Payroll odds and ends from IRS

The IRS is a prodigious publisher. Here are digests of documents sent between IRS offices. Note: Memoranda and email advice are intended as private advice from the IRS to the requesting party. They may be used for informational purposes only; they may not be used or cited as precedent.

1. No friends-only rate for an employee discount program. Employee discount programs are valuable perks, but you must design them properly: Only employees and their family members can participate. The top tax-free discount on services is 20% off the cost of services you provide to the public.

In the case in question, employees enrolled in their employer’s discount program and received points they could redeem. Twist #1: The program was open to employees and whomever they chose to participate. Twist #2: The discount rate, which exceeded 20%, was based on the rate the company charged its corporate customers, instead of the published discount rates that were available to the general public.

IRS: Employees are hit with a double whammy. They’re taxable on the discount provided to their friends and they’re taxable on the excess discount—the amount by which the employer’s discount exceeds the statutory rate of 20%. The employer doesn’t escape, either. It owes its share of FICA taxes and FUTA taxes, too. (ILM 20171202F)

2. Original signatures needed on Form SS-8. Workers who want to test their status as either employees or independent contractors can file Form SS-8 with the IRS. You can also file the form, but employers rarely do, since the questions are geared toward finding that workers are employees.

The IRS concluded in email advice that a request made on Form SS-8 is a determination letter request for an employment tax matter, and, therefore, that original signatures are required; fax signatures are not permitted. (EEC 201710027)

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