The Federal, State and Local Governments News is a periodic newsletter with information for federal tax matters for all types of government entities. Subscribe to future editions Expand/Collapse All 2021 January 8 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, 20219:00 a.m. Eastern - Meeting ID: 161 617 79802:00 p.m. Eastern - Meeting ID: 160 527 4160 Thursday January 14, 202111:00 a.m. Eastern - Meeting ID: 160 684 38084:00 p.m. Eastern - Meeting ID: 161 660 1009 Participants may also join via voice call using the following information: Dial by your location and input the meeting ID when prompted: • 1-669-254-5252 US (San Jose) • 1-646-828-7666 US (New York) 2020 December 14 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 2020-54 PDF 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. You can also check out Payroll Reporting for Election Workers on IRSvideos.gov. 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: Your total Form 941 tax liability for either the current quarter or the preceding quarter is less than $2,500, and You don't incur a $100,000 next-day deposit obligation during the current quarter. Refer to Notice 931 PDF 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. October 21 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 these presentations on payroll reporting. Payroll Reporting for Election Workers Learn about reporting and withholding requirements that apply to paid election workers. 10 Minutes on Reconciling Forms 941/W-3/W-2 to Gross Payroll 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. October 5 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. September 29 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. September 16 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. July 9 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. February 19 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: 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. 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 Qualified Tuition Reduction IRS videos Individual Taxpayer Identification Number (ITIN) (video, 2:30) How to complete Form W-9 (video, 6:42) 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 November 25 We are looking for feedback to improve the Federal, State or Local government section of IRS.gov to help you easily find what you need. We want IRS.gov to be the place our customers come for correct and timely information to meet their tax obligations. Your participation will help us improve our navigation menus and labeling, which will save you valuable time. The study takes approximately 10-15 minutes to complete. Responses are confidential and anonymous. Note: This study is now closed. We constantly strive to provide excellent service. Thank you for helping us improve our website! 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. October 4 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: About General Instructions for Certain Information Returns helps you file correct Forms 1099 W-9 Saves Time and Money discusses the benefits of securing Form W-9 from service vendors TIN Matching Video explains the free Taxpayer Identification Number (TIN) On-Line Matching program offered by the IRS Social Security Number Verification Service 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. July 31 TIN Matching Program Video Learn how to: Decrease the number of notices you receive from the IRS. Help perfect W-9 data before filing Forms 1099-MISC. Reduce Backup Withholding problems. And more... Taxpayer Identification Matching (TIN) Tools Learn about: The online TIN Matching Program and the Social Security Number Verification Service May 30 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. March 29 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 Program PDF. 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 Letter PDF 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 Letter PDF 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. Internal Revenue Agent (Exempt Organizations) Internal Revenue Agent (Employee Plans) 2018 October 26 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. Payroll Reporting for Election Workers – Learn about reporting and withholding requirements that apply to paid election workers. 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. May 24 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: Worker Reclassification - Section 530 Relief – Section 530 of the Revenue Act of 1978 provides businesses with relief from federal employment tax obligations if certain statutory requirements are met. Third Party Payer Arrangements - Professional Employer Organizations – An introduction to Professional Employer Organizations and the related employment tax responsibilities. Third Party Payer Arrangements - Payroll Service Providers and Reporting Agents – An introduction to Payroll Service Providers and Reporting Agents and the employment tax roles of each. Common Paymaster – An explanation of the basic components of a common paymaster arrangement that may enable a related corporation (the common paymaster) to be treated as a single employer for purposes of the FICA and FUTA wage bases. Section 530 Relief for Governmental Entities – Section 530 offers taxpayers relief from federal employment tax obligations if certain statutory requirements are met. This relief may apply to government entities depending on if they have a Section 218 Agreement or are a federal agency. 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 December 18 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 2016-42 PDF 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. November 6 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. Payroll Reporting for Election Workers Learn about the special rules for taxing, withholding, and reporting pay for election workers. 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. September 25 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.