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Federal, State and Local Government Specialist

Federal, State and Local Government Specialist. Donna Richard Internal Revenue Agent 512-499-5033. Internal Revenue Service. State Agencies. County Governments. Federal Agencies. School Districts. Municipal Governments. FSLG FIELD OPERATIONS. FSLG Group (Area) Managers

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Federal, State and Local Government Specialist

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  1. Federal, State and Local Government Specialist Donna Richard Internal Revenue Agent 512-499-5033

  2. Internal Revenue Service State Agencies County Governments Federal Agencies School Districts Municipal Governments

  3. FSLG FIELD OPERATIONS • FSLG Group (Area) Managers • 8 Areas (Groups) • 10 FSLG Specialists Per Group • FSLG Specialists • About 80 FSLG Specialists Nationwide • Each State has at least one Specialist assigned to it

  4. OUTREACH AND AUDIT • Conferences • Compliance Checks • Examination

  5. HOT TOPICS • Section 218 Agreements • Required Federal Return Filings • Fringe Benefits • Worker Classification

  6. FSLGHISTORICAL OVERVIEW • 1951 Section 218 of the Social Security Act Allowed State and Local Governments to participate in Social Security • 1987 IRS Started Collecting FICA from State and Local Governments

  7. REQUIRED FILINGS Form 941 Form W-2 Form 1099

  8. Types of Payments/ServicesReported on the FORM 1099-MISC ( By Box) • Rents – Box 1 • Other Income – Box 3 • Backup Withholding (BWH)– Box 4 • Medical/Health Care Payments – Box 6 • Non-employee Compensation – Box 7 • Gross Proceeds to Attorneys – Box 14

  9. Information Needed From Payee • Secure Form W-9 • Upfront when services contracted • Put in Vendor File • Provides correct name/TIN combination • Provides information to determine whether payee is subject to backup withholding or not • Provides perjury statement with signature • Limits risk and liability for government entity

  10. Who Does NOT Get 1099-MISC? • Employees • Corporations Except: Attorneys or Medical or Health Care Service Providers • Businesses that provide you with: • Merchandise Inventory • Equipment, supplies, parts only* *Parts provided with services are reportable

  11. Who Does NOT Get Form 1099-MISC? Contd…. • Exempt Organizations IRC §501(c)(3) • Governmental Entities

  12. Failure to Secure a Vendor’s Social Security Number or Taxpayer Identification Number May Subject Your Agency toBACKUP WITHHOLDING.” (IRC 3406) 28%

  13. CP 2100 FROM IRS: • Notice tells Payer their responsibility for backup withholding and could be subject to civil penalties on the listed payees • Notice provides details of payees with: • Missing TINs, and/or • Incorrect Name/TINs, and/or • Not currently-issued payee TINs

  14. Never assume an entity is incorporated! LC – Limited Company LLC – Limited Liability Company LP – Limited Partnership LLP – Limited Liability Partnership

  15. FEDERAL STATE AND LOCAL GOVERNMENTS FRINGE BENEFITS

  16. WHAT IS A FRINGE BENEFITS? • ANY PROPERTY, SERVICE OR CASH (Other than Salary, Provided by Employer) • TAXABLE UNLESS EXCLUDED SPECIFICALLY BY LAW • Example: Medical Premiums IRC 106

  17. TAXABLE FRINGE BENEFITS: • INCLUDE in Employee’s wages and on W-2 (Never on 1099-MISC) • Subject to Federal Withholding, Social Security and Medicare • Even if benefit is received by/for spouse or child of employee

  18. NON-TRAVEL FRINGE BENEFITS: • Clothing/uniforms • Cell phones • Awards • Bonuses

  19. AWARDS ARE TAXABLE • CASH PRIZES OR AWARDS are always taxable • PERFORMANCE AWARDS are always taxable • NON-CASH: • Use Fair Market Value

  20. AWARDS EXCEPTIONS: • Certain Awards transferred to Charities • Pulitzer, Nobel Peace Prize • Certain Employee Achievement Awards • Length of Service, Safety - Not Cash • Nominal Holiday/Special Occasion Awards • Coffee mugs, plagues, etc.

  21. TRAVEL-RELATED FRINGE BENEFITS: • Per Diem Allowances • for lodging, meals and/or incidentals • for business related travel • while away from home

  22. MEAL ALLOWANCES WHILE TRAVELING ON BUSINESS: • MEALS AWAY FROM HOME: • OVERNIGHT • Accountable Plan - Not taxable • NOT OVERNIGHT • Taxable as wages

  23. MEAL ALLOWANCES WHEN NOT TRAVELING: • Meals with business meetings - • NOT taxable if: • clear business setting • directly related • Employer buys you lunch - • Taxable as wages

  24. EMPLOYER-PROVIDED VEHICLE: • HOW DOES EMPLOYEE ACCOUNT FOR PERSONAL USE? • Personal Use is taxable • Verified Business Use is not taxable • Employee can reimburse Employer for personal use

  25. VALUING PERSONAL USE - THREE RULES: • Automobile Lease Valuation Rule* • Cents-Per-Mile Rule • Commuting Rule

  26. Non-Taxable Fringe Benefits: • No additional cost service • Qualified employee discounts • Working condition fringe • De minimis fringe • Qualified transportation expenses • Qualified Moving Expense Reimbursements

  27. REMEMBER: • If the benefit is taxable: • Determine the Value of the benefit • Include it in Wages and W-2

  28. Independent Contractor vs. Employee

  29. How do you make this determination?

  30. Employee or Independent Contractor? • Determine the Worker’s Status • Who has the right to control the worker? • 3 Categories of Evidence • Behavioral Control • Financial Control • Relationship of the Parties

  31. Right to direct and control • The right to direct and control the means and details of the work

  32. BEHAVIORAL RELATIONSHP: • IF the firm provides instructions: • on how to do the job, • what hours to work, what days, etc. , • the worker is most likely an employee.

  33. FINANCIAL CONTROL: • If the firm provides an office, • all office supplies, computer • and other business equipment to the worker, • the worker is an employee.

  34. RELATIONSHIP OF THE PARTIES: • If the firm provides benefits: • health insurance, life insurance, • retirement benefits, 40l(k) plan, 403(b) • the worker is an employee.

  35. INDEPENDENT CONTRACTOR • Offers services to public • Operates own business • Bills for services • Doesn’t have to personally perform work

  36. COMMON MISCONCEPTIONS: • EMPLOYEES CAN BE: • Part-time workers • Temporary workers • Probationary period • Workers who say they are Independent Contractors

  37. State Laws • Worker may be an employee for Federal Law purposes and an independent contractor for State purposes,or vice versa.

  38. Employee Accountant Wages on Form W-2 Withhold FITW Withhold FICA Independent Contractor Janitorial Services Compensation on Form 1099-MISC Dual Status Worker – 1 Entity

  39. Elected And Appointed Officials • Examples of Elected and Appointed Officials • Mayor • City Attorney • Judge or Justice of the Peace • Building Inspector • Board Members • Road Commissioner • Animal Control Officer

  40. Elected And Appointed Officials • Employee • Position established by law • Duties defined by statute • Performs duties as a public official • Responsible to the public • Paid out of governmental funds

  41. LOOK AT THE FACTS • No single fact provides the answer • Weigh all of the evidence

  42. Sources Of Information • Publication 15, “Circular E, Employer’s Tax Guide” • Publication 15-A, “Employer’s Supplemental Tax Guide” • Publication 15-B, “Employer’s Tax Guide to Fringe Benefits” • Publication 963, “Federal-State Reference Guide “, Catalog #21843B • Taxable Fringe Benefit Guide (IRS.GOV)

  43. IRS CONTACTS: • IRS INFORMATION 1-800-829-1040 • CUSTOMER ACCOUNT SERVICES 1-877-829-5500

  44. QUESTIONS

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