The IRS has been busy adding to its regulatory agenda. Here’s the latest news from the regulations front.
1. Temporary regs authorize voluntary withholding. Temporary and proposed regulations allow the IRS to designate payments that parties—employers and employees (for payments not already subject to income tax withholding) or payers and payees—can agree will be subject to income tax withholding. The IRS will designate the payments that may be subject to voluntary withholding in its weekly Internal Revenue Bulletin. The temporary regs became effective Nov. 27, 2013, and will expire Nov. 25, 2016. (78 F.R. 71476, 11-29-13)
2. Final regs allow agents to report FUTA for recipients of home care services. Under final regs, third parties who already act as withholding agents for recipients of government subsidized home health care services may act as agents for FUTA purposes and file Form 940 on recipients’ behalf. Agents can file one 940 form on behalf of multiple recipients, provided they also file Schedule R to allocate the information reported in the aggregate on the 940 form. FUTA agents may act for home health care recipients during the time they receive government assistance and until the end of the calendar year during which they’re no longer receiving assistance. The regs became effective Jan. 1, 2014, but agents may rely on earlier valid designations. (78 F.R. 75471, 12-12-13)
APPOINTING REPORTING AGENTS: To appoint a reporting agent, home health care recipients complete Form 2678. Reporting agents then file that form with the IRS for each home health care recipient they seek to represent; each recipient’s Employer Identification Number or a completed Form SS-4 must be included with the IRS filing. Instead of filing Form 2678, state agents may request reporting agent status by including the request on recipients’ enrollment forms. (Rev. Proc. 2013-39, IRB 2013-52)
3. Final regs allow safe-harbor 401(k) plans to alter employer contributions. Final regs allow safe-harbor 401(k) plans to be amended to reduce or suspend midyear employer matching contributions or employer nonelective contributions, provided the employer is operating at an economic loss.
The regs also allow safe-harbor 401(k) plans to be amended to reduce or suspend employer matching or nonelective contributions midyear regardless of the employer’s financial health, provided participants received a notice before the beginning of the plan year that discloses that employer contributions might be reduced or suspended midyear, and participants receive a supplemental notice if a reduction or suspension occurs. The suspension or reduction must be embargoed until 30 days after participants receive this supplemental notice.
With respect to employer nonelective contributions, the regs apply to plan amendments adopted after May 18, 2009. The regs become effective for reductions or suspensions in employer matching contributions for plan years beginning Jan. 1, 2015. (78 F.R 68735, 11-15-13)
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