have information about the revised Voluntary Classification Settlement Program for eligible taxpayers who agree to prospectively reclassify workers as employees.

• Announcement 2012-45, Voluntary Classification Settlement Program
• Announcement 2012-46, Voluntary Classification Settlement Program — Temporary Eligibility Expansion

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Update to Announcement 2012-25 - Extension of Time for Businesses to Comply with Rev. Rul. 2012-18 Regarding the Proper Treatment of Service Charges

Announcement 2012-50
    
This announcement extends the time for businesses to comply with the rules regarding proper treatment of service charges specified in Q&A 1 of Rev. Rul. 2012-18, 2012-26 I.R.B. 1032.  This extension is provided in order to allow businesses not currently in compliance additional time to modify their business practices and make needed system changes.

In a previously issued interim guidance memorandum (IGM), included as an attachment to Announcement 2012-25, 2012-26 I.R.B. 1054, the Internal Revenue Service (Service) provides administrative guidelines to examiners concerning Rev. Rul. 2012-18.  Specifically, the IGM instructs examiners to apply Q&A 1 of Rev. Rul. 2012-18, in limited circumstances, prospectively to amounts paid on or after January 1, 2013.  In Announcement 2012-25, the Service sought public comments regarding whether additional time was needed to ensure that systems are compliant.  Based on the comments received, the Service has determined that an extension to January 1, 2014, is appropriate.  An updated IGM will be issued to examiners informing them of the extension of time to January 1, 2014, with the extension to apply in the limited circumstances set forth in the IGM.

EFFECT ON OTHER DOCUMENTS

Announcement 2012-25 is amplified.

DRAFTING INFORMATION

The principal author of this announcement is Linda L. Conway-Hataloski of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt & Government Entities).  For questions regarding this announcement, contact Linda L. Conway-Hataloski at 202-622-0047 (not a toll-free call).

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