June 2012 Edition of Indian Tribal Governments News
Table of Contents
- Director’s Message
- Webinar for Indian Tribal Governments
- Social Security Administration and IRS Reconciliation Processes
- Fuel Tax Exemptions and Federal Excise Tax Refund Guidelines
- FinCEN Reminder
- Required Forms of Identification for Casino Winners
- Volunteer Income Tax Assistance Volunteers – Thank You!
- Pacific Northwest Training Opportunities: Seeking Venues
- Upcoming Arizona Training Opportunities
- Western Region Advanced Employment Tax Training Classes
- Outreach Successes
Scroll down the page to view each of the articles
We have a number of things coming up that we want to share with you.
First, I want to remind you that the IRS is holding a public hearing on July 10th regarding Indian Tribal Governmental Plans Guidance. This will take place in the auditorium at our main headquarters located at 1111 Constitution Avenue N.W. in Washington, D.C. at 10:00 a.m.
We will also be hosting a free webinar on Wednesday, June 27 (please note that this is a date change). You will find an article in this edition providing you with more information about it.
The big news is about our website IRS.gov. For the next two months, IRS.gov is going through a major renovation. This is going to temporarily affect how we get news information to you. That’s the main reason why we are having a June rather than July edition. While the website is being renovated, you will continue to get news via our e-mail subscription service, just like you always do.
By mid August you’ll see a new IRS.gov. However, our part of the website, www.irs.gov/tribes, will still be there, so you can always use that address to find us. And don’t forget – you can always contact your ITG Specialist.
Christie Jacobs, Director
Webinar for Indian Tribal Governments
Tribal Council Member Pay, Travel Expenses and Tip Agreements
The office of Indian Tribal Governments will be presenting a free webinar on June 27 at 2:00 p.m. Eastern Time.
ITG Tax Law Specialists Jonathan Damm and Telly Meier will discuss a variety of topics to include:
- When should tribes classify their tribal council members as employees?
- What tribal programs can tribal council members participate in?
- What IRS Tip Agreements are available to Native American casinos?
- What are the benefits of having a Tip Agreement?
- How do you determine tip rates for various occupational categories?
- How do you set up an “actual” tip rate that captures all tips received by the employee?
- What are Accountable and Nonaccountable Plans?
- When do you include reimbursable travel expenses as taxable income?
The webinar is free! All you have to do is click here to register!
To attend the webinar, you would use the same link.
If you cannot attend the webinar, we will have it available for viewing approximately two weeks after the date of the event.
If you have any questions, do not hesitate to contact your ITG Specialist.
Social Security Administration (SSA) and IRS Reconciliation Processes
Employers are required to report wages annually for each employee on Form W-2, Wage and Tax Statement. The Social Security Administration (SSA) processes these wage reports as an agent of the Internal Revenue Service (IRS).
The SSA uses earnings information to determine eligibility for and the amount of Social Security benefits to which workers may be entitled. Accurate earnings information is necessary to ensure that the SSA credits the correct earnings to the correct individual's record.
Each year the SSA receives more than 250 million wage reports on Forms W-2 from employers. As the SSA processes these wage reports, it maintains a record of total Social Security and Medicare wages and tips processed for each employer. These totals are then compared with the totals of employment tax records filed by the employer with IRS on Form 941 returns. Employers whose reports to the IRS and SSA do not balance are contacted for an explanation of the discrepancy and asked for additional wage evidence.
The IRS contacts employers who reported more wages to the SSA than to the IRS.
The SSA contacts employers who reported more wages to the IRS than to the SSA.
Failure to resolve these discrepancies may result in an IRS assessment of penalties for filing incorrect reports.
When an employer reports more wages to the IRS, the SSA is concerned that employees' earnings are not credited correctly to the agency's records. The SSA examines some of these cases and makes an effort to resolve the difference without contacting the employer.
When an effort to resolve the discrepancy is unsuccessful or a resolution is not possible without the employer’s assistance, the SSA sends a notice and questionnaire to the employer, requesting the earnings data needed to resolve the case. If the SSA does not receive a response after 120 days, the employer is sent a second notice. When no response is received after the second notice, the IRS is responsible for contacting the employer and may impose penalties, if necessary.
Fuel Tax Exemptions and Federal Excise Tax Refund Guidelines for Government Entities
Generally, you pay federal excise taxes on taxable fuels, (i.e., gasoline, kerosene, and diesel), when you remove it from a taxable fuel terminal. However, federal law provides a fuel excise tax exemption when the District of Columbia, a governmental entity or any of its political subdivisions purchases any liquid used as a fuel in a motor vehicle, motorboat, or aircraft for its exclusive use. This fuel excise tax exemption does not include Leaking Underground Storage Tank (LUST) tax.
A local government includes any political subdivision of a state. An Indian tribal government is treated as a state only if the fuel is used in an activity that involves the exercise of an essential tribal government function.
Note: The American Red Cross is treated as a state for fuel excise tax exemption purposes.
To qualify for tax-free treatment, a government entity must purchase the fuel for its own exclusive use. A resale of taxable fuel from one governmental entity to a second governmental entity, for its own exclusive use, is permissible. A sale from a governmental entity to a nonprofit education organization, other than the American Red Cross, does not qualify as exclusive use by a government.
The evidence required for a governmental entity tax-free sale is a certificate. An employee or officer authorized by the governmental entity must sign and execute it. In cases where it is impracticable to furnish a separate certificate due to purchase frequency, a certificate covering orders between specific dates (not to exceed one year) is acceptable. The fuel distributor (ultimate vendor) and credit card issuer must retain the certificates and proper records of invoices, orders, etc., relative to tax-free sales.
In general, a fuel distributor (ultimate vendor) who sells tax-free fuel to a governmental entity and submits a claim for refund of the fuel excise tax must meet all of the following conditions:
- They paid federal excise tax on the fuel.
- They have not collected the federal excise tax from the governmental entity.
- They are registered under Internal Revenue Code section 4101.
In the case where a fuel card (credit card) is issued to a governmental entity for use in purchasing tax exempt fuel, the person extending the credit to the governmental entity is entitled to the fuel excise tax refund, as long as the person extending the credit has accomplished the following:
- Is registered under section 4101
- Has established, under the section 48.4101 Regulations, that such person:
- has not collected the amount of the tax from the person who purchased the article; or
- has obtained the written consent from the ultimate purchaser to the allowance of the credit or refund; and
- Has established that such person has:
- repaid or agreed to repay the amount of the tax to the ultimate vendor,
- obtained the written consent of the ultimate vendor to the allowance of the credit or refund; or
- otherwise made arrangements that directly or indirectly provide the ultimate vendor with reimbursement of the tax.
If the person extending the credit fails to meet the above requirements, the law limits the claim to the governmental entity (ultimate purchaser). In this case, the person extending the credit shall collect the tax from the governmental entity so that a claim can be filed.
As noted above, to purchase tax free fuel, the fuel distributor or credit card issuer must execute and retain a certificate (model M for gasoline and Model P for diesel and kerosene). For more information, see Publication 510, Excise Taxes.
Note: Generally, a governmental entity cannot submit a fuel excise tax claim for refund of diesel fuel, kerosene, kerosene for use in aviation, gasoline, or aviation gasoline unless the purchase was made with a fuel credit card.
In summary, claims may only be filed as follows:
- By the registered credit card issuer if the governmental entity or local government (or nonprofit educational organization if applicable) used a credit card and the credit card issuer meets the requirements.
- By the registered ultimate vendor if the ultimate purchaser did not use a credit card, and the ultimate vendor meets the requirements.
- By the ultimate purchaser if the ultimate purchaser used a credit card and neither the registered credit card issuer nor the registered ultimate vendor is eligible to make the claim.
Governmental entities should exercise care when purchasing fuel to ensure that the fuel supplier or credit card issuer meets the necessary requirements to process tax exempt transactions.
Financial Crimes Enforcement Network (FinCEN) Reminder for Mandatory E-filing
In our April ITG News edition we alerted you to the FinCEN notice dated February 24, 2012. Beginning no later than July 1, 2012, FinCEN is adopting a requirement that all financial institutions subject to Bank Secrecy Act (BSA) reporting must use electronic filing (E-Filing) for certain FinCEN reports. E-filing will save both the government and the filer time and money. For more information please read the FinCEN notice available on their website.
Required Forms of Identification for Casino Winners
Casinos are required to gather identification from patrons whenever jackpots or winnings reach certain thresholds. When a casino issues a Form 1099-MISC and Form W-2G, it must gather personal identification to verify the individual for whom the information return is filed. Treasury Regulation 301.6109-1(b) provides that a driver’s license (or other picture ID) and a completed Form W-9 satisfies verification requirements when completing a Form 1099-MISC. On the other hand, whenever a Form W-2G is necessary, Treasury Regulation 7.6041-1(c) requires the casino to get two forms of identification. The regulations give three examples of acceptable ID (driver’s license, social security card, and voter registration card) to verify the winner’s name, address and social security number. Even though the regulations list three types of identification, many other forms of government-issued IDs are acceptable, such as Indian Tribal Enrollment Cards, military and federal IDs, state-issued IDs, passports, and resident alien cards. Many casinos have implemented internal policies accepting a completed Form W-9 instead of a social security card. Over time it seems as though this has become a widespread practice among numerous casinos, becoming an industry practice.
A Form W-9, Request for Taxpayer Identification Number and Certification, does not meet the requirements for gathering identification. It is a self-serving federal government form which duplicates the information contained on the Form W-2G. Therefore, whenever the Treasury Regulations call for two forms of identification (for W-2G purposes), a Form W-9 is not considered to be identification nor is it mentioned as one of the acceptable forms of ID. The only items mentioned in the Treasury Regulations as being acceptable IDs are government-issued IDs. Casinos can have internal policies which mandate completing the Form W-9 for jackpot winners, but the form cannot substitute as one of the required two forms of ID as stated in the regulations.
Federal Government and Military IDs
Federal Government and Military IDs are considered to be valid forms of ID, but it is against the law to make copies. If your internal policies dictate that copies are to be made of any and all IDs presented, keep in mind that Title 18, U.S. Code Part 1, Chapter 33, Section 701 prohibits the duplication of these IDs and is punishable by fine and/or imprisonment. Thus, you may accept this type of ID but you may not photocopy it.
If you have questions regarding acceptable types of identifications, contact your local ITG Specialist.
Volunteer Income Tax Assistance Volunteers (VITA) - Thank You!
The IRS Office of Indian Tribal Governments (ITG) and the Office of Stakeholder Partnerships, Education and Communication (SPEC) would like to thank all of our partners who provided tax assistance. The 2011 filing season was excellent. We had an 11% increase in the number of returns that had been filed over the previous filing season. There were some sites that had an 80% increase in the number of prepared returns over the prior year filings. We could not provide this wonderful free service to our customers without the wonderful contributions of these VITA volunteers:
- Aztec Senior Center
- Colorado River Indian Tribes (CRIT)
- Cornfields Chapter of the Navajo Nation
- DNA OFFICES Chinle Chapter Compound
- DNA OFFICES Window Rock Gallup Catholic Charities
- Gila River Indian Community (GRIC)
- Inter-Tribal Governments
- JADE Community Education
- Native Community Finance
- Navajo County Department of Public Works
- New Mexico Legal Aid Northern Pueblos Housing
- Pascua Yaqui Tribe Development Services Division
- Quechan Indian Tribe
- San Carlos Housing Authority
- San Lucy District of the Tohono O’odham Nation
- Sandia Pueblo and Casino
- Salt River Pima (SRP) Maricopa Indian Tribe
- Southwest Native People’s VITA Coalition (SWN-Kayenta)
- Tohono O’odham Nation
- White Mountain Apache Housing Authority
- Zuni Housing Authority
The IRS needs you: Become a Volunteer
Are you interested in giving back to your community, but are unsure how? The IRS has the Volunteer Income Tax Assistance (VITA) program available just for you.
In order to become a volunteer at one of these existing sites, you will need to complete a tax law training program. The volunteer tax law preparation training is performance-based and uses a process-based approach to engage each student in the return preparation process. Role-playing and demonstrations on how to use the technical tools to complete an accurate return are used extensively. Students will require one of the following kits for training in the Basic, Intermediate, Advanced, Military and International courses:
- Publication 4480 - Link & Learn Taxes Kit consists of the exercise workbook (Publication 4491-W); Volunteer Resource Guide (Publication 4012) which should also be used at the site; and Form 6744 - Test/Retest. Publication 4480 is the cover transmittal for the kit. The electronic course evaluation form is part of Link & Learn Taxes online.
- Publication 4491 - Student Training Kit consists of the Student Training Guide (Publication 4491), workbook (Publication 4491-W), Volunteer Resource Guide (Publication 4012), Form 6744 - Test/Retest, and a carrying bag (Publication 1278). Students and instructors can evaluate the materials in the kits using the electronic course evaluation module in Link & Learn Taxes online.
For ordering guidance and other information, please consult your local IRS-SPEC tax consultant.
Pacific Northwest Training Opportunities: Seeking Venues
The Pacific Northwest ITG office is once again offering the “highly informative and error-proofing” Employment Tax/Information Reporting and Gaming Information Reporting Workshops in the Pacific Northwest for our Tribal customers. We just need to know where and when to hold the two-day Employment Tax/Information Reporting workshops and the one-day Gaming Information Reporting workshop.
We would like to hold the training in the month of August or September. That’s where you come in. If your Tribe could host the training at no charge for the meeting space, we would like to partner with you in offering this training through such a venue. Also, we would like to know which week(s) in August or September works best for your staff to attend.
If interested, please e-mail Doug Wellington with your interest in attending and/or hosting the training. He can also be reached at 503-415-7315. As we would like to afford you the maximum planning time to arrange travel, we would like to finalize the date and location by July 15th; so please respond with your interest as soon as possible.
Upcoming Arizona Training Opportunities
ITG will be offering the following workshops at the IRS office located at 300 West Congress Street in Tucson: Conference Room B.
Basic Employment Tax Workshop – offered two times!
- August 15-16, 2012; 8:30 a.m. - 4:30 p.m.
- October 10-11, 2012; 8:30 a.m. - 4:30 p.m.
- Defining Employees vs. Independent Contractors
- Computing the Correct Taxes for Payroll
- Completing Form 941, Employer's Quarterly Federal Tax Return
- Making Federal Tax Deposits
- Due dates on Tax Returns
- Completing Forms W-2/W-3 and 1099/1096
- Reconciling Forms 941 and W-2 at Year End
- Avoiding Penalties
- Meeting Rules for an Accountable Plan for Per Diem & Travel Reimbursements
- The IRS Collection Process
- How the IRS and Social Security Administration Interact
- Introduction to the Volunteer Income Tax Assistance (VITA) Program: How to Get Involved
Advanced Payroll Topics Workshop – offered two times!
- August 28-31, 2012; 9:00 a.m. - 4:00 p.m.
- October 23-26, 2012; 9:00 a.m. - 4:00 p.m.
- Detecting Fraud
- Foreign Workers
- Fringe Benefits
- IRS Collection and Notices
- Job Training Payments/Compensation
- Loans to Tribal Members
- Money Service Businesses (MSB)
- Non-employee Honorariums & Travel Reimbursements Payroll Advances
- Accountable and Non-accountable Travel Accounts
- Reporting 401-K Contributions on the Forms 941 and W-2
- Third-Party Sick Leave
- Tips & Tip Reporting
Space is limited; only 30 reservations will be accepted for each session. Please e-mail Tricia Miller or Michelle Risk for additional information or to register.
Western Region Advanced Employment Tax Training Classes
Indian Tribal Governments in northern California will be holding two advanced classes in employment tax:
July 18, 2012; 9:00 a.m. to 5:00 p.m.
IRS office located at 777 Sonoma Avenue in room 215-A, Santa Rosa, California
July 25, 2012; 9:00 a.m. to 5:00 p.m.
IRS office located at 4330 Watt Avenue in room 118A, Sacramento, California
The classes will cover various topics:
- How to treat payments made to Tribal Council members
- Loans to Tribal members
- Travel reimbursements for non-employees
- What are taxable versus non taxable fringe benefits?
- How to maximize internal controls
Space to this event is limited so attendance will be based on first come first served. The Santa Rosa class room will have room for 30 attendees, and the Sacramento class room has room for 40 attendees.
There is no charge for the class but all attendees must pay for their own travel, lodging and food.
For more information please contact:
Dennis Duggan: (707) 535-3838
Mark Betzler: (916) 974-5310
Jonathan Trexel: (916) 974-5578
Please Respond by June 28, 2012.
Anchorage - ITG held their Annual Employment Tax/Gaming Training at the Anchorage office of the Internal Revenue Service. Three different sessions of the training were held March 26-29, April 2-5 and April 9-12. A full-day session for pull tab, bingo, and gaming issues was offered the first day. The remaining days dealt with employee issues and information reporting.
Throughout the three different sessions 74 individuals attended. Below is the attendee representation:
Thirty-four tribal governments (55)
Five cities (8)
Three village corporations (5)
Three nonprofits (3)
State of Alaska (3)
The participants gave very favorable feedback. ITG Specialists from the Anchorage office presented the workshops. The Alaska Department of Labor and Workforce Development provided guest speakers who discussed employment issues related to Alaska's filing requirements and online filing. Meanwhile, the Alaska Department of Revenue Tax Division (Gaming Unit) provided a guest speaker who discussed state gaming issues and regulations.
Defining Employees vs. Independent Contractors
Computing the correct taxes for payroll
Completing Form 941, Employer’s Quarterly Federal Tax Return
Making federal tax deposits
Due dates on tax returns
Completing Forms W-2/W-3 and 1099/1096
Reconciling Forms 941 and W-2 at year end
Meeting rules for an Accountable Plan for Per Diem & Travel Reimbursements
Pull tab and gaming excise tax filing requirements
Bethel - On May 7-10, ITG also held a Tax Workshop in Bethel. The event was sponsored by the Association of Village Council Presidents (AVCP) and was held at the Long House Bethel Inn Conference Room. Seventeen individuals attended. Eleven tribal governments were represented along with one regional nonprofit.
Feedback from the participants was very favorable. ITG specialists from the Anchorage office covered federal employment tax and information reporting topics. The Alaska Department of Labor and Workforce Development provided a guest speaker who discussed employment issues related to state of Alaska filing requirements and how to file online. A full-day session for pull tab and bingo issues was also offered. A guest speaker from the Alaska Tax Division Gaming Unit discussed Alaska’s gaming rules and regulations while an ITG Specialist discussed federal tax filing requirements for pull tab and raffle sales.
If you are interested in co-sponsoring similar training in your area, encourage your regional nonprofit association or other local organizations to sponsor a workshop and provide a venue for the training.
For further information, please e-mail Judy Pearson. You can also call her office at 907-271-6949 or fax 907-271-6664.
During the second quarter of this year, ITG specialists from the Albuquerque office instructed two Basic Employment Tax Workshops for the Navajo Nation chapters of the Eastern, Ft. Defiance, and Northern Agencies. They held two Employment Tax Workshops at the Route 66 Resort and Casino near Albuquerque, NM: the first on April 16-17 and the second on April 19-20. The ITG specialists also held an Open Assistance Day on April 18 to provide individual chapters with one-on-one additional guidance.
Many chapter officials chose to be in attendance with their account maintenance specialists and community service coordinators. Representatives from the Navajo Nation Local Governance Staff Coordination (LGSC) were also in attendance. Together these three groups focused on resolving employment tax issues affecting the Navajo Nation.
ITG specialists trained and met with 141 individuals from 65 chapters: 26 from Fort Defiance Agency, 24 from Eastern Agency, and 15 from Northern Agency. A good time was had by all!