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Internal Revenue Bulletin:  2016-21 

May 23, 2016 

EMPLOYMENT TAX


REG–114307–15REG–114307–15

Generally, for federal income tax purposes, a business entity that has a single owner and is not a corporation is disregarded as an entity separate from its owner (a disregarded entity). However, for purposes of employment taxes, a disregarded entity is treated as a corporation, except that the owner of a disregarded entity who is treated as a sole proprietor for income tax purposes remains subject to self-employment taxes. The current regulations do not explicitly address situations in which the owner of a disregarded entity is a partnership. These proposed regulations address this issue by clarifying that the rule that a disregarded entity is treated as a corporation for employment tax purposes does not alter the self-employment tax treatment of any individuals who are partners in the partnership that owns a disregarded entity.

REG–127561–15REG–127561–15

The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 requires the establishment of a voluntary certification program for professional employer organizations. A professional employer organization, sometimes referred to as an employee leasing company, is an organization that enters into an agreement with a client to perform some or all of the federal employment tax withholding, reporting, and payment functions related to workers performing services for the client. Being certified by the IRS as a certified professional employer organization (CPEO) has certain federal employment tax consequences for both the CPEO and its customers and clients. These proposed regulations set forth the federal employment tax liabilities and other obligations of persons certified by the IRS as CPEOs.

T.D. 9766T.D. 9766

Generally, for federal income tax purposes, a business entity that has a single owner and is not a corporation is disregarded as an entity separate from its owner (a disregarded entity). However, for purposes of employment taxes, a disregarded entity is treated as a corporation, except that the owner of a disregarded entity who is treated as a sole proprietor for income tax purposes remains subject to self-employment taxes. The current regulations do not explicitly address situations in which the owner of a disregarded entity is a partnership. These temporary regulations address this issue by clarifying that the rule that a disregarded entity is treated as a corporation for employment tax purposes does not alter the self-employment tax treatment of any individuals who are partners in the partnership that owns a disregarded entity.

T.D. 9768T.D. 9768

The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 requires the establishment of a voluntary certification program for professional employer organizations. A professional employer organization, sometimes referred to as an employee leasing company, is an organization that enters into an agreement with a client to perform some or all of the federal employment tax withholding, reporting, and payment functions related to workers performing services for the client. Being certified by the IRS as a certified professional employer organization (CPEO) has certain federal employment tax consequences for both the CPEO and its customers and clients. These final and temporary regulations describe the requirements a person must satisfy in order to become and remain a CPEO.


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