The IRS conducted a webinar on Nov. 3, 2010, called “Common Employment Tax Issues.” The speakers on the webinar were Brian Griffin, IRS Employment Tax Manager, National Tip Reporting Compliance Program, and Rebecca Wilson, an attorney in the IRS Office of Chief Counsel. The webinar included a general overview of the following topics: (1) the employment tax national research project; (2) worker classification; (3) taxation of fringe benefits; (4) officer compensation; and (5) backup withholding.
The IRS is conducting employment tax examinations of 2,000 taxpayers each year for the next three years as part of the employment tax national research project (NRP). Any employment tax return may be selected for examination, including Forms 940, 941, 943, 944, 945, W-2, and amended returns in the 94X series.
The worker classification discussion included information on the IRS Classification Settlement Program under which employers being audited can get a reduced assessment if they agree to prospectively classify workers correctly.
The speakers reviewed the guidelines for valuing fringe benefits, as well as the rules for non-cash valuation and withholding. They also discussed cafeteria plans and nontaxable fringe benefits.
The speakers pointed out that corporate officers are considered to be employees under federal law. They reviewed the following important concepts: performance of substantial services, receipt of compensation, and payment of a reasonable wage.
The backup withholding tax rate will increase from 28% to 31% on Jan. 1, 2011, unless Congress enacts legislation to keep it at 28%.
The webinar will be archived and available for viewing within the next three weeks on the IRS's video portal at http://www.irsvideos.gov/.
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