The Federal, State and Local Governments News is a periodic newsletter with information for federal tax matters for all types of government entities.

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Recent Developments

Changes to guidance, law and procedures that affect federal, state and local governments.

Delinquent return notices are temporarily suspended (March 25, 2022)

The IRS is suspending the issuance of several notices generally mailed in case of a delinquent return. The suspended notice for FSL is CP217: Form 940 Not Required for Federal, State and Local Government Agencies. For the complete list, review the March 25, 2022 newsletter.


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2022

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IRS sends CP2100 and 2100A notices to help payers correct backup withholding errors

In April, the Internal Revenue Service sent CP2100 and CP2100A notices to financial institutions, businesses or payers who filed certain types of information returns that don't match IRS records. These notices are sent twice a year; an initial mailing in September and October and a second mailing in April of the following year.  CP2100 and CP2100A notices inform payers the information return is missing a Taxpayer Identification Number (TIN), has an incorrect name or a combination of both. For more information see IR-2022-87, April 15, 2022.

For additional resources on backup withholding:

Backup Withholding Video
Learn how to respond to the CP2100 and 2100A notices timely.

Backup Withholding
Learn what payments are subject to backup withholding.

Taxpayer Identification Number (TIN) On-Line Matching
Use the TIN Matching program to match your 1099 payee information against IRS records prior to filing information returns.

TIN Matching Program Video
Watch the video to avoid penalties and expenses from filing invalid Forms 1099.

Form 945, Annual Return of Withheld Federal Income Tax
Use this form to report withheld federal income tax from nonpayroll payments. Nonpayroll payments include backup withholding.

Visit Federal, State and Local Governments Website

Find tax information and resources for government entities, including tax withholding requirements, information returns and e-services, Taxpayer Identification Number (TIN) matching and employee benefits.

Visit FSLG homepage

Section 218 and Retirement Systems Basics: Videos

This four-video series helps government entities correct or prevent payroll errors related to their unique participation in Social Security and Medicare coverage.

Watch the videos

Government Employees SS and Medicare Coverage
Determine if a position is covered by a Section 218 Agreement.

IRS Suspends Mailing

The IRS is suspending the issuance of several notices generally mailed to tax-exempt or governmental entities in case of a delinquent return. Due to the historic pandemic, the IRS hasn’t yet processed several million returns filed by individuals and entities. The suspension of the notices will help avoid confusion when a filing is still in process.

The IRS will continue to assess the inventory of pending returns to determine the appropriate time to resume mailing these notices. Some taxpayers and tax professionals may still receive the notices during the next few weeks. Generally, there is no need to call or respond to the notices as long as the return was filed timely. 

The suspended notices are:

Number Name
CP214 Reminder Notice About Your Form 5500-EZ or 5500-SF Filing Requirement
CP217 Form 940 Not Required – Federal, State, and Local Government Agencies
CP259A First Taxpayer Delinquency Investigation Notice – Form 990/990EZ/990N
CP259B First Taxpayer Delinquency Investigation Notice – Form 990PF
CP259D First Taxpayer Delinquency Investigation Notice – Form 990T
CP259F First Taxpayer Delinquency Investigation Notice – Form 5227
CP259G First Taxpayer Delinquency Investigation Notice – Form 1120-POL
CP259H First Taxpayer Delinquency Investigation Notice – Form 990/990EZ
CP403 First Delinquency Notice – Form 5500 or 5500-SF
CP406 Second Delinquency Notice – Form 5500

When to use Forms 1099-MISC and NEC Video

Watch the new video, When to use Forms 1099-MISC and NEC, to know when to use Form 1099-MISC, Miscellaneous Information and Form 1099-NEC, Nonemployee Compensation. The video covers the 2021 updates to both forms. This video and others are available on IRSvideos.gov.

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 2021-65PDF 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:

  • Social Security Number
  • Employer identification
  • Individual taxpayer identification
  • Adoption taxpayer identification

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:

  • Common law employees
  • Statutory employees
  • Section 218 agreement for government entities
  • Form SS-8

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 GuidePDF, 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:

  • Controlled, occasional employee use of photocopier
  • Occasional snacks, coffee, doughnuts, etc.
  • Occasional tickets for entertainment events
  • Holiday gifts
  • Occasional meal money or transportation expense for working overtime
  • Group-term life insurance for employee, spouse or dependent with face value not more than $2,000
  • Flowers, fruit, books, etc., provided under special circumstances
  • Personal use of a cell phone provided by an employer primarily for business purposes

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.

2021

Webinar: Who is an Employee?

The IRS is inviting you to attend our live webinar, Who is an Employee?, on December 16, 2021, at 1:00 ET. Register for this free webinar presented by the IRS Office of Federal, State and Local Governments.

Information in this webinar will help you determine which workers you should treat as employees.

Topics include:

  • Common law employees
  • Statutory employees
  • Section 218 agreement for government entities
  • Form SS-8

Webinar: Reconciliation of Payroll

The Office of Federal, State and Local Governments invites you to watch the Reconciliation of Payroll webinar (recorded October 14, 2021) on IRSvideos.gov.

This webinar discusses when you should reconcile your payroll and which payroll amounts to use. It also explains how to reconcile gross payroll to taxable income for federal income tax and FICA.

Reconciliation of Payroll Webinar

You are invited to register for a free webinar on Payroll Reconciliation hosted by the Office of Federal, State and Local Governments on October 14, 2021 at 2:00 PM (ET). This webinar will cover when your payroll should be reconciled and what payroll amounts to use. It will also explain reconciling gross payroll to taxable income for federal income tax and FICA.

Visit Federal, State and Local Governments Redesigned Website

The IRS Office of Federal, State and Local Governments announces the new design and layout of the Tax information for Federal, State and Local Governments Website. The website is an important tax resource providing valuable information and resources for government entities.

Visit the homepage at irs.gov/fslg to view the redesigned site.

Reconciliation of Payroll Webinar

You are invited to register for a free webinar on Payroll Reconciliation hosted by the Office of Federal, State and Local Government on October 14, 2021 at 2 p.m. (ET). This webinar will cover when your payroll should be reconciled and what payroll amounts to use. It will also explain reconciling gross payroll to taxable income for federal income tax and FICA.

Tax Credits for Paid Leave Under the American Rescue Plan Act of 2021 for Leave After March 31, 2021

The American Rescue Plan Act of 2021 (ARP) allows small and midsize employers, and certain governmental employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations.

The ARP tax credits are available to eligible employers that pay sick and family leave for leave from April 1, 2021, through September 30, 2021. For more on these ARP tax credits, see the fact sheet and related FAQs.

FIRE System Update Coming September 2021

Any filer, including corporations, partnerships, employers, estates or trusts who files 250 or more Forms 1097, 1042-S, 1098, 1099, 3921, 3922, 5498, 8027, 8955-SSA or W-2G for any calendar year must file their information returns electronically using Filing Information Returns Electronically (FIRE) System. FIRE is the online tool used to transmit information returns and automatic extension requests to the IRS. Before filers can use FIRE, they must complete an online application to obtain a 5-digit alphanumeric code known as a Transmitter Control Code (TCC). Currently, Form 4419 is used to request a TCC.

A new online application, Information Returns (IR) Application for Transmitter Control Code, is scheduled to deploy on September 26, 2021 and will replace Form 4419. The new application will be available on the FIRE page. For more information on FIRE changes, see FIRE System Update: Improving the Process and Security for Information Return (IR) Application for Transmitter Control Code (TCC).

EIN Holders Must Update Any Change to Responsible Party

The IRS is urging those entities with Employer Identification Numbers (EINs) to update their applications if there has been a change in the responsible party or contact information.

IRS regulations require EIN holders to update responsible party information within 60 days of any change by filing Form 8822-B, Change of Address or Responsible Party - Business. It is critical that the IRS have accurate information in cases of identity theft or other fraud issues related to EINs or business accounts.

For more information see IR-2021-161, July 30, 2021.

Find Us on Social Media

The IRS uses social media to share federal, state and local government information. This includes tax changes, scam alerts, initiatives, tax products and services, and more.

IRS social media resources include:

Subscribe to the platform that best fits your needs.

Election Workers Webinar

The Tax Exempt and Government Entities Division would like to invite you to register to watch the free webinar on Reporting Election Workers Earnings on June 24, 2021 at 1:00 p.m. (ET). This webinar explains which workers should be treated as election workers and when taxes should be withheld from wages. It will also cover what should be included in earnings.

For more information, see Webinars for Tax Exempt & Government Entities.

Submit Forms 2848 and 8821 Online

Did you know you can now electronically sign third-party authorization Form 2848, Power of Attorney, and Form 8821, Tax Information Authorization?

With the new tool,  Submit Forms 2848 and 8821 Online , tax professionals can now upload the forms directly to the IRS.

For details, see IRS News Release or Fact Sheet 2021-1.

Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers

The Tax Exempt and Government Entities Division would like to alert businesses and payroll service providers to a new email scam. This email scam uses a corporate officer's name to request employee Forms W-2 from company payroll or human resources departments. The email is sent to an employee in the payroll or human resources departments requesting a list of all employees and their Forms W-2. See the full article; Form W-2/SSN Date Theft: Information for Businesses and Payroll Services Providers, for steps to take in contacting the IRS if businesses and payroll service professionals received the email and/or lost data to this scam.

Worker Classification (Independent Contractors vs. Employees)

Are your payees independent contractors or are they employees? Before you can determine how to treat payments for services, you must first know the business relationship between you and the person performing the services.

For more information, see Worker Classification Video or Independent Contractor (Self-Employed) or Employee?

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The IRS uses social media to share federal, state and local government information. This includes tax changes, scam alerts, initiatives, tax products and services, and more.

IRS social media resources include:

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The Tax Exempt and Government Entities Division would like to invite you to register to watch the free webinar on Reporting Election Workers Earnings on June 24, 2021 at 1:00 p.m. (ET).

This webinar is designed to explain which workers should be treated as election workers and when taxes should be withheld from wages. It will also cover what should be included in earnings.

Questions emailed to: mailto: TEGE.outreach@IRS.gov with the subject line “Pre-submitted questions for Election Worker webinar (June 24)” will be answered as time permits. The deadline for submitting questions is June 10, 2021. 

For more information, see Webinars for Tax Exempt & Government Entities.

Live Webinar on Election Workers on June 24
 
The Tax Exempt and Government Entities Division would like to invite you to register to watch the free webinar on Reporting Election Workers Earnings on June 24, 2021 at 1:00 p.m. (ET).

This webinar is designed to explain which workers should be treated as election workers and when taxes should be withheld from wages. It will also cover what should be included in earnings.

Questions emailed to: mailto: TEGE.outreach@IRS.gov with the subject line “Pre-submitted questions for Election Worker webinar (June 24)” will be answered as time permits. The deadline for submitting questions is June 10, 2021.
 
For more information, see Webinars for Tax Exempt & Government Entities.

The Tax Exempt and Government Entities Division invites you to register for the free Taxable Fringe Benefit Essentials for Employers Webinar on April 14, 2021 at 1:00 p.m. (ET).
 
This webinar is designed to explain what a fringe benefit is and how to value a fringe benefit. It will cover the most common fringe benefits and explain if those fringe benefits are taxable.
 
For more information, see Webinars for Tax Exempt & Government Entities.

Taxable Fringe Benefit Essentials for Employers Webinar

The Tax Exempt and Government Entities Division would like to invite you to register to watch the free Taxable Fringe Benefit Essentials for Employers Webinar on April 14, 2021 at 1 p.m. (ET).

This webinar is designed to explain what a fringe benefit is and how to value a fringe benefit. It will cover the most common fringe benefits and explain if those fringe benefits are taxable.

For more information, see Webinars for Tax Exempt & Government Entities.

Redesigned Form W-4

The 2020 Form W-4 was redesigned to reduce the form's complexity and to increase transparency and accuracy in the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.

Who must furnish a new Form W-4?

  • All new employees first paid after 2019 must use the redesigned form.
  • Existing employees who want to adjust their withholding.
  • Existing employees that claim to be exempt from federal income tax withholding.

For additional information about Form W-4, see the links below:

What’s New with Fringe Benefits

The business mileage rate for 2021 is 56 cents per mile down from 57.5 cents in 2020. You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee.

For more information on Fringe Benefits, if they are taxable and how they should be reported, see the links below:

403(b) Contribution Limits

The limit on elective salary deferrals has not changed for 2021. The amount an employee can contribute to a 403(b) account out of salary is $19,500 for 2020 and 2021.

Age 50 catch-up: A plan may permit employees who are age 50 or over at the end of the calendar year to make additional salary deferrals of $6,500 in 2020 and 2021.

15-years of service catch-up: A 403(b) plan may permit employees who have at least 15 years of service with the same eligible 403(b) employer (a public school system, hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization)), to make additional salary deferrals equal to the lesser of:

  • $3,000,
  • $15,000, reduced by the amount of additional elective deferrals made in prior years because of this rule, or
  • $5,000 times the number of the employee’s years of service for the organization, minus the total elective deferrals made for earlier years.

For employees eligible for both the age 50 and 15-years of service catch-ups, salary deferrals in excess of the deferral limit ($19,500 in 2020 and 2021) are first applied to the 15-year catch-up and then the age 50 catch-up.

For more information about 403(b) contributions limits, see the links below:

Find Us on Social Media
The IRS uses social media to share federal, state, and local government information. This includes tax changes, scam alerts, initiatives, tax products and services, and more.
IRS social media resources include:

Subscribe to the platform that best fits your needs.

Taxable Fringe Benefit Essentials for Employers Webinar

The Tax Exempt and Government Entities Division would like to invite you to register to watch the free Taxable Fringe Benefit Essentials for Employers Webinar on April 14, 2021 at 1:00 p.m. (ET).

This webinar is designed to explain what a fringe benefit is and how to value a fringe benefit. It will cover the most common fringe benefits and explain if those fringe benefits are taxable.

For more information, see Webinars for Tax Exempt & Government Entities.

Find Us on Social Media
The IRS uses social media to share federal, state, and local government information. This includes tax changes, scam alerts, initiatives, tax products and services, and more.
IRS social media resources include:

Subscribe to the platform that best fits your needs.

Who is entitled to Covid‐19 Relief Credits?

The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided two new employer tax credits:

  • Sick and Family Leave Credit
  • Employee Retention Credit.

As a reminder, federal, state and local government entities, and any agencies or instrumentalities of those entities, are not entitled to either of these credits. However, tribal governments may be eligible to claim both the Sick and Family Leave Credit and the Employee Retention Credit. For more information on eligible employers, see:

If a Form 941, Employer's Quarterly Federal Tax Return, claiming either of these credits has been filed by or on behalf of a federal, state or local government entity, or any agency or instrumentality of a government entity, the claimed credits will be disallowed and result in a balance due tax liability.

The following information provides more details on the credits:

Thank You for Attending the Form 1099-NEC Awareness Day Event

The IRS Tax Exempt and Government Entities Division and the Office of Indian Tribal Governments thanks the over 5,000 participants who attended the Form 1099-NEC Awareness Day Zoom meetings January 12, 14 and 21, 2021.

These meetings provided an overview of the Form 1099-Non-Employee Compensation (NEC) and reporting requirements for the 2021 filing season.

Check out these links to resources discussed during the presentations:

Online Tools and Resources:

Educators can now deduct out-of-pocket expenses for COVID-19 protective items

Eligible educators can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of COVID-19 in the classroom. COVID-19 protective items include, but are not limited to: 

  • face masks;
  • disinfectant for use against COVID-19;
  • hand soap;
  • hand sanitizer;
  • disposable gloves;
  • tape, paint or chalk to guide social distancing;
  • physical barriers (for example, clear plexiglass);
  • air purifiers; and
  • other items recommended by the Centers for Disease Control and Prevention (CDC) to be used for the prevention of the spread of COVID-19.

Rev. Proc. 2021-15PDF provides guidance related to educators and their expenses under the COVID-related Tax Relief Act of 2020, which was enacted as part of the Consolidated Appropriations Act, 2021. The new law clarifies that unreimbursed expenses paid or incurred after March 12, 2020, by eligible educators for protective items used to stop the spread of COVID-19 in the classroom qualify for the educator expense deduction.

The educator expense deduction rules permit eligible educators to deduct up to $250 of qualifying expenses per year ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each).

Eligible educators include any individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

This deduction is for expenses paid or incurred during the tax year. Taxpayers claim the deduction on Form 1040, Form 1040-SR or Form 1040-NR (attached Schedule 1 (Form 1040)).

Find Us On Social Media

The IRS uses social media to share federal, state and local government information. This includes tax changes, scam alerts, initiatives, tax products and services, and more.

IRS social media resources include:

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The Tax Exempt and Government Entities Division (TEGE) invites you to join us for a free Zoom awareness meeting on either January 12, 2021 or January 14, 2021. 

This meeting is designed to help governmental entities understand the new Form 1099-NEC (Non-Employee Compensation) reporting requirements for the 2020 filing season.  Each session is limited to the first 950 participants. 

Dates and Times:
Several dates and times offered to maximize the reach of the event.

Tuesday January 12, 2021

Thursday January 14, 2021

Participants may also join via voice call using the following information:

Dial by your location and input the meeting ID when prompted:

 

2020

Reporting nonemployee compensation and backup withholding

The IRS reminds employers that starting in tax year 2020, payers must complete the new Form 1099-NEC, Nonemployee Compensation, to report any payment of $600 or more to a payee.

Generally, payers must file Form 1099-NEC by January 31. For 2020 tax returns, the due date is February 1, 2021. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Also, nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the IRS notifies the payer that the TIN provided was incorrect.

Guidance on reporting qualified sick and family leave wages paid

The IRS provided guidance in Notice 2020-54PDF to employers requiring them to report the amount of qualified sick and family leave wages paid to employees under the Families First Coronavirus Response Act (FFCRA) on Form W-2.

The Notice also provides employers with optional language to use in the Form W-2 instructions for employees.

Additional information about tax relief for those affected by the COVID-19 pandemic can be found on IRS.gov.

Do you hire election workers?

Each election year, thousands of state and local government entities hire workers to conduct primary and general elections. Compensation paid to election workers is income and may be subject to taxes and reporting requirements.

Election Workers: Reporting and Withholding will help you understand their unique reporting and withholding requirements and which election workers may be covered by a Section 218 Agreement.

Deposit Requirements for Employment Taxes, Notice 931

Before the beginning of each calendar year, you must determine if you should use a monthly or semiweekly deposit schedule for employment taxes. The deposit schedule you must use is based on the total tax liability you reported during a lookback period. Your deposit schedule isn't determined by how often you pay your employees or make deposits.

Instead of making deposits during the current quarter, you can pay your total Form 941 tax liability when you timely file Form 941 if:

  1. Your total Form 941 tax liability for either the current quarter or the preceding quarter is less than $2,500, and 
  2. You don't incur a $100,000 next-day deposit obligation during the current quarter.

Refer to Notice 931PDF for deposit requirements and more information about the lookback period for calendar year 2021.

Check out Filing and Paying to find additional information on paying and depositing your employment taxes.

The IRS Tax Exempt and Government Entities Division invites you to view the Worker Classification webinar (recorded October 7, 2020) on IRSvideos.gov.
 
This webinar is designed to help government and private sector entities determine whether a worker is an employee or independent contractor. It will also cover Form SS-8, Classification Settlement Agreements and what to do if an individual is an employee.

Webinars on IRSvideos

Check out this presentation on payroll reporting.

       Learn about reconciling your payroll to eliminate discrepancies and reduce the number of W-2C’s filed.

Find these presentations and more on IRSvideos.gov.

Reminder:  Worker Classification Webinar on October 7
The Tax Exempt and Government Entities Division invites you to register for the free Worker Classification Webinar on October 7, 2020 at 1:00 p.m. (ET).
This webinar is designed to help government and private sector entities understand the definition of an employee and determine whether a worker is an employee or independent contractor. It will also cover Form SS-8, Classification Settlement Agreements and what to do if an individual is an employee.

Questions emailed to: TEGE.outreach@IRS.gov with the subject line “Pre-submitted questions for the Workers Classification webinar (October 7)” will be answered as time permits.  For further details, see Webinars for Tax Exempt & Government Entities.
 

Reminder: Worker Classification Webinar on October 7
The Tax Exempt and Government Entities Division invites you to register for the free Worker Classification Webinar on October 7, 2020 at 1:00 p.m. (ET).

This webinar is designed to help government and private sector entities understand the definition of an employee and determine whether a worker is an employee or independent contractor. It will also cover Form SS-8, Classification Settlement Agreements and what to do if an individual is an employee.

Questions emailed to: TEGE.outreach@IRS.gov with the subject line “Pre-submitted questions for the Workers Classification webinar (October 7)” will be answered as time permits. For further details, see Webinars for Tax Exempt & Government Entities.

Application Deadline for TEGE Commissioner Extended to October 9
The IRS has extended the application deadline for the Tax Exempt and Government Entities Division Commissioner position until October 9, 2020. The IRS encourages interested applicants to visit USAjobs.gov for full details.

For a complete application, applicants need to include the following documents:

  • Resume
  • Separate document for Executive Core Qualifications (ECQ) narrative
  • Separate document for Technical Competencies (TC) narrative
  • SF-50 for current or former federal employees
    • If a current or former Senior Executive Service (SES) employee, SF-50 should indicate your SES status

Additional details are available on USAJobs.gov, including more information for current and former federal Senior Executives interested in applying.

Worker Classification Webinar

The Tax Exempt and Government Entities Division would like to invite you to register to watch the free Worker Classification Webinar on October 7, 2020 at 1:00 p.m. (ET).
This webinar is designed to help government and private sector entities understand the definition of an employee and determine whether a worker is an employee or independent contractor. It will also cover Form SS-8, Classification Settlement Agreements and what to do if an individual is an employee.

Questions emailed to: TEGE.outreach@IRS.gov with the subject line “Pre-submitted questions for the Workers Classification webinar (October 7)” will be answered as time permits.

For further details, see Webinars for Tax Exempt & Government Entities.

September 17 deadline approaching to apply for TE/GE Commissioner

With the Sept. 17 application deadline approaching, the IRS is seeking qualified candidates to serve as the commissioner of the Tax Exempt and Government Entities division. One of the four business operating divisions, TE/GE serves a diverse population of entities that include small local community organizations, major universities and philanthropic organizations, hospitals, large pension funds, small business retirement plans, local and state government, participants in complex tax-exempt bond transactions, and Indian tribal governments and tribal associations. This Senior Executive Service position involves working closely with the IRS’s top leadership and, in turn, providing executive leadership and direction to a nationwide staff of executives and managers to continue supporting creative and innovative solutions to the challenges facing the IRS as it deals with TE/GE’s important stakeholders. 

The open position follows the August announcement by Tammy Ripperda, the current TE/GE commissioner, that she plans to retire from the government at the end of September following 32 years of public service. During her career, Tammy has been at the forefront of many improvement initiatives for the IRS’s tax enforcement functions. In her numerous executive positions, she has served in three of the IRS’s four operating divisions.
For more information and how to apply, see the posting on USAJOBS.gov. The application period for this Senior Executive Service position runs through Sept. 17, 2020. All qualified candidates are encouraged to apply.

IRS Letter 2800C and Employer Federal Income Tax Withholding

IRS sends Letter 2800C, also called a “lock-in” letter, to instruct employers to follow a specific federal income tax withholding arrangement for an employee who doesn’t have enough income taxes withheld from their wages. The employee has 60 days from the date of the letter to discuss the determination with the IRS before the withholding arrangement takes effect. Starting 60 days after the date of the letter, the withholding rate in Letter 2800C is locked in and the employer must begin withholding from the employee at that new rate.

There are two situations in which the employer may withhold at a rate that is different from the rate in Letter 2800C. The first occurs if the employee submits a new Form W-4 with a statement supporting a decrease in their withholding rate and the IRS approves. In this situation, the IRS will inform the employer and the employee with a Letter 2808C. Letter 2808C specifies the changes to the employee’s withholding rate that have been approved by the IRS. The changes in Letter 2808C are effective immediately. There is no 60-day waiting period.

The second situation involves increasing the rate of withholding above what is stated in the “lock-in” letter. This situation occurs if the employee submits a new Form W-4 that results in more withholding than the rate in the “lock-in” letter. In this situation, the employer may accept and process the employee’s request. The employer must disregard any new Form W-4 the employee submits that decreases the amount of withholding. Employers should block the employee’s access to make changes to online Forms W-4 if that access may allow the employee to decrease their withholding below the rate specified in a Letter 2800C.
Employers that do not withhold federal income tax from their employee as instructed by a “lock-in” letter will be liable for paying the additional tax required to be withheld.

You can find more information at Withholding Compliance Q&As and view our Lock-In Letter Video.

Revised Form W-4 and new Income Tax Withholding Assistant for Employers

The Internal Revenue Service has revised Form W-4 and launched two new online tools:

  1. The Income Tax Withholding Assistant for Employers is a spreadsheet-based tool designed to help employers, especially small businesses, easily transition to the redesigned withholding system (no longer based on withholding allowances), which went into effect on Jan. 1. IRS has posted a webinar, Understanding the 2020 Form W-4 and How to Use it to Calculate Withholding (video, 1:10:42), to the IRS video portal.
  2. A new and improved Tax Withholding Estimator that incorporates the changes from the redesigned Form W-4, Employee’s Withholding Certificate, that employees can fill out and give to their employers this year. The IRS urges everyone to see if they need to adjust their withholding by using the Tax Withholding Estimator to perform a Paycheck Checkup. Watch our video (2:00) on the IRS Tax Withholding Estimator.

New filing addresses for Form 941, employer’s quarterly federal tax returns

The addresses for where to file paper Form 941 tax returns have changed. The IRS recommends checking any pre-printed envelopes used to mail business returns to ensure the correct address and avoid delays. Or, you may file and pay electronically for the quickest processing.

Recent IRS News Releases

  • IRS recommends business owners e-file payroll tax returns
  • IRS provides tax inflation adjustments for tax year 2020
  • Feb. 20 IRS webinar focuses on gig economy
  • IRS urges tax professionals, taxpayers to protect tax software accounts with multi-factor authentication

Issue snapshot

IRS videos

IRS launches Taxpayer First Act webpage and email account 

The Taxpayer First Act of 2019 expands and strengthens taxpayer rights. The Act also requires the agency to develop a comprehensive customer service strategy, modernize its technology and enhance its cyber security. The IRS is requesting commentary from taxpayers, including those in the small business and self-employed industries. Those interested in providing feedback on reorganization or other components of the TFA are encouraged to send it to TFAO@irs.gov. For more information about the TFA, visit IRS.gov/taxpayer-first-act.

2019

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Cost-of-Living Adjustments

The IRS released the 2020 COLA limits for retirement plans and IRAs. See which contribution, deferral and compensation limits have increased for 2020. You may also want to review the tax year 2020 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

CP 2100 Notices

The IRS will issue a CP2100 or CP2100A Notice if the payee’s name and Taxpayer Identification Number (TIN) on the information return filed does not match IRS records. This notice informs payers they may be responsible for beginning backup withholding, if they haven’t already done so. Publication 1281, Backup Withholding on Missing and Incorrect Name/TIN(s)PDF, contains all the information payers need to comply with backup withholding requirements.

These resources will help you avoid receiving a CP2100:

Do you hire election workers?

Each election year, thousands of state and local government entities hire workers to conduct primary and general elections. Compensation paid to election workers is income and may be subject to income tax and FICA taxes as well as reporting requirements.

Election Workers: Reporting and Withholding will help you understand their unique reporting and withholding requirements and which election workers may be covered by a Section 218 Agreement.

Taxpayer Identification Matching (TIN) Tools

Learn about: The online TIN Matching Program and the Social Security Number Verification Service

Have questions on whether government entities need a tax-exempt number or a determination letter?

Our Government Information Letter webpage and video can answer:

  • How can you prove your “tax-exempt” status as a government entity?
  • Why don’t government entities require a determination letter from the IRS to secure tax-exempt status?
  • What does it mean to be a dual-status entity?  

How do I know if someone I hire is an employee or an independent contractor?

Government employers have unique employment tax classification issues. Worker classification can be difficult but our Employer and Pay Related Issues webpages and TE/GE Worker Classification: Employee or Independent Contractor? video will help you by answering common questions. You can also find links to IRS payroll forms and publications that include information specific to government entities in the Public Employer's Toolkit.

IRS Nationwide Tax Forums Offer More than Continuing Education

Educational seminars are just one benefit you get when you attend the 2019 IRS Nationwide Tax Forums. Others include the Case Resolution Program, opportunities to talk with IRS subject matter experts, workshops, and networking opportunities with your colleagues. Register now at www.irstaxforum.com.

Paycheck Checkup

Please help IRS spread the word that following major tax law changes, workers should review their withholding to make sure they have the right amount of tax taken out of their paychecks.

Tax Information for Federal, State and Local Governments

On IRS.gov/fslg, you’ll find information for government employers on getting started, information returns, the filing process, employment tax due dates and information return penalties.

Watch the videos on the IRS Video Portal for more information on how federal, state and local government employers can meet their tax compliance requirements.

Taxpayer Identification Number (TIN) Matching Tools

Read about the TIN Matching tools you can use to check the TIN furnished by the payee against the name/TIN combination in the IRS database before filing Forms 1099 and W-2. See Publication 2108-A, On-Line Taxpayer Identification Number (TIN) Matching ProgramPDF.

Tax Cuts and Jobs Act

Learn more about the provisions of the Tax Cuts and Jobs Act that affect federal, state and local government employers at IRS.gov/taxreform.

TE/GE Fiscal Year 2019 Program Letter

The 2019 Program LetterPDF shares where we are heading in the new fiscal year, including executing compliance strategies, building better processes, and providing useful information and guidance on the Tax Cuts and Jobs Act.

TE/GE Fiscal Year 2018 Accomplishments Letter

The Accomplishments LetterPDF lists each TE/GE functions’ accomplishments under our compliance program.

Be prepared to validate your identity if contacting the IRS

Taxpayers and tax professionals will be asked to verify their identities if they call the IRS; having the right information can save you time.

The Dirty Dozen represents the worst of the worst tax scams

Compiled annually, the “Dirty Dozen" lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes.

TE/GE job announcements

The IRS/Department of Treasury has announced revenue agent (GS 05-11) openings in multiple locations for both Exempt Organizations and Employee Plans. These announcements are open on USAJOBS until January 29, 2020. Apply today to become part of our team.

2018

Election Workers: Reporting and Withholding

Each election year, state and local government entities hire temporary workers to conduct primary and general elections. Election workers are subject to unique reporting and withholding requirements and may be covered by a Section 218 Agreement.

IRS Videos

Watch the latest presentations made for federal, state and local governments.

  • Why File Form 1099-MISC – Learn about the basic filing requirements for reporting payments on Form 1099-MISC.
  • Taxpayer Identification Number (TIN) Matching Program (obsolete) – Use TIN Matching to validate whether the TIN and name combinations provided on Forms W-9 match IRS tax filing records prior to submitting related information returns.
  • 10 Minutes on Reconciling Forms 941/W-3/W-2 to Gross Payroll – Employers who reconcile payroll can avoid discrepancies by ensuring that employees’ wages and taxes reported to the IRS and the Social Security Administration match.

Find these presentations and more on the IRS Video Portal.

Issue Snapshots

Issue Snapshots are IRS employee job aids that provide analysis and resources along with audit tips or issue indicators for technical tax issues. The most recent Issue Snapshots for federal, state and local government employers are:

IRS Videos

Watch the latest recorded webinars for federal, state, and local governments. Find these presentations and more on the IRS Video Portal.

  • Correcting Employment Taxes Using Form 941-X – Learn how to use Form 941-X to correct errors on employee wages; income tax withheld from wages; taxable Social Security wages and tips; taxable Medicare wages and tips subject to Additional Medicare Tax withholding. 
  • IRS “B” Notices and Backup Withholding (obsolete) – Learn about backup withholding, who is responsible and how it’s reported, plus what to do with a B-Notice.

2017

Early Due Dates for W-2, W-3 and Form 1099-MISC

Employers face a January 31, 2018, due date for filing 2017 Forms W-2 and W-3 with the Social Security Administration. This date applies to both electronic and paper filers.

Form 1099-MISC is due to the IRS and individuals by January 31 when reporting non-employee compensation payments in box 7.

Penalties for failure to file correct information returns or furnish correct payee statements have increased and are now subject to inflationary adjustments. These increased penalties are effective for information returns required to be filed after December 31, 2015.

Form 1098-T Reporting Changes and Limited Penalty Relief for 2017 Returns

Eligible educational institutions are required to report the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year on Form 1098-T, Tuition Statement.

Announcement 2016-42PDF provides relief from penalties under Section 6721 and 6722 to 2017 Forms 1098-T. The IRS will not impose penalties on eligible education institutions that report the aggregate amount billed (instead of amount received) for qualified tuition and related expenses on 2017 Form 1098-T. 

Issue Snapshots

Issue Snapshots are employee job aids that provide analysis and resources along with audit tips or issue indicators for a given technical tax issue. The most recent Issue Snapshots for federal, state, and local governments are:

Taxpayer Identification Matching Tools

Learn how to perfect your payee data before filing Forms 1099 and W-2 using the IRS Taxpayer Identification Number (TIN) Matching Program and the Social Security Number Verification Service offered by the Social Security Administration.

Third Party Payer Arrangements

Many employers use a third party to perform acts such as withholding, reporting and paying federal employment taxes on wages paid for the employer. Learn about some of the issue indicators and audit tips used on audits of these employers.

Student FICA Exception

FICA tax generally applies to wages paid to an employee on account of employment. Learn when the FICA exception applies to an employee who has the status of a student.

IRS Videos

Watch the latest videos made for federal, state, and local governments. Find these presentations and more on the IRS Video Portal.

10 Minutes on Reconciling Forms 941/W-3/W-2 to Gross Payroll

Employers who reconcile payroll can avoid discrepancies by ensuring that employees’ wages and taxes reported to the IRS and Social Security Administration match.

Backup Withholding: When and Why

Learn when you need to backup withhold, how to report and pay backup withholding to the IRS, how to furnish that information to the payee, and what happens if you don’t backup or withhold when it’s required.

The IRS is providing several types of tax relief for those affected by hurricanes hitting Texas, Florida, Georgia, Puerto Rico and the U.S. Virgin Islands. We’re monitoring the situation closely to resolve potential tax related issues as they’re identified.

IRS Gives Tax Relief to Victims of Hurricane Harvey; Parts of Texas Now Eligible

Hurricane Harvey victims in parts of Texas have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments. This relief also applies to Form 5500 series returns of eligible taxpayers.

IRS Gives Tax Relief to Victims of Hurricane Irma; Additional Relief Planned

Hurricane Irma victims have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments. This relief also applies to Form 5500 series returns of eligible taxpayers.

Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Harvey

The IRS relaxed procedural and administrative rules for retirement plan loans and hardship distributions to certain participants in 401(k), 403(b) and 457(b) plans. Retirement plans can provide this relief for participants who are victims of Hurricane Harvey or for certain family members who lived or worked inside the disaster area.

Like Harvey, Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Irma

The IRS announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families.

Beware of Fake Charity Scams Relating to Hurricanes Harvey and Irma

Fake charity scams proliferate after disasters like Hurricane Harvey and Hurricane Irma. We encourage you to seek out recognized charitable groups for your donations.