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.

Payroll Handbook D

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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