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Presented by Ray McLennan

Presented by Ray McLennan. State, County, Boards of Education and Local Governments. Here We Come. Three Types of Contact. Compliance Check 2. Compliance Review 3. Examination. Examination.

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Presented by Ray McLennan

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Presentation Transcript

  1. Presented by Ray McLennan

  2. State, County, Boards of Education and Local Governments Here We Come

  3. Three Types of Contact • Compliance Check 2. Compliance Review 3. Examination

  4. Examination • You will receive an information document request detailing all of the records to have available at the initial interview. • We will ask to see the following items. All 941’s, 945, W-2’s, 1099’s, and W-4’s for the year under exam including all payroll records. • Any procedures followed for above year. • Any electronic media, all accounts payable records, and any letters from IRS for the above year.

  5. Issues Fringe Benefits (Examples) • Personal use of Government owned vehicle. • Personal use of cell phone. • Travel expenses ( same day travel, extra person, nonaccountable plan). • Uniforms adaptable to street wear, and allowances

  6. Issues • Employee verse Independent Contractor. • Board members, part time workers, one time employees, cleaning personnel, etc. • 1099’s not being issued. • FICA not being withheld on pension plan contributions. • New Entity being formed and not realized

  7. Payroll Taxes • Employee or Independent Contractor

  8. Employee? Why so Important? • If misclassification occurs - employer is liable for all employment taxes. • Corrected information returns will be necessary. • Interest and penalties may be added to tax due.

  9. Watch Out • Workers cannot chose their own status. • Firm must evaluate the relationship. • Must withhold if employer/employee relationship is present. • Other laws do not override Federal law.

  10. How Do I Make the Choice? • First, determine the facts, • Then apply the law, • Then treat appropriately.

  11. What Facts Do I Need? Facts that relate to: • Behavioral Control • Financial Control • Relationship of the Parties

  12. What is Behavioral Control? • Facts that show whether the firm has the right to direct or control how the worker performs the task for which they have been hired, include the “type and degree”. • If you tell them when, where, and how, you have control.

  13. Factors to Consider: • Training • Giving Instructions

  14. Ask yourself these questions: • When and where to do the work? • What tools or equipment to use? • What workers to hire or assist with the work? • Where to purchase supplies and services? • What order or sequence to follow?

  15. What is Financial Control? • Facts that show whether the firm has the right to direct and control the financial aspects of the worker’s job.

  16. The Evidence: • Does the worker have unreimbursed business expenses? • What type of investment does the worker have?

  17. More evidence: • Does the worker make services available to the public? • How do you pay the worker? • Can the worker really realize a profit or loss?

  18. What is Relationship of the Parties? • Facts that show the type of relationship between the parties.

  19. The Evidence: • Are contracts available that describe the relationship? • Does the firm provide benefits, or would they otherwise be available? • How permanent is this relationship? • Are the services performed by this worker a key aspect of the business?

  20. Summary: • Look at evidence of behavioral control • Look at evidence of financial control • Look at evidence indicating the nature of the relationship of the parties • Some facts are of lesser importance in today’s business environment

  21. FRINGE BENEFITS

  22. AUTOMOBILES AWARDS,PRIZES CELLULAR PHONES EDUCATIONAL REIMUBURSEMENTS SAVINGS BONDS ALLOWANCES MEAL MONEY (BASED ON HOURS WORKED) GROUP TERM LIFE MOVING EXPENSES PARKING ER PROVIDED LIVING QUARTERS CLOTHING OTHER THAN CERTAIN UNIFORMS SPOUSAL TRAVEL SEASON TICKETS Examples of Fringes CASH NON-CASH

  23. Accident and health plans achievement awards athletic facilities de minims fringes dependent care asst. programs educational assist employee discounts Group-term life ($50,000) lodging on employer’s premises moving expenses reimbursements no-additional cost services tuition reduction working condition fringes EXAMPLES OF EXCLUDED FRINGES

  24. TAXATION OF BENEFITS • ALL REMUNERATION, CASH OR NON- CASH, ARE CONSIDERED GROSS INCOME UNLESS SPECIFICALLY EXEMPT BY LAW. (IRC 61) • BUSINESS PORTION MAY BE EXCLUDED AS A “WORKING CONDITION” FRINGE BENEFIT...(IRC 132) • PROVIDED THE RECORDKEEPING REQUIREMENTS OF IRC 274ARE MET.

  25. Cell Phones and Computers • Considered “listed property” • Must account for business use but may use personal use to get percentage of business use. • The percent of all minutes used not just day time minutes . • All personal use is taxable wages • Wages subject to all employment tax

  26. Automobiles • PERSONAL USE CONSITUTESWAGES • VALUATION METHODS: Cents per mile ($.405/Mile & 48.5/mile for 2005) • Commuter rule ($1.50 each way/day) • Annual Lease Valuation • On call does not matter

  27. Exempt Vehicles • Clearly Marked Police or Fire Vehicles • Unmarked Police Cars * • Ambulances or Hearses • Large Trucks • School Buses

  28. QNPU VEHICLE: • The employees use, if commuting or other personal use, is totally excludable from wages if it is a qualified non-personal use vehicle.

  29. means any vehicle which, by reason of its nature (that is, design), is not likely to be used more than a de minimis amount for personal purposes. any vehicle designed to carry cargo with a loaded gross vehicle weight over 14,000 pounds is a qualified nonpersonal use vehicle. What is NQPUV?

  30. the exclusion from gross income as a working condition fringe benefit under section 132 apply to the use of a qualified nonpersonal use vehicle because of its design, and not because of the nature of the employee's services (such as being on 24-hour call). Regs. Section 1.274-5T(k)(7)

  31. 2 Categories for Trucks: • 1. The vehicle is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer's trade, business, or function and is equipped with at least one of the following: a hydraulic lift gate, permanently installed tanks or drums, permanently installed side boards or panels materially raising the level of the sides of the bed of the pickup truck, or other heavy equipment, such as an electric generator, welder, boom, or crane used to tow automobiles and other vehicles.

  32. 2 Categories for Trucks: • 2. The vehicle is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer's trade, business, or function, is actually used primarily for transporting a particular type of load other than over the public highway in connection with a construction, manufacturing, processing, farming, mining, drilling, timbering, or other similar operation, and has been specially designed or modified to a significant degree for such use.

  33. How a Van Qualifies: • A van with a loaded gross vehicle weight not over 14,000 pounds is a qualified nonpersonal use vehicle [*5] if it is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer's trade, business, or function, it has a seat only for the driver or the driver and one other person, and either permanent shelving has been installed that fills most of the cargo area or the cargo area is open and the van constantly (during both working and nonworking hours) carries merchandise, material, or equipment used in the employer's trade, business, or function.

  34. This Qualifies:

  35. Sorry- No:

  36. Definitely Not!

  37. This Qualifies:

  38. Because it has this:

  39. INFORMATION RETURN REPORTING Form 1099

  40. FORM 1099 • All persons engaged in a trade or business ( This includes Governments) must file an information return if payments aggregating $600 or more in a calendar year are made in the course of the trade or business.

  41. Payee Information The name and address of the recipient or payee is to be furnished on demand to the person paying the income. Form W-9, Request for Taxpayer Identification Number and Certification, may be used by the payer to obtain this information from the payee.

  42. Information Returns • Payers that file 250 or more Forms 1099 must file on magnetic media.

  43. Penalties • Failure to File Correct Information Returns. • Failure to Furnish Correct Payee Statements • Failure to Comply with Other Information Reporting Requirements

  44. Ray Mclennan Office 270 442-2607 Ext. 127 Home 270-442-4290 Cell Phone 270-994-6121 E-Mail raymond.mclennan@irs.gov

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