Title 26—Internal Revenue--Volume 1
PART 31—EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
§ 31.3406(g)-2   Exception for reportable payment for which withholding is otherwise required.
(a) In general. A payor of a reportable payment (as defined in section 3406(b)) must not withhold under section 3406 if the payment is subject to withholding under any other provision of the Internal Revenue Code.
(b) Payment of wages. A payor who is required to make an information return under section 6041 with respect to a payment of wages (as defined in section 3401) because, e.g., the employee makes a certification under section 3402(n) (relating to employees incurring no income tax liability), must not withhold under section 3406 on those wages.
(c) Distribution from a pension, annuity, or other plan of deferred compensation. An amount reportable under section 6047, such as a designated distribution under section 3405, is not a reportable payment subject to withholding under section 3406. See section 3406(b). Designated distributions not subject to withholding under section 3406 include—
(1) Distributions from a pension, annuity, profit-sharing, stock bonus plan, or other plan deferring the receipt of compensation;
(2) Distributions from an individual retirement account or annuity;
(3) Distributions from an owner-employee plan; and
(4) Certain surrenders of life insurance contracts.
(d) Gambling winnings —(1) In general. A payor of a reportable gambling winning must not withhold under section 3406 if tax is required to be withheld from the gambling winning under section 3402(q) (relating to the extension of withholding to certain gambling winnings). If the reportable gambling winning is not required to be withheld upon under section 3402(q), withholding under section 3406 applies to the gambling winning if, and only if, the payee does not furnish a taxpayer identification number to the payor. Section 31.3406(b)(3)-1(b)(3) does not apply to a reportable gambling winning. The payor of a reportable gambling winning is not required to aggregate all such winnings made to a payee during a calendar year, nor is the payor required to determine whether an information return was required to be made with respect to the payee for the preceding year.
(2) Definition of a reportable gambling winning and determination of amount subject to backup withholding. For purposes of withholding under section 3406, a reportable gambling winning is any gambling winning subject to information reporting under section 6041. A gambling winning (other than a winning from bingo, keno, or slot machines) is a reportable gambling winning only if the amount paid with respect to the wager is $600 or more and if the proceeds are at least 300 times as large as the amount wagered. See § 1.6041-10 of this chapter to determine whether a winning from bingo, keno, or slot machines is a reportable gambling winning and thus subject to withholding under section 3406. The amount of a reportable gambling winning is—
(i) The amount paid with respect to the amount of the wager reduced, at the option of the payer; by
(ii) The amount of the wager.
(3) Special rules. For special rules for determining the amount of the wager in a wagering transaction with respect to horse racing, dog racing, and jai alai, or amounts paid with respect to identical wagers, see § 31.3402(q)-1(c).
(e) Certain real estate transactions. A real estate reporting person (the so-called broker) as defined in section 6045(e)(2) must not withhold under section 3406 on a payment made with respect to a real estate transaction that is subject to reporting under sections 6045 (a) and (e) and § 1.6045-4 of this chapter. Notwith- standing the previous sentence, a real estate reporting person must withhold under section 3406 of the Code and pursuant to the rules under § 31.3406(b)(3)-2 on a reportable payment made in a real estate transaction with respect to a purchaser that exchanges digital assets for real estate to the extent that the exchange is treated as a sale of digital assets subject to reporting under § 1.6045-1 of this chapter.
(f) Certain payments after an acquisition of accounts or instruments. A payor who acquires pre-1984 accounts or instruments described in § 31.3406(d)-1(b)(2)(iv) for which the payor does not have a taxpayer identification number or has an obviously incorrect taxpayer identification number as defined in § 31.3406(h)-1(b)(2) must start withholding under section 3406(a)(1)(A) and § 31.3406(d)-1 on those accounts or instruments no later than sixty days following the date of the payor's acquisition of those accounts or instruments.
(g) Certain gross proceeds. No withholding under section 3406 is required with respect to any portion of the original issue discount on an instrument or security that is subject to withholding under section 3406 as reportable gross proceeds of such instrument or security under section 6045.
(h) Applicability date. The rules apply to reportable gambling winnings paid with respect to a winning event that occurs after November 13, 2017. For rules that apply to payments made with respect to a winning event on or before that date, see § 31.3406(g)-2 as contained in 26 CFR part 31, revised April 1, 2017. For sales of digital assets, this section applies on or after January 1, 2026.
§ 31.3406(g)-3   Exemption while payee is waiting for a taxpayer identification number.
(a) In general —(1) Backup withholding not required for 60 days. If a payor has received an awaiting-TIN certificate from a payee with respect to an account or instrument receiving reportable interest or dividends as described in section 3406(b)(2), the payor must exempt the payee from withholding under section 3406(a)(1)(A) during the 60-day exemption period to the extent and in the manner described in either paragraph (a) (2) or (3) of this section. The 60-day exemption period means the 60-consecutive-day period beginning with the day the payor receives the awaiting-TIN certificate. The payor must withhold under section 3406 beginning after the 60-day exemption period if the payor has not received a taxpayer identification number from the payee in the manner required in § 31.3406(d)-1. Regardless of whether the payee provides an awaiting-TIN certificate to a payor, the payor is required to withhold under section 3406(a)(1)(D) and § 31.3406(d)-2 on reportable interest or dividend payments as described in § 31.3406(d)-2 if the payee fails to certify, under penalties of perjury, that the payee is not subject to withholding due to notified payee underreporting as required in section 3406(a)(1)(D) and § 31.3406(d)-2.
(2) Reserve method. A payor must not withhold under section 3406 during the 60-day exemption period unless the payee (or a joint payee in the case of a joint account) desires to make a withdrawal of more than $500 of either principal or interest from the account in any single transaction during the period. If a payee (or a joint payee) desires to make a withdrawal of more than $500 during the 60-day exemption period, the payor is required under section 3406 to withhold 31 percent of all reportable payments made during the period and at the time of withdrawal unless the payee reserves 31 percent of all reportable payments made to the account during the period.
(3) Alternative rule; 7-day grace period —(i) In general. A payor who receives an awaiting-TIN certificate may elect, on a payee-by-payee basis or in general, to exempt reportable interest or dividend payments to a payee from withholding under section 3406 applying the rules in paragraph (a)(3) (ii) or (iii) of this section.
(ii) Withholding on withdrawals. Under this paragraph (a)(3)(ii), a payor must obtain a certified taxpayer identification number from the payee within 60 days after the date that the payor receives the awaiting-TIN certification. In addition, the payor must withhold under section 3406 on any withdrawals made after the close of 7 business days after the date the awaiting-TIN certification is received and before the earlier of the date that the payor receives a certified taxpayer identification number from the payee, the date the account is closed (in which case the payor must withhold on any reportable payment made at the time the account or relationship is closed), or the date withholding under section 3406 starts on all reportable payments made to the account, instrument, or relationship. All cash withdrawals in an amount up to the reportable payments made from the day after the date of receipt of the awaiting-TIN certification to the date of withdrawal are treated as reportable payments.
(iii) Withholding regardless of withdrawals. Under this paragraph (a)(3)(iii), a payor must start withholding under section 3406 on the account not later than 7 business days after the date the payor receives the awaiting-TIN certification on reportable payments thereafter made to the account (whether or not the payee makes a cash withdrawal). The payor must withhold under section 3406 until the earlier of the date the payor receives a certified taxpayer identification number from the payee, the date the account is closed, or the date withholding under section 3406 starts on all reportable payments made to the account, instrument, or relationship. The payor must obtain a certified taxpayer identification number from the payee within 60 days after the date that the payor receives the awaiting-TIN certificate or undertake a mailing each year soliciting the certified taxpayer identification number from the payee until the earlier of the calendar year that the certified taxpayer identification number is received, or the calendar year in which the account is closed. However, if the account is closed in December of a calendar year, the mailing must be made after the account is closed and before January 31 of the subsequent calendar year.
(b) Special rule for readily tradable instruments. The 60-day awaiting-TIN exemption described in paragraph (a)(1) of this section applies to payments made with respect to readily tradable instruments only if the payee provides an awaiting-TIN certificate directly to the payor. If a broker acquires a readily tradable instrument through a post-1983 brokerage account (as described in § 31.3406(d)-1(c)(2)) for a payee who has no taxpayer identification number, the broker must advise the payor as required in § 31.3406(d)-4(a)(1) that the payee failed to provide a taxpayer identification number under penalties of perjury, regardless of whether the payee provides an awaiting-TIN certificate to the broker. Once a payor is notified by a broker that a payee failed to provide a taxpayer identification number in the required manner, or that the payee is subject to withholding under section 3406(a)(1) (B) or (C), the payor must impose withholding under section 3406 for the appropriate period described in § 31.3406(e)-1.
(c) Exceptions —(1) In general. The 60-day awaiting-TIN exemption described in paragraph (a) of this section does not apply to—
(i) Window transactions (as defined in § 31.3406(b)(2)-3(b));
(ii) Redemptions of bearer obligations that are subject to reporting under section 6045; or
(iii) Other amounts that are subject to reporting under section 6045 (except as described in paragraph (c)(2) of this section).
(2) Special rule for amounts subject to reporting under section 6045 other than proceeds of redemptions of bearer obligations. If a broker's customer does not provide a taxpayer identification number to the broker, and the broker effects a sale that is subject to reporting under section 6045 (other than a redemption of a bearer obligation), § 31.3406(d)-3(b) applies, whether or not the sale is pursuant to an instruction by electronic transmission, provided the customer furnishes an awaiting-TIN certificate to the broker before the sale. For purposes of this paragraph (c)(2), the 30-day period provided in § 31.3406(d)-3(b) is a 60-day period.
(d) Awaiting-TIN certificate. A payee qualifies for the 60-day awaiting-TIN exemption provided in paragraph (a) of this section if the payee furnishes a written statement to the payor, signed under penalties of perjury, that the payee has not been issued a taxpayer identification number, that the payee has applied for a taxpayer identification number or intends to apply for a number in the near future, and that the payee understands that if the payee does not provide a number to the payor within 60 days, the payor is required under section 3406 to withhold 31 percent of any reportable payment thereafter made to the payee until the payor receives a number, and 31 percent of a withdrawal to the extent of reportable payments made to the payee during the 60-day period, as described in paragraph (a) of this section. Language that is substantially similar to the awaiting-TIN certification on Form W-9 will satisfy the requirements of this paragraph (d).
(e) Form for awaiting-TIN certificate. A payor may use Form W-9 for the awaiting-TIN certificate, or a payor may include language that is substantially similar to the awaiting-TIN certification on Form W-9 in any other document of the payor. See § 31.3406(h)-3, which provides that Form W-9 is the prescribed form but permits use of substitute forms, and specifies the length of time the payor is required to retain the form. If Form W-9 is used, the payee should write “Applied For” in the space reserved for the taxpayer identification number.
§ 31.3406(h)-1   Definitions.
(a) In general. For purposes of section 3406 and the regulations thereunder, the definitions of this section apply.
(b) Taxpayer identification number —(1) In general. Taxpayer identification number means the identifying number assigned to a person under section 6109 (relating to identifying numbers, generally a nine-digit social security number for an individual and a nine-digit employer identification number for a nonindividual, e.g., a corporation, partnership, trust, or estate). An obviously incorrect number is not considered a taxpayer identification number. See § 31.6011(b)-2 and § 301.6109-1 of this chapter for provisions relating to obtaining a taxpayer identification number.
(2) Obviously incorrect number. Obviously incorrect number means a number that does not contain nine digits or a number that includes an alpha character as one of the nine digits.
(c) Broker. Broker is defined in section 6045(c)(1) and § 1.6045-1(a)(1) of this chapter. If there could be more than one broker with respect to any acquisition, only the broker having the closest contact (as determined under 1.6045-1(c)(3)(iii) and (iv) of this chapter) with the payee is treated as a broker. In the case of any instrument, the term broker does not include any person who is the payor with respect to the instrument as described in § 31.3406(a)-2.
(d) Readily tradable instrument. Readily tradable instrument means—
(1) Any instrument that is part of an issue any portion of which is traded on an established securities market (within the meaning of section 453(f)(5)); or
(2) Any instrument that is regularly quoted by brokers or dealers making a market.
(e) Day. Day means a calendar day unless specified otherwise under any section of the regulations under section 3406. For example, see §§ 31.3406(d)-5(a) and 31.3406(g)-3(a)(2).
(f) Business day. Business day means any day other than a Saturday, Sunday, or legal holiday (within the meaning of section 7503).
§ 31.3406(h)-2   Special rules.
(a) Joint accounts —(1) Relevant name and taxpayer identification number combination. For purposes of identifying the account subject to withholding under sections 3406(a)(1) (B) and (C), the relevant name and taxpayer identification number combination is that which is used for information reporting purposes.
(2) Optional rule for accounts subject to backup withholding under section 3406(a)(1) (B) or (C) where the names are switched. See § 31.3406(d)-5(c)(4)(iii) under which a payor may withhold under section 3406(a)(1)(B) as required even though the names or taxpayer identification numbers on the account have been switched. The rules under § 31.3406(d)-5(c)(4)(iii) may be applied comparably by a payor who is required to withhold under section 3406(a)(1)(C).
(3) Joint foreign payees —(i) In general. If the relevant payee listed on a jointly owned account or instrument provides a Form W-8 or documentary evidence described in § 1.1441-1(e)(1)(ii) regarding its foreign status, withholding under section 3406 applies unless every joint payee provides the statement regarding foreign status (under the provisions of chapters 3 or 61 of the Internal Revenue Code and the regulations under those provisions); any one of the joint owners who has not established foreign status provides a taxpayer identification number to the payor in the manner required in §§ 31.3406(d)-1 through 31.3406(d)-5; or, in the case of a withholdable payment (as defined in § 1.6049-4(f)(15)), any joint payee does not appear to be an individual as described in § 1.1471-3(f)(7). See § 1.6049-5(d)(2)(iii) of this chapter for corresponding joint payees provisions.
(ii) Information reporting on an account including foreign payees. If any one of the joint payees who has not established foreign status provides a taxpayer identification number under paragraph (a)(3)(i)(B) of this section, that number is the taxpayer identification number that is required to be furnished for purposes of information reporting and withholding under section 3406.
(b) Backup withholding from an alternative source —(1) In general. A payor may not withhold under section 3406 from a source maintained by the payor other than the source with respect to which there exists a liability to withhold under section 3406 with respect to the payee. See section 3403 and § 31.3403-1, which provide that the payor is liable for the amount required to be withheld regardless of whether the payor withholds.
(2) Exceptions for payments made in property —(i) Backup withholding from alternative source. In the case of a payment that is made in property (other than money), the payor must withhold under section 3406, 31 percent of the fair market value of the property determined immediately before or on the date of payment. The payor may withhold under section 3406 from the principal amount being deposited with the payor or from another source maintained by the payee with the payor. The source from which the tax is withheld under section 3406 must be payable to at least one of the persons listed on the account subject to withholding. If the account or source is not payable exclusively to the same person or persons listed on the account subject to withholding under section 3406, then the payor must obtain a written statement from all other persons to whom the account or source is payable authorizing the payor to withhold under section 3406 from the alternative account or source. A payor that elects to withhold under section 3406 from an alternative source may determine the account or source from which the tax is to be withheld, or may allow the payee to designate the alternative source. A payee may not, however, require a payor to withhold under section 3406 from a specific alternative source. See § 31.3402(q)-1(d), Example 5, for methods of withholding on prizes, awards, and gambling winnings paid in property other than cash.
(ii) Deferral of withholding. If the payor cannot locate, using reasonable care (following procedures substantially similar to those set forth in § 31.3406(d)-5(c)(3)(ii) (A) and (B)), an alternative source of cash from which the payor may satisfy its withholding obligation pursuant to paragraph (b)(2)(i) of this section, the payor may defer its obligation to withhold under section 3406, except for reportable payments of property made in connection with prizes, awards, or gambling winnings, until the earlier of—
(A) The date the payor makes a cash payment to the account subject to withholding under section 3406 or cash is otherwise deposited in the account in a sufficient amount to satisfy the obligation in full; or
(B) The close of the fourth calendar year after the obligation arose.
(iii) Barter exchanges. In the case of a barter exchange that issues scrip to, or credits the account of, a member or client of the exchange in payment for property or services, the barter exchange may withhold under section 3406 from—
(A) The scrip or credit, if converted to cash in order to satisfy the deposit requirements of section 6302 and § 31.6302-4; or
(B) Any other source maintained by the exchange for the member or client in the manner described in paragraph (b)(2) of this section.
(c) Trusts. Withholding under section 3406 applies to reportable payments made to a trust if any of the conditions for imposing withholding under section 3406 apply to the trust. Generally, a trust is not a payor and will not be required to withhold under section 3406 on reportable payments that it makes to its beneficiary who is subject to withholding under section 3406. The preceding sentence does not apply, however, to a grantor trustdescribed in § 31.3406(a)-2(b)(1) or (2), which is treated as a payor. The trustee of a trust described in this paragraph (c) may certify that the trust's taxpayer identification number is correct and that the trust is not subject to withholding due to notified payee underreporting, without regard to the status of the beneficiaries of the trust.
(d) Adjustment of prior withholding by middlemen. A middleman payor (as defined in § 31.3406(a)-2(b) or in the section on information reporting to which the payment relates) who receives a payment from which tax has been erroneously withheld under section 3406 may seek a refund of the tax withheld by the payor from whom the middleman payor received the payment (referred to as the “upstream payor”). Alternatively, the middleman payor may obtain a refund of the tax by claiming a credit for the amount of tax withheld by the upstream payor against the deposit of any tax imposed by this chapter which the middleman payor is required to withhold and deposit (as described in section 6413 and § 31.6413(a)-2). In either case, the middleman payor must pay or credit the gross amount of the payment (including the tax withheld) to its payee as though it had received the gross amount of the payment from the upstream payor and must withhold under section 3406 only if one of the conditions for imposing backup withholding exists with respect to its payee. If its payee is not subject to withholding under section 3406, the payor must pay or credit the full amount of the payment to the payee, unless, with respect to payments made after December 31, 2000, the payor chooses to apply prior withholding under section 3406 to an amount required to be withheld under another section of the Internal Revenue Code (such as under section 1441) to the extent permitted under procedures prescribed by the Internal Revenue Service (see § 601.601(d)(2) of this chapter). See § 31.6413(a)-3 regarding repayment by a payor of tax erroneously collected from a payee.
(e) Conversion of amounts paid in foreign currency into United States dollars —(1) Convertible foreign currency. If a payment is made in a currency other than the United States dollar, the amount subject to withholding under section 3406 is determined by applying the statutory rate of backup withholding to the foreign currency payment and converting the amount withheld into United States dollars on the date of payment at the spot rate (as defined in § 1.988-1(d)(1) of this chapter) or pursuant to a reasonable spot rate convention. For example, a withholding agent may use a month-end spot rate or a monthly average spot rate. A spot rate convention must be used consistently with respect to all non-dollar amounts withheld and from year to year. Such convention cannot be changed without the consent of the Commissioner.
(2) Nonconvertible foreign currency. [Reserved]
(f) Coordination with other sections. For purposes of section 31, chapter 24 (other than section 3402(n)) of subtitle C of the Internal Revenue Code (relating to employment taxes and collection of income tax at source) and so much of subtitle F (other than section 7205) of the Internal Revenue Code (relating to procedure and administration) as relates to this chapter, and the regulations thereunder—
(1) An amount required to be withheld under section 3406 must be treated as a tax required to be withheld under section 3402;
(2) An amount withheld under section 3406 must be treated as an amount withheld under section 3402;
(3) An amount withheld under section 3406 must be deposited as required under § 31.6302-4;
(4) Wages includes the gross amount of any reportable payment (as defined in section 3406(b)) except for purposes of section 6014 (relating to an election by the taxpayer not to compute the tax on his annual return);
(5) Employee includes a payee of any reportable payment; and
(6) Employer includes a payor who is required to withhold the tax under section 3406 (as defined in § 31.3406(a)-2) with respect to any reportable payment (as defined in section 3406(b)).
(g) Tax liabilities and penalties. A payor is subject to the same civil and criminal penalties for failing to impose withholding under section 3406 as an employer who fails to withhold on a payment of wages. In addition, a broker may be subject to the penalty under section 6705 (failure of a broker to provide notice to a payor).
(h) To whom payor is liable for amount withheld. A payor is not liable to any person for any amount withheld under section 3406. A payor is liable only to the United States for an amount that is required to be withheld as provided in § 31.3403-1.
(i) Effective/applicability date. This section applies to payments made on or after January 6, 2017. (For payments made after June 30, 2014, and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1, revised April 1, 2016.)
§ 31.3406(h)-3   Certificates.
(a) Prescribed form to furnish information under penalties of perjury —(1) In general. Except as provided in paragraph (c) of this section, the Form W-9 is the form prescribed under section 3406 on which a payee that is a U.S. person certifies, under penalties of perjury, that—
(i) The taxpayer identification number furnished to the payor is correct (as required in § 31.3406(d)-1 and § 31.3406(d)-5);
(ii) The payee is not subject to withholding due to notified payee underreporting (as required in § 31.3406(d)-2);
(iii) The payee is an exempt recipient (as described in § 31.3406(g)-1); or
(iv) The payee is awaiting receipt of a taxpayer identification number (as described in § 31.3406(g)-3).
(2) Use of a single or multiple Forms W-9 for accounts of the same payee. A valid Form W-9 must include the name and taxpayer identification number of the payee. Except as provided in paragraph (b) of this section, the payee must sign under penalties of perjury and date the Form W-9 in order to satisfy the requirements of this section. A payor or broker may require a payee to furnish a separate Form W-9 for each obligation, deposit, certificate, share, membership, contract, or other instrument, or one Form W-9 for all the payee's obligations or relationships with the payor or broker. In addition, a payee of a mutual fund that has a common investment advisor or common principal underwriter with other mutual funds (within the same family of funds) may be permitted, in the discretion of the mutual fund, to provide one Form W-9 with respect to shares acquired or owned in any of the funds.
(b) Prescribed form to furnish a noncertified taxpayer identification number. With respect to accounts or other relationships where the payee is not required to certify, under penalties of perjury, that the taxpayer identification number being furnished is correct, the payor or broker may obtain the taxpayer identification number orally or may use Form W-9, a substitute form, or any other document, but the payee is not required to sign the form.
(c) Forms prepared by payors or brokers—(1) Substitute forms; in general. A payor or broker may prepare and use a form that contains provisions that are substantially similar to those of the official Form W-9. A payor or broker may use any document relating to the transaction, such as the signature card for an account, so long as the certifications are clearly set forth. A payor or broker who uses a substitute form may furnish orally or in writing the instructions for the Form W-9 that relate to the account. A payor or broker may refuse to accept certifications (including the official Form W-9) that are not made on the form or forms provided by the payor or broker. A payor or broker may refuse to accept a certification provided by a payee only if the payor or broker furnishes the payee with an acceptable form immediately upon receipt of an unacceptable form or within 5 business days of receipt of an unacceptable form. An acceptable form for this purpose must contain a notice that the payor or broker has refused to accept the form submitted by the payee and that the payee must submit the acceptable form provided by the payor in order for the payee not to be subject to withholding under section 3406. If the payor or broker requires the payee to furnish a form for each account of the payee, the payor or broker is not required to furnish an acceptable form until the payee furnishes the payor or broker with the payee's account numbers. A payor or broker may use separate substitute forms to have a payee certify under penalties of perjury that—
(i) The payee's taxpayer identification number is correct; and
(ii) The payee is not subject to withholding under section 3406 due to notified payee underreporting.
(2) Form for exempt recipient. A payor or broker may use a substitute form for the payee to certify, under penalties of perjury, that the payee is an exempt recipient (described in § 31.3406(g)-1 or described in the respective reporting section), provided the form contains provisions that are substantially similar to those of the official Form W-9 relating to exempt recipients. A certificate must be prepared in accordance with the instructions applicable to exempt recipients on Form W-9, and must set forth fully and clearly the data called for therein. If a payor will treat the payee as an exempt recipient only if the payee files a certificate as to its exempt status, the certificate is valid only if it contains the payee's taxpayer identification number. Thus, a payee must include the payee's taxpayer identification number on a certificate that a payor requires to be made in order to treat the payee as an exempt recipient.
(d) Special rule for brokers. A broker may act as the payee's agent for purposes of furnishing a taxpayer identification number or certification to a payor with respect to any readily tradable instrument (as defined in § 31.3406(h)-1(d)) provided the payee provides a taxpayer identification number on Form W-9 or other acceptable substitute form to the broker. The payor may rely on a taxpayer identification number provided by the broker unless certification is required (as described in § 31.3406(d)-4) and the broker notifies the payor that the number was not certified.
(e) Reasonable reliance on certificate —(1) In general. A payor is not liable for the tax imposed under section 3406 if the payor's failure to deduct and withhold the tax is due to reasonable reliance, as defined in paragraph (e)(2) of this section, on a Form W-9 (or other acceptable substitute) required by this section.
(2) Circumstances establishing reasonable reliance. For purposes of paragraph (e)(1) of this section, a payor can reasonably rely on a Form W-9 (or other acceptable substitute) unless—
(i) The form does not contain the name and taxpayer identification number of the payee (or does not state, in lieu of a taxpayer identification number, that the payee is awaiting receipt of a taxpayer identification number (i.e., an awaiting-TIN certificate));
(ii) The form is not signed and dated by the payee;
(iii) The form does not contain the statement, when required, that the payee is not subject to withholding due to notified payee underreporting;
(iv) The payee has deleted the jurat or other similar provisions by which the payee certifies or affirms the correctness of the statements contained on the form; or
(v) For purposes of section 3406(a)(1)(C), the payor is required to subject the account to which the form relates to withholding under section 3406(a)(1)(C) under the circumstances described in § 31.3406(c)-1(c)(3)(iii).
(f) Who may sign certificate —(1) In general. A Form W-9 or other acceptable substitute form may be signed by any person who is authorized to sign a declaration under penalties of perjury on behalf of the payee as provided in section 6061 and the regulations thereunder (relating to who may sign generally for an individual, which includes certain agents who may sign returns and other documents), section 6062 and the regulations thereunder (relating to who may sign corporate returns), and section 6063 and the regulations thereunder (relating to who may sign partnership returns).
(2) Notified payee underreporting. A payee who has not been notified that he is subject to withholding under section 3406(a)(1)(C) as a result of notified payee underreporting may make the certification related to notified payee underreporting. In addition, a payee who was subject to withholding under section 3406(a)(1)(C) due to notified payee underreporting may certify that he is not subject to withholding under section 3406(a)(1)(C) due to notified payee underreporting if the Internal Revenue Service has provided the payee with written certification that withholding under section 3406(a)(1)(C) due to notified payee underreporting has terminated.
(g) Retention of certificates —(1) Accounts or instruments that are not pre-1984 accounts and brokerage relationships that are post-1983 brokerage accounts. With respect to an account or instrument that is not a pre-1984 account (as described in § 31.3406(d)-1(b)(3)), or with respect to a brokerage relationship that is a post-1983 brokerage account (as described in § 31.3406(d)-1(c)(2)), a payor or broker who receives a Form W-9 or other acceptable substitute form related to withholding under section 3406 must retain the form in its records for 3 years from the date the account is opened or the instrument is purchased. The form may be retained on microfilm or microfiche.
(2) Accounts or instruments that are pre-1984 accounts and brokerage relationships that are not post-1983 brokerage accounts. With respect to a pre-1984 account (as described in § 31.3406(d)-1(b)(1)) or with respect to a brokerage relationship that is not a post-1983 brokerage account (as described in § 31.3406(d)-1(c)(1)), a payor or broker is not required to retain any Form W-9 or other acceptable substitute form. If, however, the payor or broker requires the payee to file only one Form W-9 or substitute form for all accounts or instruments of the payee, the payor or broker must retain the single form in the manner and for the period of time described in paragraph (g)(1) of this section if that form relates to any account or instrument that is not a pre-1984 account or relates to a post-1983 brokerage account. If a payee has certified that the payee is an exempt recipient described in § 31.3406(g)-1, the payor or broker must retain the form unless the payor or broker can establish the existence of procedures that are reasonably calculated to ensure that a payee who has so certified is accurately identified in the payor's or broker's records.
(h) Cross references. For the requirement to file an information return (and furnish the related statement) with respect to a reportable payment, particularly if that payment has been subject to withholding under section 3406, see subtitle F, chapter 61, subparts B and C of the Internal Revenue Code. See § 31.6302-4 for the requirement to deposit amounts withheld under section 3406 on either a monthly or semi-weekly basis. See § 31.6011(a)-4(b) for the requirement to file Form 945, Annual Return of Withheld Federal Income Tax, to reflect amounts withheld under section 3406. See § 31.6071(a)-1 for the time for filing the Form 945.
§ 31.3406(i)-1   Effective date.
Sections 31.3406-0 through 31.3406(i)-1 (except §§ 31.3406(d)-5 and 31.3406(g)-1(c) and except for international transactions) are effective after December 31, 1996, and, optionally, for reportable payments made and transactions occurring on or after December 21, 1995. For the effective date of § 31.3406(d)-5, see § 31.3406(d)-5(i). Section 31.3406(g)-1(c) is effective before January 1, 1997. See §§ 35a.9999-0T through 35a.9999-5 of this chapter for rules that apply to international transactions after December 31, 1996.
§ 31.3406(j)-1   Taxpayer Identification Number (TIN) matching program.
(a) The matching program. Under section 3406(i), the Commissioner has the authority to establish Taxpayer Identification Number (TIN) matching programs. The Commissioner may prescribe in a revenue procedure ( see § 601.601(d)(2) of this chapter) or other appropriate guidance the scope and the terms and conditions of participating in any TIN matching program. In general, under a matching program, prior to filing information returns with respect to reportable payments as defined in section 3406(b)(1), a payor of those reportable payments who is entitled to participate in the matching program may contact the Internal Revenue Service (IRS) with respect to the TIN furnished by a payee who has received or is likely to receive a reportable payment. The IRS will inform the payor whether or not a name/TIN combination furnished by the payee matches a name/TIN combination maintained in the data base utilized for the particular matching program. For purposes of this section, the term payor includes an agent designated by the payor to participate in TIN matching on the payor's behalf.
(b) Notice of incorrect TIN. No matching details received by a payor through a matching program will constitute a notice regarding an incorrect name/TIN combination under § 31.3406(d)-5(c) for purposes of imposing backup withholding under section 3406(a)(1)(B).
(c) Application of section 3406(f). The provisions of section 3406(f), relating to confidentiality of information, apply to any matching details received by a payor through the matching program. A payor may not take into account any such matching details in determining whether to open or close an account with a payee.
(d) Reasonable cause. The IRS will not use either a payor's decision not to participate in an available TIN matching program or the results received by a payor from participation in a TIN matching program implemented under the authority of this section as a basis to assert that the payor lacks reasonable cause under section 6724(a) for the failure to file an information return under section 6721 or to furnish a correct payee statement under section 6722. If the establishment of reasonable cause may be relevant to a substantial number of the participants in a TIN matching program implemented under the authority of this section, the extent to which, if any, a payor may establish reasonable cause by participating in the TIN matching program will be set forth in the guidance establishing the program.
(e) Definition of account. Account means any account, instrument, or other relationship with a payor and with respect to which a payor has made or is likely to make a reportable payment as defined in section 3406(b)(1).
(f) Effective date. The last sentence in paragraph (a) of this section is applicable on January 31, 2003. All other provisions of this section are applicable on and after June 18, 1997.
§ 31.3501(a)-1T   Question and answer relating to the time employers must collect and pay the taxes on noncash fringe benefits (Temporary).
The following questions and answers relate to the time employers must collect and pay the taxes imposed by subtitle C on noncash fringe benefits:
Q-1: If a noncash fringe benefit constitutes “wages” under section 3121(a), 3306(b), or 3401(a), or constitutes “compensation” under section 3231(e), when must an employer collect and pay the taxes imposed by Subtitle C?
A-1: For purposes of an employer's liability to collect and pay the taxes imposed by Subtitle C, an employer may deem such fringe benefit to be paid at any time on or after the date on which it is provided, as long as such date is on or before the last day of the calendar quarter in which such benefit is provided. An employer may consider the benefit to be provided in two or more parts for purposes of the preceding sentence. For example, if a fringe benefit with a fair market value of $1,000 is provided on January 1, 1985, the employer could deem $500 paid on February 28, 1985 and $500 paid on March 31, 1985.
With respect to noncash fringe benefits provided during the first calendar quarter of 1985, a special rule applies. Such benefits may be deemed paid at any time on or after the date on which they are provided as long as the date they are deemed paid is on or before the last day of the second calendar quarter of 1985.
In addition, for purposes of § 31.6302(c)-1(a)(1)(i), the term “tax” does not include the employer tax under section 3111 with respect to noncash fringe benefits which are deemed by the employer to be paid on the last day of any calendar quarter. For purposes of the first sentence of § 31.6302(c)-2(a)(1), the phrase “employer tax imposed after December 31, 1983, under section 3221 (a) and (b)” will not include any such employer tax with respect to noncash fringe benefits which are deemed by the employer to be paid on the last day of the quarter; provided that for purposes of deposits required under § 31.6302(c)-1(a)(1)(v), such first sentence applies to such noncash fringe benefits.
Notwithstanding anything in this section to the contrary, if an employer in fact withholds, the amount withheld is subject to the general deposit rules.
The manner in which and the time at which the employer withholds amounts from the wages of an employee to pay the taxes imposed under section 3101, 3201, and/or 3402 will generally be left to be determined by the employer and the employee. Any delay in withholding, however, does not affect the employer's obligation upon the filing of an employment tax return, to pay amounts which would be due under this subtitle if the employer had withheld, with respect to noncash fringe benefits, the amount which would have been required to be withheld if such noncash fringe benefits had been paid in cash on the date the benefits were deemed paid. However, if such amounts are not withheld from the wages of an employee within a reasonable period after payment of the taxes by the employer, payment by the employer may be deemed additional compensation of the employee.
Q-2: Are any fringe benefits excepted from the rules contained in Q/A-1 of this section?
A-2: Yes. The rules contained in Q/A-1 of this section do not apply to the transfer of personal property (both tangible and intangible) of a kind held for investment or to the transfer of real property. Accordingly, an employer is liable for the collection and payment of taxes imposed by this subtitle when such property is transferred. For example, stock transferred in connection with the performance of services is paid, for purposes of this subtitle C, on the date the stock is transferred, i.e., on the date the stock vests pursuant to section 83 (absent a section 83(b) election).
Q-3: What is an example of the application of the rules contained in Q/A-1 of this section with respect to obligations under Chapters 21 and 24 of subtitle C?
A-3: All of employer A's employees received $100 in cash as wages each week from A. In addition, during a calendar quarter, each such employee receives noncash fringe benefits, the fair market value of which is $500. A deems all such noncash fringe beneftis to be paid on the last day of the quarter. As of the end of the quarter, no amount has been withheld from the employee's wages with respect to such noncash fringe benefits, and A has “undeposited taxes” (within the meaning of § 31.6302(c)-1(a)(1)(i)) of more than $3,000 attributable to amounts actually withheld under section 3102 or section 3402 or due under section 3111 with respect to cash wages of A's employees. The amount which A must deposit within 3 banking days after the end of the quarter will be determined without regard to the noncash fringe benefits deemed paid on the last day of the quarter.
During the month following the quarter, A withholds from its employees with respect to the noncash fringe benefits deemed paid on the last day of the quarter. As A withholds amounts, such amounts become “taxes” subject to § 31.6302(c)-1(a)(1)(i). If, as of the date of filing of the return for the period which includes the last day of the quarter, A has not deposited all amounts with respect to the quarter which are due under section 3111 or which would have been due had A withheld, under sections 3102 and 3402, with respect to noncash fringe benefits, the amount which would have been required to be withheld had such benefits been paid in cash, A shall pay the balance with its return. A must make such payment regardless of whether, at the time the return is filed, he has actually withheld all amounts which he would have been required to withhold had such benefits been paid in cash.
Q-4: If an employee is provided with a noncash fringe benefit and separates from service before the benefit is deemed paid by the employer, is the employer liable for the taxes imposed by subtitle C?
A-4: Yes. The employer's liability is unaffected by his ability to collect the tax from the former employer.
Q-5: If an entity other than the employer provides a noncash fringe benefit to an employee, is that entity considered the employer of such employee with respect to such noncash fringe benefit for any purposes of subtitle C?
A-5: The provision of noncash fringe benefits by an entity to an employee of another employer does not make such entity the employer of such employee with respect to such noncash fringe benefit for any purpose of subtitle C, so long as such noncash fringe benefits are incidental to the provision of wages by the employer to such employee. For example, if two unrelated airlines, A and B, enter into a reciprocal agreement where by the parents of employees of both airlines are entitled to free flights on both airlines, the fact that A is providing a noncash fringe benefit to the employees of B generally will not make A the employer of such employees for purposes of subtitle C.
Q-6: Do special rules apply to the provision of taxable noncash fringe benefits by a nonemployer under a reciprocal agreement with the employee's employer?
A-6: If the provision of taxable noncash fringe benefits meets the requirements of Q/A-5 of this section, the nonemployer provider of the benefits is not required to withhold. The employer must take the steps necessary to obtain the relevant information from the provider of the benefits in order to enable the employer to satisfy, in a timely manner, its obligations under subtitle C to collect and pay taxes with respect to the noncash fringe benefits provided by the nonemployer.
Q-7: For purposes of subtitle C, how is the fair market value of an employer-provided automobile or other road vehicle during any time period to be determined?
A-7: The value of the availability of an employer-provided automobile or other road vehicle must be determined under the rules provided in ;§§ 1.61-21 and 1.132-1 of this chapter. (For purposes of this section, the terms “automobile” and “road vehicle” have the meaning given those terms in § 1.61-21). For example, assume that an employee adopts the special rule provided in § 1.61-21 and that the Annual Lease Value, as defined in § 1.61-21, of an automobile or other road vehicle is $2,100. The automobile or other road vehicle is provided to employee A on January 1, 1985. As of March 31, A had driven the automobile or other road vehicle 1,000 personal miles and 3,000 miles in the course of his employer's business. For the quarter, A would have had wages of $131.25 attributable to his personal use of the automobile or other road vehicle computed by subtracting a $393.75 working condition fringe from $525 ($2,100 divided by 4). See section 132(d) and § 1.132-1T. During the second quarter of 1985, A drives the automobile or other road vehicle only 1,000 miles, all of which are personal. In order to calculate the value of the wages provided to A in the second quarter in the form of the availability of the employer-provided automobile or other road vehicle, first A's employer calculates the Annual Lease Value attributable to the first six months of 1985 which is $1,050 ($2,100 divided by 2). Second, A's employer calculates the working condition fringe exclusion which is $630 ($1,050 multiplied by a fraction the numerator of which is A's business mileage (3,000 miles) and the denominator of which is A's total mileage (5,000 miles)). The calculations result in a total inclusion of $420 ($1,050—$630). From the total inclusion of $420, the wages provided in the first quarter, $131.25, are subtracted, leaving $288.75 as the wages includible in the second quarter attributable to the availability to A of the employer-provided automobile or other road vehicle.
Q-8: May an employer treat any part of the Annual Lease Value or Daily Lease Value (as defined in 1.61-21 of this chapter ), or the fair market value if the special rule of 1.61-21 of this chapter is not or cannot be used, of an automobile or other road vehicle made available to an employee as includible in the employee's gross income without regard to whether the employee has used the automobile or other road vehicle in the employer's business?
A-8: No, except as otherwise provided in this Q/A-8, an employer may not include any amount in an employee's income with respect to an employer-provided automobile or other road vehicle unless such inclusion is based on:
(a) Records or a statement submitted by an employee that contain the business and total mileage for the period beginning on January 1, 1985, and ending on the last day of the employer's taxable year that began in 1984, or
(b) Records that satisfy the employer's “adequate contemporaneous record” requirement under section 274(d)(4) and the regulations thereunder for the employer's taxable years beginning after December 31, 1984.
Notwithstanding the preceding paragraph of this Q/A-8, an employer may include in an employee's income the value of the availability of an employer-provided road vehicle, calculated without regard to a working condition fringe exclusion based on business mileage if one of the conditions listed in § 1.274-6T(f)(1) is satisfied with respect to the relevant period.
In addition, the employer must, before including any amount in an employee's income with respect to an employer-provided road vehicle, take into account other working condition fringe exclusions, such as the security exclusion discussed in § 1.132-1T. If proper calculation of an exclusion requires information from the employee and the employee does not respond within a reasonable period of time to a request for that information or produces information which the employer knows or has reason to know is not accurate, the employer may disregard such exclusion in reporting the employee's gross income.
Q-8a: May an employer withhold amounts attributable to noncash fringe benefits on the basis of average wages as permitted under section 3402(h)(1)?
A-8a: In general, yes. In estimating wages under section 3402(h)(1)(A), however, the employer must take into account estimated business use of the benefit (such as an employer-provided road vehicle). In no event, however, may the amount reported by the employer as “wages” for any employee for any quarter be based on an estimation. However, the rules in Q/A-1 of this section regarding permissible delays in actual withholding apply.
Q-9: If an employee purchases any property or service from an employer at a discount and the discount is not excludable under section 132 and any applicable regulations thereunder, when is the noncash fringe benefit provided?
A-9: Such property or service is provided at the time that ownership is transferred, in the case of property, or the time service is rendered, in the case of services. This will be true regardless of when the employee pays for such property or service or the date payment is due or the rate of interest charged prior to payment. The time at which ownership of the property is transferred must be determined under general tax principles.
Q-10: What rules apply with respect to the treatment of the payment of any noncash fringe benefit as the payment of supplemental wages under section 3402?
A-10: An employer may treat the payment of any noncash fringe benefit as the payment of supplemental wages. Thus, if noncash fringe benefits are provided and tax has been withheld from the employee's regular wages, the employer may determine the tax to be withheld with respect to such noncash fringe benefits by using a flat percentage rate of 20 percent, without allowance for exemptions and without reference to any regular payment of wages. For example, assume that during a calendar quarter A receives from his employer a taxable noncash fringe benefit with a fair market value of $1,000. If the requirements specified above are satisfied, A's employer may determine the tax to be withheld with respect to such benefit by using a flat percentage rate of 20 percent. The employer may also determine the tax to be withheld with respect to such benefit by use of the method described in § 31.3402 (g)-1(a)(2).
§ 31.3502-1   Nondeductibility of taxes in computing taxable income.
For provisions relating to the nondeductibility, in computing taxable income under subtitle A, of the taxes imposed by sections 3101, 3201, and 3211, and of the tax deducted and withheld under chapter 24, see §§ 1.164-2 and 1.275-1 of this chapter (Income Tax Regulations). For provisions relating to the credit allowable to the recipient of the income in respect of the tax deducted and withheld under chapter 24, see § 1.31-1 of this chapter (Income Tax Regulations).
§ 31.3503-1   Tax under chapter 21 or 22 paid under wrong chapter.
If, for any period, an amount is paid as tax—
(a) Under chapter 21 or corresponding provisions of prior law by a person who is not liable for tax for such period under such chapter or prior law, but who is liable for tax for such period under chapter 22 or corresponding provisions of prior law, or
(b) Under chapter 22 or corresponding provisions of prior law by a person who is not liable for tax for such period under such chapter or prior law, but who is liable for tax for such period under chapter 21 or corresponding provisions of prior law,
§ 31.3504-1   Designation of agent by application.
(a) In general. In the event wages as defined in chapter 21 or 24 of the Internal Revenue Code (Code), or compensation as defined in chapter 22 of the Code, of an employee or group of employees, employed by one or more employers, is paid by a fiduciary, agent, or other person (“agent”), or if that agent has the control, receipt, custody, or disposal of (collectively “pays”) wages or compensation, the Internal Revenue Service may, subject to the terms and conditions as it deems proper, authorize that agent to perform the acts required of the employer or employers under those provisions of the Code and the regulations that apply, for purposes of the taxes imposed by the chapter or chapters, with respect to wages or compensation paid by the agent. If the agent is authorized by the Internal Revenue Service to perform such acts, all provisions of law (including penalties) and of the regulations applicable to an employer with respect to such acts shall be applicable to the agent. However, each employer for whom the agent acts shall remain subject to all provisions of law (including penalties) and of the regulations applicable to an employer with respect to such acts. Any application to authorize an agent to perform such acts, signed by the agent and the employer, shall be made on the form prescribed by the Internal Revenue Service and shall be filed with the Internal Revenue Service as prescribed in the instructions to the form and other applicable guidance.
(b) Special rule for home care service recipients. (1) In general. In the event an agent is authorized pursuant to paragraph (a) of this section to perform the acts required of an employer under chapters 21 or 24 on behalf of one or more home care service recipients, as defined in paragraph (b)(3) of this section, the Internal Revenue Service may authorize that agent to perform the acts as are required of employers for purposes of the tax imposed by chapter 23 of the Code with respect to wages paid by the agent for home care services, as defined in paragraph (b)(2) of this section, rendered to the home care service recipient. If the agent is authorized by the Internal Revenue Service to perform such acts, all provisions of law (including penalties) and of the regulations applicable to an employer in respect of such acts shall be applicable to the agent. However, each employer for whom the agent acts shall remain subject to all provisions of law (including penalties) and of the regulations applicable to an employer with respect to such acts.
(2) Home care services. For purposes of this section, the term home care services includes health care and personal attendant care services rendered to the home care service recipient.
(3) Home care service recipient. For purposes of this section, the term home care service recipient means any individual who receives home care services, as defined in paragraph (b)(2) of this section, while enrolled, and for the remainder of the calendar year after ceasing to be enrolled, in a program administered by a Federal, state, or local government agency that provides Federal, state, or local government funds, to pay, in whole or in part, for home care services for that individual.
(c) Effective/applicability dates. An authorization under paragraph (a) in effect prior to December 12, 2013 continues to be in effect after that date. Paragraph (b) of this section applies to wages paid on or after January 1, 2014. However, pursuant to section 7805(b), taxpayers may rely on paragraph (b) of this section for all taxable years for which a valid designation is in effect under paragraph (a) of this section.
§ 31.3504-2   Designation of payor to perform acts of an employer.
(a) In general. A person (as defined in section 7701(a)(1)) that pays wages or compensation (“payor”) to the individual(s) performing services for any client pursuant to a service agreement, except as provided in paragraph (d) of this section, is designated to perform the acts required of an employer with respect to the wages or compensation paid. For purposes of this section the term wages has the same meaning as the term wages has for purposes of chapters 21, 23, and 24, and the term compensation has the same meaning as the term compensation has for purposes of chapter 22. This section is not applicable if the payor has been authorized as an agent of the employer under § 31.3504-1.
(b) Definitions —(1) Client. The term client means an individual or entity that enters into a service agreement with the payor.
(2) Service agreement. (i) The term service agreement means an agreement pursuant to which the payor—
(A) Asserts it is the employer (or “co-employer”) of the individual(s) performing services for the client;
(B) Pays wages or compensation to the individual(s) for services the individual(s) perform for the client; and
(C) Assumes responsibility to collect, report, and pay, or assumes liability for, any taxes applicable under subtitle C of the Code with respect to the wages or compensation paid by the payor to the individual(s) performing services for the client.
(ii) For purposes of paragraph (b)(2)(i)(A) of this section, the payor may implicitly or explicitly assert it is the employer (or “co-employer”) of the individual(s) performing services for the client, including by agreeing to—
(A) Recruit and hire employees for the client or assign employees as permanent or temporary members of the client's work force, or participate with the client in these actions;
(B) Hire the client's employees as its own and then provide them back to the client to perform services for the client; or
(C) File employment tax returns using its own employer identification number that include wages or compensation paid to the individual(s) performing services for the client.
(c) Effects of designation. If a payor is designated to perform the acts required of an employer under this section then the following rules apply—
(1) A payor must perform the acts required of an employer under each applicable chapter of the Code and the relevant regulations with respect to the wages or compensation paid by such payor. All provisions of law (including penalties) and the regulations applicable to the employer are applicable to the payor so designated with respect to the wages or compensation paid by the payor; and
(2) Each employer for whom the payor is designated remains subject to all provisions of law (including penalties) and of the regulations applicable to an employer.
(d) Exceptions. A payor is not designated to perform the acts required of an employer under this section for any wages or compensation paid by the payor to the individual(s) performing services for a client if—
(1) The wages or compensation are reported on a return filed under the client's employer identification number (as defined in section 6109 and the applicable regulations);
(2) The payor is a common paymaster under sections 3121(s) or 3231(i);
(3) The payor is the employer of the individual(s) (including an employer within the meaning of section 3401(d)(1)); or
(4) The payor is treated as an employer under section 3121(a)(2)(A).
(e) Examples. The following examples illustrate the application of this section:
(1) Example 1. Corporation P enters into an agreement with Employer, effective January 1, 2015. Under the agreement, Corporation P hires the Employer's employees as its own employees and provides them back to Employer to perform services for Employer. Corporation P also assumes responsibility to make payment of the individuals' wages and for the collection, reporting, and payment of applicable taxes. For all pay periods in 2015, Employer provides Corporation P with an amount equal to the gross payroll (that is, wage and tax amounts) of the individuals, and Corporation P pays wages (less the applicable withholding) to the individuals performing services for Employer. Corporation P also reports the wage and tax amounts on Form 941, Employer's QUARTERLY Federal Tax Return, filed for each quarter of 2015 under Corporation P's employer identification number. Corporation P is not a common paymaster, the employer of the individuals (including an employer within the meaning of section 3401(d)(1)), or treated as the employer of the individual under section 3121(a)(2)(A). Corporation P is designated to perform the acts of an employer with respect to all of the wages Corporation P paid to the individuals performing services for Employer for all quarters of 2015. Employer and Corporation P are each subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(2) Example 2. Same facts as Example 1, except that Corporation P only reports the wage and tax amounts on Form 941, Employer's QUARTERLY Federal Tax Return, filed for the 1st and 2nd quarters of 2015. Neither Corporation P nor Employer files returns for the 3rd and 4th quarters of 2015. Corporation P is designated to perform the acts of an employer with respect to all of the wages Corporation P paid to the individuals performing services for Employer for all quarters of 2015. Employer and Corporation P are each subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(3) Example 3. Same facts as Example 1, except that neither Corporation P nor Employer reports the wage and tax amounts on Form 941, Employer's QUARTERLY Federal Tax Return, for any quarter of 2015. Corporation P is designated to perform the acts of an employer with respect to all of the wages Corporation P paid to the individuals performing services for Employer for all quarters of 2015. Employer and Corporation P are each subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(4) Example 4. Same facts as Example 1, except that Employer provides only net payroll (that is, wages less tax amounts) to Corporation P for each pay period. Corporation P is designated to perform the acts of an employer with respect to all of the wages Corporation P paid to the individuals performing services for Employer for all quarters of 2015. Employer and Corporation P are each subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(5) Example 5. Same facts as Example 1, except that after Corporation P reports the wage and tax amounts on Form 941, Employer's QUARTERLY Federal Tax Return, filed for each quarter of 2015 under Corporation P's employer identification number, Corporation P files a claim for refund of the employment taxes it paid for each quarter of 2015 that are related to wages Corporation P paid to the individuals performing services for Employer. The basis for Corporation P's refund claim is that Corporation P is not the employer of the individuals that performed services for Employer. Corporation P is designated to perform the acts of an employer with respect to all of the wages Corporation P paid to the individuals performing services for Employer for all quarters of 2015. Accordingly, Corporation P is not entitled to a refund. Employer and Corporation P are each subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(6) Example 6. Corporation S enters into an agreement with Employer, effective January 1, 2015. Under the agreement, Corporation S provides payroll services, including payment of wages to individuals performing services for Employer, and assumes responsibility for the collection, reporting, and payment of applicable taxes. For all pay periods in 2015, Employer provides Corporation S with an amount equal to the gross payroll (that is, wage and tax amounts) of the individuals, and Corporation S pays wages (less the applicable withholding) to the individuals performing services for Employer. Corporation S also reports the wage and tax amounts on Form 941, Employer's QUARTERLY Federal Tax Return, filed for each quarter of 2015 under Employer's employer identification number. Corporation S is not designated to perform the acts of an employer with respect to all of the wages Corporation S paid to the individuals performing services for Employer for all quarters of 2015. Corporation S did not assert it was the employer and filed Forms 941 using Employer's employer identification number. Accordingly, Corporation S is not liable for the applicable employment taxes under this section. Employer remains subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(7) Example 7. Corporation T enters into a consulting agreement with Manufacturer effective January 1, 2015, to provide consulting services to Manufacturer. Corporation T is responsible to pay wages to the individuals providing the consulting services to Manufacturer and to collect, report, and pay the applicable taxes. Corporation T has the right to direct and control the individuals as to when and how to perform the consulting services and, thus, is the common law employer of the individuals providing the consulting services. Corporation T is not designated to perform the acts of an employer with respect to all of the wages Corporation T pays to individuals providing consulting services to Manufacturer. However, as the common law employer of the individuals, Corporation T is subject to all provisions of law (including penalties) applicable in respect of employers with respect to such wages.
(8) Example 8. On January 1, 2015, Corporation U enters into an agreement with Employer for Employer to farm Corporation U's property. Under the agreement, Corporation U and Employer agree to split the proceeds of the sale of the products grown on the property. Employer hires workers to assist it with the farming. Employer has the right to direct and control the workers as to when and how to perform the services and, thus, is the common law employer of the workers. However, Employer is unable to pay the workers until after the products are sold. Therefore, Corporation U pays wages to the workers and deducts this amount from Employer's share of the profits. Corporation U controls the payment of wages within the meaning of section 3401(d)(1). Corporation U is not designated to perform the acts of an employer with respect to all of the wages Corporation U paid to workers providing services for Employer. However, as the section 3401(d)(1) employer of the workers performing services for Employer, Corporation U is subject to all provisions of law (including penalties) applicable in respect of employers with respect to such wages.
(9) Example 9. Corporation V and Employer execute and submit a Form 2678, Employer/Payer Appointment of Agent, to the Service, requesting approval to authorize Corporation V to report, deposit, and pay taxes with respect to wages it pays, as agent of Employer for purposes of Form 941, Employer's QUARTERLY Federal Tax Return. The Form 2678 is approved by the Service and effective for all quarters of 2015. Accordingly, Corporation V reports the wages it pays to individuals performing services for Employer and related tax amounts on Form 941 and Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, filed for each quarter of 2015 under Corporation V's employer identification number. Corporation V is not designated under this section to perform the acts of an employer with respect to all of the wages Corporation V paid to the individuals performing services for Employer for all quarters of 2015. However, as an agent authorized under § 31.3504-1(a), Corporation V is subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages. Employer also remains subject to all provisions of law (including penalties) applicable in respect of employers for all quarters of 2015 with respect to such wages.
(f) Effective/applicability date. These final regulations are effective for wages or compensation paid by a payor in quarters beginning on or after March 31, 2014.
§ 31.3505-1   Liability of third parties paying or providing for wages.
(a) Personal liability in case of direct payment of wages —(1) In general. A lender, surety, or other person—
(i) Who is not an employer for purposes of section 3102 (relating to deduction of tax from wages under the Federal Insurance Contributions Act), section 3202 (relating to deduction of tax from compensation under the Railroad Retirement Tax Act), or section 3402 (relating to deduction of income tax from wages) with respect to an employee or group of employees, and
(ii) Who pays wages on or after January 1, 1967, directly to such employee or group of employees, employed by one or more employers, or to an agent on behalf of such employee or employees,
(2) Example. The provisions of this paragraph may be illustrated by the following example:
(b) Personal liability where funds are supplied —(1) In general. A lender, surety, or other person who—
(i) Advances funds to or for the account of an employer for the specific purpose of paying wages of the employees of that employer, and
(ii) At the time the funds are advanced, has actual notice or knowledge (within the meaning of section 6323(i)(1)) that the employer does not intend to, or will not be able to, make timely payment or deposit of the amounts of tax required by subtitle C of the Code to be deducted and withheld by the employer from those wages,
(2) Examples. The provisions of this paragraph may be illustrated by the following examples:
(3) Ordinary working capital loan. The provisions of section 3505(b) do not apply in the case of an ordinary working capital loan made to an employer, even though the person supplying the funds knows that part of the funds advanced may be used to make wage payments in the ordinary course of business. Generally, an ordinary working capital loan is a loan which is made to enable the borrower to meet current obligations as they arise. The person supplying the funds is not obligated to determine the specific use of an ordinary working capital loan or the ability of the employer to pay the amounts of tax required by subtitle C of the Code to be deducted and withheld. However, section 3505(b) is applicable where the person supplying the funds has actual notice or knowledge (within the meaning of section 6323(i)(1)) at the time of the advance that the funds, or a portion thereof, are to be used specifically to pay net wages, whether or not the written agreement under which the funds are advanced states a different purpose. Whether or not a lender has actual notice or knowledge that the funds are to be used to pay net wages, or merely that the funds may be so used, depends upon the facts and circumstances of each case. For example, a lender, who has actual notice or knowledge that the withheld taxes will not be paid, will be deemed to have actual notice or knowledge that the funds are to be used specifically to pay net wages where substantially all of the employer's ordinary operating expenses consist of salaries and wages even though fund for other incidental operating expenses may be supplied pursuant to an agreement described as a working capital loan agreement.
(c) Definition of other person —(1) In general. As used in this section, the term “other person” means any person who directly pays the wages or supplies funds for the specific purpose of paying the wages of an employee or group of employees of another employer. It does not include a person acting only as agent of the employer or as agent of the employees.
(2) Examples. The provisions of this paragraph may be illustrated by the following examples:
(d) Payment of taxes and interest —(1) Procedure for payment. A lender, surety, or other person may satisfy the personal liability imposed upon him by section 3505 by executing Form 4219 and filing it, accompanied by payment of the amount of tax and interest due the United States, in accordance with the instructions for the form. In the event that the lender, surety, or other person does not satisfy the liability imposed by section 3505, the United States may collect the liability by appropriate civil proceedings commenced within 10 years after assessment of the tax against the employer.
(2) Effect of payment —(i) In general. A person paying the amounts of tax required to be deducted and withheld by subtitle C of the Code as a result of section 3505 and this section is not required to pay the employer's portion of the payroll taxes upon those wages, or file an employer's tax return with respect to those wages, or furnish annual wage and tax statements to the employees.
(ii) Amounts paid by a lender, surety, or other person. Any amounts paid by the lender, surety, or other person to the United States pursuant to this section shall be credited against the liability of the employer on whose behalf those payments are made and shall also reduce the total liability imposed upon the lender, surety, or other person under section 3505 and this section.
(iii) Amounts paid by the employer. Any amounts paid to the United States by an employer and applied to his liability under subtitle C of the Code shall reduce the total liability imposed upon that employer by subtitle C. Such payments will also reduce the liability imposed upon a lender, surety, or other person under section 3505 except that such liability shall not be reduced by any portion of an employer's payment applied against the employer's liability under subtitle C which is in excess of the total liability imposed upon the lender, surety, or other person under section 3505. For example, if a lender supplies $1,000 to an employer for the payment of net wages, upon which $300 withholding tax liability is imposed, a part-payment of $25 by the employer which is applied to this liability would reduce the employer's total liability under subtitle C of the Code by that amount, but the liability imposed upon the lender by section 3505(b) in an amount equal to the withholding tax liability of the employer, which is limited to 25 percent of the amount supplied by him, would remain $250. However, if the employer makes another payment of $200 which is applied to his liability for the withholding taxes, the lender's liability under section 3505 attributable to the withholding taxes is reduced by $175 ($225 less $50 (the amount by which the employer's liability exceeds the lender's liability after application of the limitation)). Thus, after the second payment by the employer, the lender's liability under section 3505(b) is $75 ($250 less $175), plus interest due on the underpayment for the period of underpayment, to a maximum of $250, 25 percent of the funds supplied.
(3) Extensions of the period for collection. Prior to the expiration of the 10-year period for collection after assessment against the employer, the lender, surety, or other third party may agree in writing with the district director, service center director, or compliance center director to extend the 10-year period for collection. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon. If any timely proceeding in court for the collection of the tax and any applicable interest is commenced, the period during which such tax and interest may be collected shall be extended and shall not expire until the liability for the tax (or a judgment against the lender, surety, or other third party arising from such liability) is satisfied or becomes unenforceable.
(e) Returns required by employers and statements for employees. This section does not relieve the employer of the responsibilities imposed upon him to file the returns and supply the receipts and statements required under subchapter A, Chapter 61 of the Code (relating to returns and records).
(f) Time when liability arises. The liability under section 3505 and this section of a lender, surety, or other person paying or supplying funds for the payment of wages is incurred on the last day prescribed for the filing of the employer's Federal employment tax return (determined without regard to any extension of time) in respect of such wages.
(g) Effective date. These regulations are effective on August 1, 1995.
§ 31.3506-1   Companion sitting placement services.
(a) Definitions —(1) Companion sitting placement service. For purposes of this section, the term “companion sitting placement service” means a person (whether or not an individual) engaged in the trade or business of placing sitters with individuals who wish to avail themselves of the sitters' services.
(2) Sitters. For purposes of this section, the term “sitters” means individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled.
(b) General rule. For purposes of subtitle C of the Internal Revenue Code of 1954 (relating to employment taxes), a companion sitting placement service shall not be treated as the employer of its sitters, and the sitters shall not be treated as the employees of the placement service. However, the rule of the preceding sentence shall apply only if the companion sitting placement service neither pays nor receives (directly or through an agent) the salary or wages of the sitters, but is compensated, if at all, on a fee basis by the sitters or the individuals for whom the sitting is performed.
(c) Individuals deemed self-employed. Any individual who, by reason of this section, is deemed not to be the employee of a companion sitting placement service shall be deemed to be self-employed for purposes of the tax on self-employment income (see sections 1401-1403 and the regulations thereunder in Part 1 of this chapter (Income Tax Regulations)).
(d) Scope of rules. The rules of this section operate only to remove sitters and companion sitting placement services from the employee-employer relationship when, under §§ 31.3121(d)-1 and 31.3121(d)-2, that relationship would otherwise exist. Thus, if, under §§ 31.3121(d)-1 and 31.3121(d)-2, a sitter is considered to be the employee of the individual for whom the sitting is performed rather than the employee of the companion sitting placement service, this section has no effect upon that employee-employer relationship.
(e) Examples. The provisions of this section may be illustrated by the following examples:
(f) Effective date. This section shall apply to remuneration received after December 31, 1974.
§ 31.3507-1   Advance payments of earned income credit.
(a) General rule —(1) In general. Every employer paying wages after June 30, 1979, to an employee with respect to whom an earned income credit advance payment certificate is in effect must, at the time of paying the wages, also pay the employee the advance earned income credit amount of that employee. For the purposes of applying this section and § 31.3507-2—
(i) In the case of an individual who receives wages which are subject to income tax withholding, the term “employee” has the same meaning as set forth in section 3401(c) and the regulations thereunder, and the term “wages” has the same meaning as set forth in sections 3401(a) and 3402(e) and the regulations under those sections; and
(ii) In the case of an individual who does not receive wages which are subject to income tax withholding, but who receives wages which are subject to employee FICA taxes, the term “employee” has the same meaning as set forth in section 3121(d) and the regulations thereunder and the term “wages” has the same meaning as set forth in section 3121(a) and the regulations thereunder.
(2) Cross references. For determination of the advance earned income credit amount of an employee, see paragraph (b) of this section. For rules relating to the treatment of the payment of an employee's advance earned income credit amount as equivalent to payment by the employer of withholding and FICA taxes, see paragraph (c) of this section. For rules describing the earned income credit advance payment certificate, see § 31.3507-2 (a) and (b). For rules relating to the employee's furnishing of the earned income credit advance payment certificate and the payroll periods for which the certificate is effective, see § 31.3507-2 (c) and (d).
(b) Advance earned income credit amount. The advance earned income credit amount of an employee is determined, with respect to any payroll period, on the basis of the employee's wages from the employer for the period and in accordance with the advance amount tables prescribed by the Commissioner of Internal Revenue and then in effect for the payroll period. See, however, paragraph (c)(2) of this section. The advance amount paid is reflected on the employee's W-2 form as a separate item (and neither as a reduction of withholding nor an increase in compensation). For purposes of applying this section and § 31.3507-2, the term “payroll period” has the meaning set forth in section 3401(b) and the regulations thereunder. As required by section 3507(c)(2)(A), these advance amount tables must be similar in form to, and coordinated with, the tables prescribed under section 3402 (relating to income tax collected at the source). Sections 3507(c)(2)(B) and 3507(c)(2)(C) provide, respectively, separate rules for the treatment in the advance amount tables of the advance earned income credit of the following two separate classes of employees:
(1) Employees who are not married (within the meaning of section 143), or employees whose spouses do not have an earned income credit advance payment certificate in effect; and
(2) Employees whose spouses have an earned income credit advance payment certificate in effect.
(c) Payment of advance earned income credit amount as payment of withholding and FICA taxes —(1) In general. (i) The provisions of this paragraph (c) apply for all purposes of the Internal Revenue Code of 1954. Payments of advance earned income credit amounts pursuant to paragraph (a)(1) of this section do not constitute the payment of compensation. These payments by the employer are treated as made—
(A) First, from the aggregate amount, with respect to all employees, required to be deducted and withheld for the payroll period under section 3401 (relating to income tax withholding);
(B) Second, from the aggregate amount, with respect to all employees, required to be deducted for the payroll period under section 3102 (relating to employee FICA taxes); and
(C) Third, from the aggregate amount of the taxes imposed for the payroll period under section 3111 (relating to employer FICA taxes).
(ii) The provisions of paragraph (c)(1)(i) of this section may be illustrated by the following example:
(2) Advance payments exceeding taxes due. (i) if, for any payroll period, the aggregate amount of advance earned income credit amounts required to be paid by an employer under paragraph (a)(1) of this section exceeds the sum of the amounts for the payroll period referred to in paragraphs (c)(1)(i) (A) through (C) of this section, the employer reduces each advance amount paid for the payroll period by an amount which bears the same ratio to the excess of the advance amounts as the subject advance amount bears to the aggregate of advance amounts for the payroll period. However, this paragraph (c)(2) does not apply if the employer makes the election provided by paragraph (c)(3) of this section.
(ii) The provisions of paragraph (c)(2) of this section may be illustrated by the following example.
(3) Election to treat excess amounts as advance tax payment. In lieu of reducing advance payments under paragraph (c)(2) of this section, an employer may elect under this paragraph (c)(3) to pay in full all advance earned income credit amounts. However, if no election is made, the employer is required to reduce advance amounts paid in accordance with paragraph (c)(2) of this section. The election, if made, applies to all advance earned income credit amounts required to be paid for the payroll period. The employer reflects the election on the employer's Form 941, 941E, 942, or 943 as the case may be, and must specify (with supporting computations) the amount of the excess of advance amounts paid and the payroll period to which the excess relates. Separate elections may be made for separate payroll periods. The excess of advance amounts paid is treated as an advance payment by the employer of employment taxes described in paragraph (c)(3)(i) through (iii) of this section and due for the period reported on the Form 941, 941E, 942, or 943 which includes the payroll period during which the excess amounts were paid. The amount of the excess advance payment is applied to the amounts of the employer's liability—
(i) First, for income tax withholding due under section 3401 for the reporting period in which the payment is made;
(ii) Second, for employee FICA taxes due under section 3102 for the reporting period in which the payment is made; and
(iii) Third, for employer FICA taxes due under section 3111 for the reporting period in which the payment is made.
(4) Failure to make advance payments. The failure to pay an employee, at the time required by paragraph (a)(1) of this section, all or any part of an advance earned income credit amount as required by this section is treated, for all purposes including penalties, as a failure by the employer as of that time to deduct and withhold under chapter 24 of the Internal Revenue Code of 1954 an amount equal to the advance amount (or part thereof) not paid. This treatment applies to the failure to pay an advance amount to an eligible employee without regard to whether the employee is ultimately not entitled to claim the earned income credit (in full or in part) on a return for the year, so long as the employee has a valid earned income credit advance payment certificate in effect with the employer at the time when the wages were paid. If an employer fails to pay an advance earned income credit amount as required under this section, the advance amount will not be collected by the Internal Revenue Service from the employer if the employer has properly withheld and deposited all income taxes and FICA taxes applicable with respect to the employee. However, such amount may be collected if the employer has not properly withheld and deposited these taxes.
§ 31.3507-2   Earned income credit advance payment certificates.
(a) Definition. For the purposes of this section and § 31.3507-1, an earned income credit advance payment certificate is a statement furnished by an employee to the employer which—
(1) Certifies that the employee reasonably expects to be eligible to receive the earned income credit provided by section 43 for the employee's last taxable year under subtitle A of the Internal Revenue Code of 1954 which begins in the calendar year in which the wages are paid:
(2) Certifies that the employee does not have an earned income credit advance payment certificate in effect for the calendar year (in which the wages are paid) with respect to the payment of wages by another employer, and
(3) States if the employee's spouse has an earned income credit advance payment certificate in effect with any employer. For the rule for determining if an employee's spouse has a certificate in effect, see paragraph (c)(3) of this section.
(b) Form and content of earned income credit advance payment certificate —(1) In general. Form W-5 (Earned Income Credit Advance Payment Certificate) is the prescribed form for the earned income credit advance payment certificate. The Form W-5 must be prepared in accordance with the instructions applicable thereto and must set forth fully and clearly the data therein called for. In lieu of the prescribed form, a form the provisions of which are identical with those of the prescribed form may be used.
(2) Invalid certificates. A Form W-5 does not meet the requirements of section 3507 or this section and is invalid if it is not completed or signed or contains an alteration or unauthorized addition (as defined in § 31.3402(f)(5)-1(b) (1) and (2)). Any earned income credit advance payment certificate which the employee clearly indicates to be false by oral statement or written statement to the employer must be treated by the employer as a certificate which is invalid as of the date of the employee's statement. For purposes of the preceding sentence, the term “employer” includes any individual authorized by the employer to receive earned income credit advance payment certificates or to make payroll distributions. If an employer receives from an employee an invalid certificate, the employer must consider it a nullity with respect to all payments of wages thereafter to the employee and must inform the employee of the certificate's invalidity. The employer is not required to ascertain whether any completed and signed earned income credit advance payment certificate is correct. However, the employer should inform the district director if the employer has reason to believe that the certificate contains any incorrect statement.
(c) When earned income credit advance payment certificate takes effect —(1) No previous certificate. An earned income credit advance payment certificate furnished the employer where no previous certificate is or has been in effect with the employer for that employee for the calendar year takes effect with—
(i) The date of the beginning of the first payroll period ending on or after the date on which the certificate is received by the employer;
(ii) The date of the first payment of wages made without regard to a payroll period on or after the date on which the certificate is received by the employer; or
(iii) The first day of the calendar year for which the certificate is furnished, if that day is later than the otherwise applicable effective date specified in paragraph (c)(1)(i) or (ii) of this section.
(2) Previous certificate. Except as otherwise provided in this paragraph (c)(2), an earned income credit advance payment certificate furnished the employer where a previous certificate is or has been in effect with the employer for that employee for the calendar year takes effect on the date of the first payment of wages made on or after the first status determination date (as defined in paragraph (c)(4) of this section) occurring at least thirty days after the date on which the certificate is received by the employer. However, if the employer so chooses, the employer may treat the certificate as effective on the date of any payment of wages made on or after the date on which the certificate is received by the employer (without regard to any status determination date).
(3) Certificate of spouse. For the sole purpose of applying paragraph (a)(3) of this section, in determining if a certificate is in effect with respect to an employee's spouse, the spouse's certificate is treated as then in effect if the spouse's certificate will be or is reasonably expected to be in effect on the first status determination date following the date on which the employer receives the employee's certificate.
(4) Status determination date. For the purposes of this section, the term “status determination date” means January 1, May 1, July 1, and October 1 of each year.
(d) Period during which certificate remains in effect; change of status —(1) Period certificate remains in effect. An earned income credit advance payment certificate which takes effect during a calendar year continues in effect with respect to the employee only during that calendar year and until revoked by the employee or until another certificate takes effect. See paragraphs (d)(2) and (c)(2) of this section.
(2) Change of status —(i) Revocation of certificate. If, after an employee has furnished an earned income credit advance payment certificate—
(A) The employee no longer wishes to receive advance earned income credit payments; or
(B) There has been a change of circumstances which has the effect of either making the employee ineligible for the earned income credit for the taxable year or causing a certificate to be in effect for the employee's spouse, then the employee must revoke the certificate previously furnished by furnishing the employer a new certificate (Form W-5 or identical form) in revocation of the earlier certificate. Depending upon the nature of the change of circumstances, the employer may be required, pursuant to the new certificate, to pay further advance earned income credit amounts to the employee (but in different amounts than previously paid to the employee). The Form W-5 (or identical form) must be prepared in accordance with the instructions applicable thereto and must set forth fully and clearly the data therein called for. In the case of revocation due to change of circumstances, the new certificate in revocation must be delivered to the employer within ten days after the employee first learns of the change of circumstances. The new certificate is effective under the rules provided in paragraph (c)(2) of this section for later certificates. A new certificate furnished by an employee which is invalid within the meaning of paragraph (b)(2) of this section is considered a nullity with respect to all payments of wages thereafter to the employee. The prior certificate of the employee remains in effect, unless the employee clearly indicates by an oral or written statement to the employer that the prior certificate is invalid. See paragraph (b)(2) of this section.
(ii) Change in spouse's certificate. If, after an employee has furnished an earned income credit advance payment certificate stating that a certificate is in effect for the spouse of the employee, the certificate of the spouse is no longer in effect, the employee may furnish the employer with a new certificate which reflects this change of circumstances.
§ 31.3511-1   Certified professional employer organization.
(a) Treatment as employer —(1) In general. For purposes of the federal employment taxes and other obligations imposed under chapters 21 through 25 of subtitle C of the Internal Revenue Code (federal employment taxes), a certified professional employer organization (CPEO) (as defined in § 301.7705-1(b)(1) of this chapter) is treated as the employer of any covered employee (as defined in § 301.7705-1(b)(5) of this chapter), but only with respect to remuneration remitted by the CPEO to the covered employee.
(2) Work site employee. In the case of a covered employee who is a work site employee (as defined in § 301.7705-1(b)(17) of this chapter) of the customer, no person other than the CPEO is treated as the employer of the work site employee with respect to the customer for purposes of federal employment taxes imposed on remuneration remitted by the CPEO to the work site employee.
(3) Non-work site covered employee. In the case of a covered employee who is not a work site employee, a person other than the CPEO is also treated as an employer of the employee for purposes of federal employment taxes imposed on remuneration remitted by the CPEO to the employee if such person is determined to be an employer of the employee without regard to the application of this paragraph (a) and section 3511.
(b) Exemptions, exclusions, definitions, and other rules —(1) In general. Solely for purposes of federal employment taxes imposed on remuneration remitted by a CPEO to a covered employee, the application of exemptions, exclusions, definitions, and other rules that are based on the type of employer is presumed to be based on the type of employer of the customer of the CPEO for whom the covered employee performs services. If a covered employee performs services for more than one customer of the CPEO during the calendar year, the presumption described in the previous sentence applies separately to remuneration remitted by the CPEO to the covered employee for services performed with respect to each such customer.
(2) Presumption rebutted. The presumption set forth in paragraph (b)(1) of this section may be rebutted if either the Commissioner determines, or the CPEO demonstrates by clear and convincing evidence, that the relationship between the customer and the covered employee is not the legal relationship of employer and employee as set forth in § 31.3401(c)-1. If such a determination or demonstration is made, then, with respect to remuneration remitted by a CPEO to a covered employee, the application of exemptions, exclusions, definitions, and other rules that are based on the type of employer will be based on the type of employer of the person determined by the Commissioner or demonstrated by the CPEO to be the common law employer of the covered employee in accordance with § 31.3401(c)-1.
(3) No inference from presumption. The presumption set forth in paragraph (b)(1) of this section does not create any inference with respect to the determination of who is an employer or employee or whether the legal relationship of employer and employee exists for federal tax purposes or for purposes of any other provision of law (other than for paragraph (b)(1) of this section).
(c) Annual wage limitation, contribution base, and withholding threshold —(1) CPEO has separate taxable wage base, contribution base, and withholding threshold. For purposes of applying the annual wage limitations under sections 3121(a)(1) and 3306(b)(1) (relating to the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, respectively), the contribution base under section 3231(e)(2) (relating to the Railroad Retirement Tax Act), and the withholding threshold under section 3102(f)(1) (relating to the Additional Medicare Tax), remuneration received by a covered employee from a CPEO for performing services for a customer of the CPEO within any calendar year is subject to a separate annual wage limitation, contribution base, and withholding threshold that are each computed without regard to any remuneration received by the covered employee during the calendar year from any other employer (including, if applicable, remuneration received directly from the customer receiving services from the employee). Notwithstanding the preceding sentence, a CPEO is treated as a successor or predecessor employer for purposes of the annual wage limitations and contribution base upon entering into or terminating a CPEO contract (as defined in § 301.7705-1(b)(3) of this chapter) with respect to a work site employee, as described in paragraph (d) of this section.
(2) Performance of services for more than one customer. If, during a calendar year, a covered employee receives remuneration from a CPEO for services performed by the covered employee for more than one customer of the CPEO, the annual wage limitation, contribution base, and withholding threshold do not apply to the aggregate remuneration received by the covered employee from the CPEO for services performed for all such customers. Rather, the annual wage limitation, contribution base, and withholding threshold apply separately to the remuneration received by the covered employee from the CPEO with respect to services performed for each customer.
(d) Successor employer status —(1) In general. For purposes of sections 3121(a)(1), 3231(e)(2)(C), and 3306(b)(1), a CPEO and its customer are treated as—
(i) A successor and predecessor employer, respectively, upon entering into a CPEO contract with respect to a work site employee who is performing services for the customer; and
(ii) A predecessor and successor employer, respectively, upon termination of the CPEO contract between the CPEO and the customer with respect to the work site employee who is performing services for the customer.
(2) Non-work site covered employee. A CPEO entering into a CPEO contract with a customer during a calendar quarter with respect to a covered employee who is not a work site employee at any time during that calendar quarter will not be treated as a successor employer (and the customer will not be treated as a predecessor employer) for purposes of paragraph (d)(1)(i) of this section regardless of whether, during the term of the CPEO contract, the covered employee subsequently becomes a work site employee. Similarly, a CPEO terminating a CPEO contract with a customer during a calendar quarter with respect to a covered employee who is not a work site employee at any time during that calendar quarter will not be treated as a predecessor employer (and the customer will not be treated as a successor employer) for purposes of paragraph (d)(1)(ii) of this section regardless of whether, during the term of the CPEO contract, the covered employee had previously been a work site employee.
(e) Treatment of credits —(1) In general. For purposes of the credits specified in paragraph (e)(2) of this section—
(i) The credit with respect to a work site employee performing services for a customer applies to the customer, not to the CPEO; and
(ii) In computing the credit, the customer, and not the CPEO, is to take into account wages and federal employment taxes paid by the CPEO with respect to the work site employee and for which the CPEO receives payment from the customer.
(2) Credits specified. A credit is specified in this paragraph (e) if such credit is allowed under—
(i) Section 41 (credit for increasing research activity);
(ii) Section 45A (Indian employment credit);
(iii) Section 45B (credit for portion of employer social security taxes paid with respect to employee cash tips);
(iv) Section 45C (clinical testing expenses for certain drugs for rare diseases or conditions);
(v) Section 45R (employee health insurance expenses for small employers);
(vi) Section 45S (employer credit for paid family and medical leave);
(vii) Section 51 (work opportunity credit);
(viii) Section 1396 (empowerment zone employment credit);
(ix) Statutory employee retention credits that are similar to the employee retention credit in section 1400R and that provide disaster relief to employers in designated disaster areas; and
(x) Any other section specified by the Commissioner in further guidance (as defined in § 301.7705-1(b)(8) of this chapter).
(f) Section not applicable to related customers, self-employed individuals, and other circumstances. This section does not apply—
(1) In the case of any customer that—
(i) Has a relationship to a CPEO described in section 267(b) (including, by cross-reference, section 267(f)) or section 707(b), except that “10 percent” shall be substituted for “50 percent” wherever it appears in such sections; or
(ii) Has commenced a CPEO contract with the CPEO but such commencement has not been reported to the IRS as described in paragraph (g)(3)(i) of this section; or
(2) To remuneration paid by a CPEO to any self-employed individual (as defined in § 301.7705-1(b)(14) of this chapter) in that capacity;
(3) To any CPEO contract that a CPEO enters into while its certification has been suspended by the IRS; or
(4) To any CPEO whose certification has been revoked or voluntarily terminated for periods after the effective date of revocation or voluntary termination.
(g) Reporting and recordkeeping —(1) Reporting and recordkeeping for employers. A CPEO that is treated as an employer of a covered employee pursuant to paragraph (a) of this section must meet all reporting and recordkeeping requirements described in subtitle F of the Code that are applicable to employers in a manner consistent with such treatment.
(2) Reporting on magnetic media —(i) In general. A CPEO must file on magnetic media any Form 940, “Employer's Annual Federal Unemployment (FUTA) Tax Return,” Form 941, “Employer's QUARTERLY Federal Tax Return,” and Form 943, “Employer's Annual Federal Tax Return for Agricultural Employees,” and all required accompanying schedules, as well as such other returns, schedules, and other required forms and documents as is required by further guidance.
(ii) Waiver. The Commissioner may waive the requirements of this paragraph (g)(2) in case of undue economic hardship (including economic hardship resulting from temporary software and technological issues). The principal factor in determining hardship will be the amount, if any, by which the cost of filing the return, schedule, or other required form or document on magnetic media in accordance with this paragraph (g)(2) exceeds the cost of filing on or by other media. A request for a waiver must be made in accordance with applicable guidance. The waiver must specify the type of filing (that is, the name of the form or schedule) and the period to which it applies. In addition, the waiver will be subject to such terms and conditions regarding the method of filing as may be prescribed by the Commissioner in further guidance.
(iii) Magnetic media. The term magnetic media means any magnetic media permitted under applicable guidance. These generally include electronic filing, as well as other media specifically permitted under the applicable guidance.
(3) Reporting to the IRS by CPEOs. A CPEO must report the following to the IRS in such time and manner, and including such information, as the Commissioner may prescribe in further guidance:
(i) The commencement or termination of any CPEO contract (as defined in § 301.7705-1(b)(3) of this chapter) with a customer, or any service agreement as described in § 31.3504-2(b)(2) with a client, and the name and employer identification number (EIN) of such customer or client.
(ii) With any Form 940, Form 941, and Form 943 that it files, all required schedules, including, but not limited to, the applicable Schedule R (or any successor form), containing such information as the Commissioner may require about each of its customers under a CPEO contract (as defined in § 301.7705-1(b)(3) of this chapter) and each of its clients under a service agreement (as described in § 31.3504-2(b)(2)). A CPEO must file Form 940, Form 941, and Form 943, along with all required schedules, on magnetic media, unless the CPEO is granted a waiver by the Commissioner in accordance with paragraph (g)(2)(ii) of this section.
(iii) A periodic verification that it continues to meet the requirements of § 301.7705-2 of this chapter, as described in § 301.7705-2(j).
(iv) Any change that materially affects the continuing accuracy of any agreement or information that was previously made or provided by the CPEO to the IRS, as described in § 301.7705-2(k) of this chapter.
(v) A copy of its audited financial statements and an opinion of a certified public accountant regarding such financial statements, as described in § 301.7705-2(e)(1) of this chapter.
(vi) The quarterly statements, assertions, and attestations regarding those assertions described in § 301.7705-2(f)(1) of this chapter.
(vii) Any information the IRS determines is necessary to promote compliance with respect to the credits described in paragraph (e)(2) of this section and provided in section 3302.
(viii) Any other information the Commissioner may prescribe in further guidance.
(4) Reporting to customers by CPEOs. A CPEO must meet the following reporting requirements with respect to its customers in such time and manner, and including such information, as the Commissioner may prescribe in further guidance:
(i) Provide each of its customers with the information necessary for the customer to claim the credits described in paragraph (e)(2) of this section.
(ii) Notify any customer if its CPEO contract has been transferred to another person (or if another person will report, withhold, or pay, under such other person's EIN, any applicable federal employment taxes with respect to the wages of any individuals covered by its CPEO contract) and provide the customer with the name and EIN of such other person.
(iii) If the CPEO's certification is suspended or revoked as described in § 301.7705-2(n) of this chapter, notify each of its current customers of such suspension or revocation.
(iv) If any covered employees are not, or cease to be, work site employees because they perform services at a location at which the 85 percent threshold described in § 301.7705-1(b)(17) of this chapter is not met, notify the customer that it may also be liable for federal employment taxes imposed on remuneration remitted by the CPEO to such covered employees, as described in paragraph (a)(3) of this section.
(5) Information and agreements in any contract or agreement between a CPEO and a customer or client. Any CPEO contract (as defined in § 301.7705-1(b)(3) of this chapter) between a CPEO and a customer or service agreement described in § 31.3504-2(b)(2) between a CPEO and a client must—
(i) In the case of a contract that is a CPEO contract—
(A) Contain the name and EIN of the CPEO reporting, withholding, and paying any applicable federal employment taxes with respect to any remuneration paid to individuals covered by the contract or agreement;
(B) Require the CPEO to provide to the customer the notices and information required by paragraph (g)(4) of this section;
(C) Describe the information that the CPEO will provide that is necessary for the customer to claim the credits specified in paragraph (e)(2) of this section; and
(D) Require the CPEO to notify the customer that the customer may also be liable for federal employment taxes on remuneration remitted by the CPEO to covered employees if the work sites at which they perform services do not (or ever cease to) meet the 85 percent threshold described in § 301.7705-1(b)(17) of this chapter; and
(ii) In the case of a service agreement described in § 31.3504-2(b)(2) that is not a CPEO contract (and thus the individuals covered by that contract are not covered employees), or if this section does not apply to the contract under paragraph (f) of this section, notify, or be accompanied by a notification to, the client that the service agreement or contract is not covered by section 3511 and does not alter the client's liability for federal employment taxes on remuneration remitted by the CPEO to the employees covered by the service agreement or contract.
(h) Penalties and additions to tax —(1) In general. A CPEO that is treated as an employer of a covered employee under this section and that is required to meet the reporting requirements of an employer is subject to the same penalties and additions to tax as an employer with respect to such reporting requirements, including, but not limited to, penalties and additions to tax under sections 6651, 6656, 6672, 6721, 6722, and 6723.
(2) Failures to timely make reports required under section 3511. CPEOs are subject to penalty under section 6652(n) with respect to reports required to be made to the IRS in paragraphs (g)(1) and (3) of this section and reports required to be made to customers in paragraph (g)(4) of this section.
(3) Failures to attach Schedule R. A CPEO is subject to penalty under section 6652(n) for failure to attach Schedule R (or successor form) to Forms 941, 940, or 943 as required by paragraph (g)(3)(ii) of this section. A CPEO is also subject to penalty under section 6723 for failure to include the EIN of each customer on Schedule R of Form 941, 940, or 943. See § 301.6723-1 of this chapter for the application of the section 6723 penalty in the case of multiple failures on a single document.
(4) Failures to file on magnetic media. With respect to the requirement in paragraph (g)(3)(ii) of this section that a CPEO must file Forms 940, 941, and 943, along with all required schedules, on magnetic media, a failure to file on magnetic media does not constitute a failure to file for purposes of section 6651(a)(1) nor does it constitute a failure to make a report for purposes of section 6652(n). Rather, the requirement to file Forms 940, 941, and 943 on magnetic media is a condition of maintaining certification as a CPEO.
(i) Applicability date. The rules in this section apply on and after May 3, 2019.
§ 31.6001-1   Records in general.
(a) Form of records. The records required by the regulations in this part shall be kept accurately, but no particular form is required for keeping the records. Such forms and systems of accounting shall be used as will enable the district director to ascertain whether liability for tax is incurred and, if so, the amount thereof.
(b) Copies of returns, schedules, and statements. Every person who is required, by the regulations in this part or by instructions applicable to any form prescribed thereunder, to keep any copy of any return, schedule, statement, or other document, shall keep such copy as a part of his records.
(c) Records of claimants. Any person (including an employee) who, pursuant to the regulations in this part, claims a refund, credit or abatement, shall keep a complete and detailed record with respect to the tax, interest, addition to the tax, additional amount, or assessable penalty to which the claim relates. Such record shall include any records required of the claimant by paragraph (b) of this section and by §§ 31.6001-2 to 31.6001-5, inclusive, which relate to the claim.
(d) Records of employees. While not mandatory (except in the case of claims), it is advisable for each employee to keep permanent, accurate records showing the name and address of each employer for whom he performs services as an employee, the dates of beginning and termination of such services, the information with respect to himself which is required by the regulations in this subpart to be kept by employers, and the statements furnished in accordance with the provisions of § 31.6051-1.
(e) Place and period for keeping records. (1) All records required by the regulations in this part shall be kept, by the person required to keep them, at one or more convenient and safe locations accessible to internal revenue officers, and shall at all times be available for inspection by such officers.
(2) Except as otherwise provided in the following sentence, every person required by the regulations in this part to keep records in respect of a tax (whether or not such person incurs liability for such tax) shall maintain such records for at least four years after the due date of such tax for the return period to which the records relate, or the date such tax is paid, whichever is the later. The records of claimants required by paragraph (c) of this section shall be maintained for a period of at least four years after the date the claim is filed.
(f) Cross reference. See §§ 31.6001-2 to 31.6001-5, inclusive, for additional records required with respect to the Federal Insurance Contributions Act, the Railroad Retirement Tax Act, the Federal Unemployment Tax act, and the collection of income tax at source on wages, respectively.
§ 31.6001-2   Additional records under Federal Insurance Contributions Act.
(a) In general. (1) Every employer liable for tax under the Federal Insurance Contributions Act shall keep records of all remuneration, whether in cash or in a medium other than cash, paid to his employees after 1954 for services (other than agricultural labor which constitutes or is deemed to constitute employment, domestic service in a private home of the employer, or service not in the course of the employer's trade or business) performed for him after 1936. Such records shall show with respect to each employee receiving such remuneration—
(i) The name, address, and account number of the employee and such additional information with respect to the employee as is required by paragraph (c) of § 31.6011(b)-2 when the employee does not advise the employer what his account number and name are as shown on an account number card issued to the employee by the Social Security Administration.
(ii) The total amount and date of each payment of remuneration (including any sum withheld therefrom as tax or for any other reason) and the period of services covered by such payment.
(iii) The amount of each such remuneration payment which constitutes wages subject to tax. See §§ 31.3121(a)-1 to 31.3121(a)(12)-1, inclusive.
(iv) The amount of employee tax, or any amount equivalent to employee tax, collected with respect to such payment, and, if collected at a time other than the time such payment was made, the date collected. See paragraph (b) of § 31.3102-1 for provisions relating to collection of amounts equivalent to employee tax.
(v) If the total remuneration payment (paragraph (a)(1)(ii) of this section) and the amount thereof which is taxable (paragraph (a)(1)(iii) of this section) are not equal, the reason therefor.
(2) Every employer shall keep records of the details of each adjustment or settlement of taxes under the Federal Insurance Contributions Act made pursuant to the regulations in this part. The employer shall keep as a part of his records a copy of each statement furnished pursuant to paragraph (c) of § 31.6011(a)-1.
(3) Every employer shall keep records of all remuneration in the form of tips received by his employees after 1965 in the course of their employment and reported to him pursuant to section 6053(a). The employer shall keep as part of his records employee statements of tips furnished him pursuant to section 6053(a) (unless the information disclosed by such statements is recorded on another document retained by the employer pursuant to paragraph (a)(1) of this section) and copies of employer statements furnished employees pursuant to section 6053(b).
(b) Agricultural labor, domestic service, and service not in the course of employer's trade or business. (1) Every employer who pays cash remuneration after 1954 for the performance for him after 1950 of agricultural labor which constitutes or is deemed to constitute employment, of domestic service in a private home of the employer not on a farm operated for profit, or of service not in the course of his trade or business shall keep records of all such cash remuneration with respect to which he incurs, or expects to incur, liability for the taxes imposed by the Federal Insurance Contributions Act, or with respect to which amounts equivalent to employee tax are deducted pursuant to section 3102(a). See §§ 31.3101-3, 31.3111-3, and 31.3121(a)-2 for provisions relating, respectively, to the liability for employee tax which is incurred when wages are received, the liability for employer tax which is incurred when wages are paid, and the time when wages are paid and received. Such records shall show with respect to each employee receiving such cash remuneration—
(i) The name of the employee.
(ii) The account number of each employee to whom wages for such services are paid within the meaning of § 31.3121(a)-2, and such additional information as is required by paragraph (c) of § 31.6011(b)-2 when the employee does not advise the employer what his account number and name are as shown on an account number card issued to the employee by the Social Security Administration.
(iii) The amount of such cash remuneration paid to the employee (including any sum withheld therefrom as tax or for any other reason) for agricultural labor which constitutes or is deemed to constitute employment, for domestic service in a private home of the employer not on a farm operated for profit, or for service not in the course of the employer's trade or business; the calendar month in which such cash remuneration was paid; and the character of the services for which such cash remuneration was paid. When the employer incurs liability for the taxes imposed by the Federal Insurance Contributions Act with respect to any such cash remuneration which he did not previously expect would be subject to the taxes, the amount of any such cash remuneration not previously made a matter of record shall be determined by the employer to the best of his knowledge and belief.
(iv) The amount of employee tax, or any amount equivalent to employee tax, collected with respect to such cash remuneration and the calendar month in which collected. See paragraph (b) of § 31.3102-1 for provisions relating to collection of amounts equivalent to employee tax.
(v) To the extent material to a determination of tax liability, the number of days during each calendar year after 1956 on which agricultural labor which constitutes or is deemed to constitute employment is performed by the employee for cash remuneration computed on a time basis.
(2) Every person to whom a “crew leader”, as that term is defined in section 3121(i), furnishes individuals for the performance of agricultural labor after December 31, 1958, shall keep records of the name; permanent mailing address, or if none, present address; and identification number, if any, of such “crew leader”.
§ 31.6001-3   Additional records under Railroad Retirement Tax Act.
(a) Records of employers. (1) Every employer liable for tax under the Railroad Retirement Tax Act shall keep records of all remuneration (whether in money or in something which may be used in lieu of money), other than tips, paid to his employees after 1954 for services rendered to him (including “time lost”) after 1954. Such records shall show with respect to each employee—
(i) The name and address of the employee.
(ii) The total amount and date of each payment of remuneration to the employee (including any sum withheld therefrom as tax or for any other reason) and the period of service (including any period of absence from active service) covered by such payment.
(iii) The amount of such remuneration payment with respect to which the tax is imposed.
(iv) The amount of employee tax collected with respect to such payment, and, if collected at a time other than the time such payment was made, the date collected.
(v) If the total payment of remuneration (paragraph (a)(1)(ii) of this section) and the amount thereof with respect to which the tax is imposed (paragraph (a)(1)(iii) of this section) are not equal, the reason therefor.
(2) The employer shall keep records of the details of each adjustment or settlement of taxes under the Railroad Retirement Tax Act made pursuant to the regulations in this part.
(b) Records of employee representatives. Every individual liable for employee representative tax under the Railroad Retirement Tax Act shall keep records of all remuneration (whether in money or in something which may be used in lieu of money) paid to him after 1954 for services rendered (including “time lost”) by him as an employee representative after 1954. Such records shall show—
(1) The name and address of each employee organization employing him.
(2) The total amount and date of each payment of remuneration for services rendered as an employee representative (including any sum withheld therefrom as tax or for any other reason) and the period of service (including any period of absence from active service) covered by such payment.
(3) The amount of such remuneration payment with respect to which the employee representative tax is imposed.
(4) If the total payment of remuneration (paragraph (a)(2) of this section) and the amount thereof with respect to which the employee representative tax is imposed (paragraph (a)(3) of this section) are not equal, the reason therefor.
§ 31.6001-4   Additional records under Federal Unemployment Tax Act.
(a) Records of employers. Every employer liable for tax under the Federal Unemployment Tax Act for any calendar year shall, with respect to each such year, keep such records as are necessary to establish—
(1) The total amount of remuneration (including any sum withheld therefrom as tax or for any other reason) paid to his employees during the calendar year for services performed after 1938.
(2) The amount of such remuneration which constitutes wages subject to the tax. See § 31.3306(b)-1 through § 31.3306(b)(8)-1.
(3) The amount of contributions paid by him into each State unemployment fund, with respect to services subject to the law of such State, showing separately (i) payments made and neither deducted nor to be deducted from the remuneration of his employees, and (ii) payments made and deducted or to be deducted from the remuneration of his employees.
(4) The information required to be shown on the prescribed return and the extent to which the employer is liable for the tax.
(5) If the total remuneration paid (paragraph (a)(1) of this section) and the amount thereof which is subject to the tax (paragraph (a)(2) of this section) are not equal, the reason therefor.
(6) To the extent material to a determination of tax liability, the dates, in each calendar quarter, on which each employee performed services not in the course of the employer's trade or business, and the amount of cash remuneration paid at any time for such services performed within such quarter See § 31.3306(c)(3)-1.
(b) Records of persons who are not employers. Any person who employs individuals in employment (see §§ 31.3306(c)-1 to 31.3306(c)-3, inclusive) during any calendar year but who considers that he is not an employer subject to the tax (see § 31.3306(a)-1) shall, with respect to each such year, be prepared to establish by proper records (including, where necessary, records of the number of employees employed each day) that he is not an employer subject to the tax.
§ 31.6001-5   Additional records in connection with collection of income tax at source on wages.
(a) Every employer required under section 3402 to deduct and withhold income tax upon the wages of employees shall keep records of all remuneration paid to (including tips reported by) such employees. Such records shall show with respect to each employee—
(1) The name and address of the employee, and after December 31, 1962, the account number of the employee.
(2) The total amount and date of each payment of remuneration (including any sum withheld therefrom as tax or for any other reason) and the period of services covered by such payment.
(3) The amount of such remuneration payment which constitutes wages subject to withholding.
(4) The amount of tax collected with respect to such remuneration payment, and, if collected at a time other than the time such payment was made, the date collected.
(5) If the total remuneration payment (paragraph (a)(2) of this section) and the amount thereof which is taxable (paragraph (a)(3) of this section) are not equal, the reason therefor.
(6) Copies of any statements furnished by the employee pursuant to paragraph (b)(12) of § 31.3401(a)-1 (relating to permanent residents of the Virgin Islands).
(7) Copies of any statements furnished by the employee pursuant to §§ 31.3401(a)(6)-1 and 31.3401(a)(7)-1, relating to nonresident alien individuals.
(8) Copies of any statements furnished by the employee pursuant to § 31.3401(a)(8)(A)-1 (relating to residence or physical presence in a foreign country).
(9) Copies of any statements furnished by the employee pursuant to § 31.3401(a)(8)(C)-1 (relating to citizens resident in Puerto Rico).
(10) The fair market value and date of each payment of noncash remuneration, made to an employee after August 9, 1955, for services performed as a retail commission salesman, with respect to which no income tax is withheld by reason of § 31.3402(j)-1.
(11) [Reserved]
(12) In the case of the employer for whom services are performed, with respect to payments made directly by him after December 31, 1955, under an accident or health plan (as defined in section 105 and the regulations thereunder)—
(i) The beginning and ending dates of each period of absence from work for which any such payment was made; and
(ii) Sufficient information to establish the amount and weekly rate of each such payment.
(13) The withholding exemption certificates (Forms W-4 and W-4E) filed with the employer by the employee.
(14) The agreement, if any, between the employer and the employee for the withholding of additional amounts of tax pursuant to § 31.3402(i)-1.
(15) To the extent material to a determination of tax liability, the dates, in each calendar quarter, on which the employee performed services not in the course of the employer's trade or business, and the amount of cash remuneration paid at any time for such services performed within such quarter. (See § 31.3401(a)(4)-1.)
(16) In the case of tips received by an employee after 1965 in the course of his employment, copies of any statements furnished by the employee pursuant to section 6053(a) unless the information disclosed by such statements is recorded on another document retained by the employer pursuant to the provisions of this paragraph.
(17) Any request of an employee under section 3402(h)(3) and § 31.3402 (h)(3)-1 to have the amount of tax to be withheld from his wages computed on the basis of his cumulative wages, and any notice of revocation thereof.
(b) The employer shall keep records of the details of each adjustment or settlement of income tax withheld under section 3402 made pursuant to the regulations in this part.
§ 31.6001-6   Notice by district director requiring returns, statements, or the keeping of records.
The district director may require any person, by notice served upon him, to make such returns, render such statements, or keep such specific records as will enable the district director to determine whether or not such person is liable for any of the taxes to which the regulations in this part have application.
§ 31.6011-4   Requirement of statement disclosing participation in certain transactions by taxpayers.
(a) In general. If a transaction is identified as a listed transaction or a transaction of interest as defined in § 1.6011-4 of this chapter by the Commissioner in published guidance (see § 601.601(d)(2)(ii)( b ) of this chapter), and the listed transaction or transaction of interest involves an employment tax under chapters 21 through 25 of subtitle C of the Internal Revenue Code, the transaction must be disclosed in the manner stated in such published guidance.
(b) Effective/applicability date. This section applies to listed transactions entered into on or after January 1, 2003. This section applies to transactions of interest entered into on or after November 2, 2006.
§ 31.6011(a)-1   Returns under Federal Insurance Contributions Act.
(a) Requirement —(1) In general. Except as otherwise provided in paragraphs (a)(3) and (a)(5) of this section and in § 31.6011(a)-5 every employer is required to make a return for the first calendar quarter in which the employer pays wages, other than wages for agricultural labor, subject to the tax imposed by the Federal Insurance Contributions Act, and is required to make a return for each subsequent calendar quarter (whether or not wages are paid therein) until the employer has filed a final return in accordance with § 31.6011(a)-6. Except as otherwise provided in § 31.6011(a)-8 and in paragraphs (a)(3), (a)(4), and (a)(5) of this section, Form 941, “Employer's QUARTERLY Federal Tax Return,” is the form prescribed for making the return required by this paragraph (a)(1). Such return shall not include wages for agricultural labor required to be reported on any return prescribed by paragraph (a)(2) of this section. The return shall include wages received by an employee in the form of tips only to the extent of the tips reported by the employee to the employer in a written statement furnished to the employer pursuant to section 6053(a).
(2) Employers of agricultural workers. Every employer who pays wages for agricultural labor with respect to taxes imposed by the Federal Insurance Contributions Act must make a return for the first calendar year in which the employer pays such wages and for each subsequent calendar year (whether or not wages are paid) until the employer has filed a final return in accordance with § 31.6011(a)-6. Form 943, “Employer's Annual Federal Tax Return for Agricultural Employees,” is the form prescribed for making the annual return required by this section, except that, if the employer's principal place of business is in Puerto Rico, or if the employer has employees who are subject to income tax withholding for Puerto Rico, the return must be made on Form 943-PR, “Planilla para la Declaración ANUAL de la Contribución Federal del Patrono de Empleados Agrícolas.” However, Form 943 is the form prescribed for making such return in the case of every employer of agricultural workers who is required pursuant to § 31.6011(a)-4 to make a return of income tax withheld from wages.
(3) Employers of domestic workers. Schedule H (Form 1040), “Household Employment Taxes,” is the form prescribed for use by every employer in making a return as required under paragraph (a)(1) of this section in respect of wages, as defined in the Federal Insurance Contributions Act, paid by the employer in any calendar year for domestic service as defined in section 3510. Schedule H (Form 1040) is generally filed as an attachment to an income tax return; however, if the employer does not otherwise have an obligation to file an income tax return, Schedule H (Form 1040) may be filed as a separate return. If, however, the employer is required under paragraph (a)(1) of this section to make a return on Form 941, “Employer's QUARTERLY Federal Tax Return,” or under paragraph (a)(2) of this section to make a return on Form 943, “Employer's Annual Federal Tax Return For Agricultural Employees,” or under paragraph (a)(5) of this section to make a return on Form 944, “Employer's ANNUAL Federal Tax Return,” the employer may choose instead to report wages with respect to domestic workers on such Form 941, Form 943, or Form 944. If such wages are included on Form 941, Form 943, or Form 944, the employer must also include Federal unemployment tax for the employee(s) on Form 940, “Employer's Annual Federal Unemployment (FUTA) Tax Return,” under the provisions of § 31.6011(a)-3.
(4) Employers in Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands. Except as otherwise provided in paragraph (a)(5), Form 941-PR, “Planilla para la Declaracion Federal TRIMESTRAL del Patrono,” is the form prescribed for use in making the return required under paragraph (a)(1) of this section in the case of every employer whose principal place of business is in Puerto Rico, or if the employer has employees who are subject to income tax withholding for Puerto Rico. Except as otherwise provided in paragraph (a)(5), Form 941-SS, “Employer's QUARTERLY Federal Tax Return (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands),” is the form prescribed for use in making the return required under paragraph (a)(1) of this section in the case of every employer whose principal place of business is in the U.S. Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, or if the employer has employees who are subject to income tax withholding for these U.S. possessions. Form 941 (or Form 944, as described under paragraph (a)(5) of this section, if the IRS notified the employer that Form 944 must be filed in lieu of Form 941) is the form prescribed for making the return in the case of every employer who is required pursuant to § 31.6011(a)-4 to make a return of income tax withheld from wages.
(5) Employers in the Employers' Annual Federal Tax Program (Form 944) —(i) In general. Employers notified of their qualification for the Employers' Annual Federal Tax Program (Form 944) are required to file Form 944, “Employer's ANNUAL Federal Tax Return,” instead of Form 941 (or Form 941-SS or Form 941-PR under paragraph (a)(4) of this section) to make a return as required by paragraph (a)(1) of this section. Upon proper request by the employer, the IRS will notify employers in writing of their qualification for the Employers' Annual Federal Tax Program (Form 944). The IRS will notify employers when they no longer qualify for the Employers' Annual Federal Tax Program (Form 944) and must file Forms 941 instead. Qualified employers are those with an estimated annual employment tax liability (that is, social security, Medicare, and withheld Federal income taxes) of $1,000 or less for the entire calendar year, except employers required under—
(A) Paragraph (a)(2) of this section to make a return on Form 943, “Employer's Annual Federal Tax Return for Agricultural Employees”; or
(B) Paragraph (a)(3) of this section to make a return on Schedule H (Form 1040), “Household Employment Taxes.”
(ii) Requests to opt in or opt out of the Employers' Annual Federal Tax Program (Form 944). The IRS has established procedures in Revenue Procedure 2009-51 published in the Internal Revenue Bulletin for employers to follow to request to participate in the Employers' Annual Federal Tax Program (Form 944) (to opt in) and to request to be removed from the Employers' Annual Federal Tax Program (Form 944) after becoming a participant in order to file Forms 941 instead (to opt out). The IRS will notify employers that their filing requirements have changed to Form 944 or Forms 941. Employers must follow the procedures in Revenue Procedure 2009-51 or its successor to request to opt in or opt out of the Employers' Annual Federal Tax Program (Form 944).
(b) When to report wages. Wages with respect to which taxes are imposed by the Federal Insurance contributions Act shall be reported in the return of such taxes required under this section or § 31.6011(a)-5 for the return period in which they are actually paid unless they were constructively paid in a prior return period, in which case such wages shall be reported only in the return for such prior period. However, if such wages are deemed to be paid in a later return period, they shall be reported only in the return for such later period. See § 31.3121(a)-2 relating to the time when wages are paid or deemed to be paid.
(c) Adjustments and refunds. For rules applicable to adjustments and refunds of employment taxes, see sections 6205, 6402, 6413, and 6414, and the applicable regulations.
(d) Returns by employees in respect of tips. If—
(1) An employee, during a calendar year, is paid wages in the form of tips which are subject to the tax under section 3101, and
(2) Any portion of the tax under section 3101 in respect of such wages cannot be collected by the employer from wages (exclusive of tips) of such employee or from funds turned over by the employee to the employer,
(e) Time and place for filing returns. For provisions relating to the time and place for filing returns, see §§ 31.6071 (a)-1 and 31.6091-1, respectively.
(f) Wages paid in nonconvertible foreign currency. For provisions relating to returns filed by certain employers who pay wages in nonconvertible foreign currency, see § 301.6316-7 of this chapter (Regulations on Procedure and Administration).
(g) Returns by employees in respect of Additional Medicare Tax. An employee who is paid wages, as defined in section 3121(a), subject to the tax under section 3101(b)(2) (Additional Medicare Tax), must make a return for the taxable year in respect of such tax. The return shall be made on Form 1040, “U.S. Individual Income Tax Return.” The form to be used by residents of the U.S. Virgin Islands, Guam, American Samoa, or the Northern Mariana Islands is Form 1040-SS, “U.S. Self-Employment Tax Return (Including Additional Child Tax Credit for Bona Fide Residents of Puerto Rico).” The form to be used by residents of Puerto Rico is either Form 1040-SS or Form 1040-PR, “Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia (Incluyendo el Crédito Tributario Adicional por Hijos para Residentes Bona Fide de Puerto Rico).”
(h) Effective/applicability dates. Paragraphs (a)(1) and (a)(5)(i) of this section apply to taxable years beginning on or after December 30, 2008. Paragraph (a)(4) of this section applies to taxable years beginning on or after January 1, 2012. Paragraph (a)(5)(ii) of this section applies to taxable years beginning on or after January 1, 2010. The rules of paragraph (a)(1) of this section that apply to taxable years beginning before December 30, 2008, are contained in § 31.6011(a)-1 as in effect prior to December 30, 2008. The rules of paragraph (a)(4) of this section that apply to taxable years beginning before January 1, 2012, are contained in § 31.6011(a)-1 as in effect prior to January 1, 2012. The rules of paragraph (a)(5)(ii) of this section that apply to taxable years beginning before January 1, 2010, but on or after December 30, 2008, are contained in § 31.6011(a)-1T as in effect on or after December 30, 2008. The rules of paragraph (a)(5) of this section that apply to taxable years beginning before December 30, 2008, are contained in § 31.6011(a)-1T as in effect prior to December 30, 2008. Paragraph (g) of this section applies to taxable years beginning on or after November 29, 2013.
§ 31.6011(a)-2   Returns under Railroad Retirement Tax Act.
(a) Requirement —(1) Employers. Every employer shall make a return for the first return period after 1954 within which compensation taxable under the Railroad Retirement Tax Act is paid to his employee or employees for services rendered after 1954, and for each subsequent return period (whether or not taxable compensation is paid therein) until he has filed a final return in accordance with § 31.6011(a)-6. For calendar years after 1975, the return period shall be the calendar year; for calendar years prior to 1976, the return period shall be the calendar quarter. Form CT-1 is the form prescribed for making the return required under this paragraph. One original and a duplicate of each return on Form CT-1 shall be filed with the director of the service center.
(2) Employee representatives. Every employee representative shall make a return for the first calendar quarter after 1954 within which he is paid taxable compensation for services rendered after 1954 as an employee representative, and for each subsequent calendar quarter (whether or not he is paid taxable compensation therein) until he has filed a final return in accordance with § 31.6011(a)-6. Form CT-2 is the form prescribed for making the return required under this subparagraph. One original and a duplicate of each return on Form CT-2 shall be filed with the director of the service center.
(b) When to report compensation —(1) In general. Except as otherwise provided in subparagraph (2) of this paragraph, compensation taxable under the Railroad Retirement Tax Act shall be reported in the return required under this section for the period in which it is deemed, under paragraph (d) of § 31.3231(e)-1 to be paid, unless under such section the compensation may be deemed to be paid in more than one return period, in which case it shall be reported only in the return for the first return period in which it is deemed to be paid.
(2) Pre-1976 returns of employers required by State law to pay compensation on weekly basis —(i) In general. If any employer is required by the laws of any State to pay compensation weekly in any calendar year prior to 1976, the return of tax with respect to such compensation may, at the election of such employer, cover all payroll weeks which, or the major part of which, fall within the period for which a return of tax is required by paragraph (a)(1) of this section. This provision shall not apply, however, to any payroll week which falls in two calendar years. Any employer who elects to file a return as provided in this subparagraph shall notify the district director in writing of such election and shall include therein a statement setting forth the facts which entitle him to make the election. Such notice shall be in duplicate and shall be attached to the original and duplicate of the return for the first period to which such election applies. Any election so made shall be binding upon the employer with respect to all returns subsequently made by him until the director of the service center authorizes or directs the employer to make a return on a different basis. For the purpose of determining the time when compensation is deemed to be paid in accordance with paragraph (d) of § 31.3231(e)-1 and of determining the due date of a return in accordance with paragraph (b) of § 31.6071(a)-1, the calendar month following the period covered by the return of an employer making such election is the same calendar month which would be determinative for such purposes if the employer had not made the election.
(ii) Prior elections. An election made by an employer, pursuant to the provisions of 26 CFR (1939) 410.501(b) (Regulations 100) or of 26 CFR (1939) 411.601 (b) (Regulations 114), which is in force and effect at the time the employer makes his first return under this section shall satisfy the requirements of paragraph (b)(2)(i) of this section with respect to the making of an election and shall be binding upon the employer with respect to all returns made by him under this section until the director of the service center authorizes or directs the employer to make a return on a different basis.
(iii) Example. Employer X is required by State law to pay his employees within 6 days after the compensation is earned. In compliance with the State law, employer X, for services rendered to him for the payroll week of June 27 to July 2, 1955, pays his employees on the last-named date. June 1955 is the last month of a period for which a return of tax is required by paragraph (a)(1) of this section. Employer X may elect to include in the return required by paragraph (a)(1) of this section for the period April 1 to June 30, 1955, the compensation paid to his employees for the payroll week of June 27 to July 2, 1955, inclusive, although the compensation for July 1 and 2 falls within another period for which a return is required by paragraph (a)(1) of this section. If, in this example, the payroll week ended on July 5, 1955, the compensation paid for the payroll week of June 29 to July 5 would be included in the return period in which July falls although the compensation earned for June 29 and 30 fell in a prior return period under the general rule.
(c) Time and place for filing returns. For provisions relating to the time and place for filing returns, see §§ 31.6071 (a)-1 and 31.6091-1, respectively.
(d) Returns by employees and employee representatives in respect of Additional Medicare Tax. An employee or employee representative who is paid compensation, as defined in section 3231(e), subject to the tax under sections 3201(a) (as calculated under section 3101(b)(2)) or section 3211(a) (as calculated under section 3101(b)(2)) (Additional Medicare Tax), must make a return for the taxable year in respect of such tax. The return shall be made on Form 1040, “U.S. Individual Income Tax Return.” The form to be used by residents of the U.S. Virgin Islands, Guam, American Samoa, or the Northern Mariana Islands is Form 1040-SS, “U.S. Self-Employment Tax Return (Including Additional Child Tax Credit for Bona Fide Residents of Puerto Rico).” The form to be used by residents of Puerto Rico is either Form 1040-SS or Form 1040-PR, “Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia (Incluyendo el Crédito Tributario Adicional por Hijos para Residentes Bona Fide de Puerto Rico).”
(e) Effective/applicability date. Paragraph (d) of this section applies to taxable years beginning on or after November 29, 2013.
§ 31.6011(a)-3   Returns under Federal Unemployment Tax Act.
(a) Requirement. Every person shall make a return of tax under the Federal Unemployment Tax Act for each calendar year with respect to which he is an employer as defined in § 31.3306(a)-1. Except as otherwise provided in § 31.6011(a)-8, Form 940 is the form prescribed for use in making the return.
(b) When to report wages. Wages taxable under the Federal Unemployment Tax Act shall be reported in the return required under this section for the return period in which they are actually paid unless they were constructively paid in a prior return period, in which case such wages shall be reported only in the return for such prior period.
(c) Time and place for filing returns. For provisons relating to the time and place for filing returns, see §§ 31.6071 (a)-1 and 31.6091-1, respectively.
§ 31.6011(a)-3A   Returns of the railroad unemployment repayment tax.
(a) Requirement —(1) Employers. Every rail employer (as defined in section 3323(a) and section 1 of the Railroad Unemployment Insurance Act) shall make a return of the tax imposed by section 3321(a) (relating to the railroad unemployment repayment tax) for each taxable period (as defined in section 3322(a)) with respect to the total rail wages (as defined in section 3323(b)) paid by the rail employer during the taxable period. Form CT-1 is the form prescribed for use in making the return. One original and a duplicate of each return on Form CT-1 shall be filed with the director of the service center as designated in the instructions to Form CT-1. Rail wages taxable under section 3321(a) shall be reported in the return required under this section for the return period in which they are actually paid unless they were constructively paid in a prior return period, in which case such wages shall be reported only in the return for such prior period.
(2) Employee representatives. Each employee representative (as defined in section 3323(d)(2) and section 1 of the Railroad Unemployment Insurance Act) shall make a return of the tax imposed by section 3321(b) on the rail wages paid to him (as determined under section 3321(b)(2)) during each calendar quarter within a taxable period. Form CT-2 is the form prescribed for use in making the return. One original and a duplicate of each return on Form CT-2 shall be filed with the director of the service center as designated in the instructions to Form CT-2. Rail wages taxable under section 3321(b) shall be reported in the return required under this section for the return period in which they are actually paid unless they were constructively paid in a prior return period, in which case such wages shall be reported only in the return for such prior period.
(b) Time and place for filing returns. For provisions relating to the time and place for filing returns, see § 31.6071(a)-1A and § 31.6091-1, respectively.
§ 31.6011(a)-4   Returns of income tax withheld.
(a) Withheld from wages —(1) In general. Except as otherwise provided in paragraphs (a)(2), (a)(3), (a)(4), and (b) of this section, and in § 31.6011(a)-5, every person required to make a return of income tax withheld from wages pursuant to section 3402 shall make a return for the first calendar quarter in which the person is required to deduct and withhold such tax and for each subsequent calendar quarter, whether or not wages are paid therein, until the person has filed a final return in accordance with § 31.6011(a)-6. Except as otherwise provided in paragraphs (a)(2), (a)(3), (a)(4), and (b) of this section, and in § 31.6011(a)-8, Form 941, “Employer's QUARTERLY Federal Tax Return,” is the form prescribed for making the return required under this paragraph (a)(1).
(2) Wages paid for domestic service. Schedule H (Form 1040), “Household Employment Taxes,” is the form prescribed for making the return required under paragraph (a)(1) of this section with respect to income tax withheld, pursuant to an agreement under section 3402(p), from wages paid for domestic service as defined in section 3510. Schedule H (Form 1040) is generally filed as an attachment to an income tax return; however, if the employer does not otherwise have an obligation to file an income tax return, Schedule H (Form 1040) may be filed as a separate return. The preceding sentence shall not apply in the case of an employer who has chosen under § 31.6011(a)-1(a)(3) to use Form 941, “Employer's QUARTERLY Federal Tax Return,” Form 943, “Employer's Annual Tax Return for Agricultural Employees,” or Form 944, “Employer's ANNUAL Federal Tax Return,” as the return with respect to such payments for purposes of the Federal Insurance Contributions Act. For the requirements relating for Schedule H (Form 1040) with respect to qualified State individual income taxes, see § 301.6361-1(d)(3)(iv).
(3) Wages paid for agricultural labor. Every person shall make a return of income tax withheld, pursuant to an agreement under section 3402(p), from wages paid for agricultural labor for the first calendar year in which he is required (by reason of such agreement) to deduct and withhold such tax and for each subsequent calendar year (whether or not wages for agricultural labor are paid therein) until he has filed a final return in accordance with § 31.6011(a)-6. Form 943 is the form prescribed for making the return required under this subparagraph. For the requirements relating to Form 943 with respect to qualified State individual income taxes, see paragraph (d)(3)(iv) of § 301.6361-1.
(4) Employers in the Employers' Annual Federal Tax Program (Form 944) —(i) In general. Employers notified of their qualification for the Employers' Annual Federal Tax Program (Form 944) are required to file Form 944, “Employer's ANNUAL Federal Tax Return,” instead of Form 941 to make a return of income tax withheld from wages pursuant to section 3402. Upon proper request by the employer, the IRS will notify employers in writing of their qualification for the Employers' Annual Federal Tax Program (Form 944). The IRS will notify employers when they no longer qualify for the Employers' Annual Federal Tax Program (Form 944) and must file Forms 941 instead. Qualified employers are those with an estimated annual employment tax liability (that is, social security, Medicare, and withheld federal income taxes) of $1,000 or less for the entire calendar year, except employers required under—
(A) Paragraph (a)(3) of this section to make a return on Form 943, “Employer's Annual Federal Tax Return for Agricultural Employees”; or
(B) Paragraph (a)(2) of this section to make a return on Schedule H (Form 1040), “Household Employment Taxes.”
(ii) Request to opt in or opt out of the Employers' Annual Federal Tax Program (Form 944). The IRS established procedures in Revenue Procedure 2009-51 published in the Internal Revenue Bulletin for employers to follow to request to participate in the Employers' Annual Federal Tax Program (Form 944) (to opt in) and to request to be removed from the Employers' Annual Federal Tax Program (Form 944) after becoming a participant in order to file Forms 941 instead (to opt out). The IRS will notify employers that their filing requirements have changed to Form 944 or Forms 941. Employers must follow the procedures in Revenue Procedure 2009-51 or its successor to opt in or opt out of the Employers' Annual Federal Tax Program (Form 944).
(b) Withheld from nonpayroll payments. Every person required to withhold tax from nonpayroll payments for calendar year 1994 must make a return for calendar year 1994 and for any subsequent calendar year in which the person is required to withhold such tax until the person makes a final return in accordance with § 31.6011(a)-6. Every person not required to withhold tax from nonpayroll payments for calendar year 1994 must make a return for the first calendar year after 1994 in which the person is required to withhold such tax and for any subsequent calendar year in which the person is required to withhold such tax until the person makes a final return in accordance with § 31.6011(a)-6. Form 945, Annual Return of Withheld Federal Income Tax, is the form prescribed for making the return required under this paragraph (b). Nonpayroll payments are—
(1) Certain gambling winnings subject to withholding under section 3402(q);
(2) Retirement pay for services in the Armed Forces of the United States subject to withholding under section 3402;
(3) Certain annuities as described in section 3402(o)(1)(B);
(4) Pensions, annuities, IRAs, and certain other deferred income subject to withholding under section 3405; and
(5) Reportable payments subject to backup withholding under section 3406.
(c) Time and place for filing returns. For provisions relating to the time and place for filing returns, see §§ 31.6071 (a)-1 and 31.6091-1, respectively.
(d) Effective/applicability dates. Paragraphs (a)(1) and (a)(4)(i) of this section apply to taxable years beginning on or after December 30, 2008. Paragraph (a)(4)(ii) of this section applies to taxable years beginning on or after January 1, 2010. The rules of paragraph (a)(1) of this section that apply to taxable years beginning before December 30, 2008, are contained in § 31.6011(a)-4 as in effect prior to December 30, 2008. The rules of paragraph (a)(4)(ii) of this section that apply to taxable years beginning before January 1, 2010, but on or after December 30, 2008, are contained in § 31.6011(a)-4T as in effect on or after December 30, 2008. The rules of paragraph (a)(4) of this section that apply to taxable years beginning before December 30, 2008, are contained in § 31.6011(a)-4T as in effect prior to December 30, 2008.
§ 31.6011(a)-5   Monthly returns.
(a) In general —(1) Requirement. The provisions of this section are applicable in respect of the taxes reportable on returns required pursuant to § 31.6011(a)-1 or § 31.6011(a)-4. An employer (or other person) who is required by § 31.6011(a)-1 or § 31.6011(a)-4 to make quarterly or annual returns on any such form shall, in lieu of making such quarterly or annual returns, make returns of such taxes in accordance with the provisions of this section if the employer is so notified in writing by the IRS. Every employer (or other person) notified by the IRS shall make a return for the calendar month in which the notice is received, for each of the prior calendar months in the return period, and for each calendar month afterwards (whether or not wages are paid in any such month) until the employer has filed a final return or is required to make quarterly or annual returns pursuant to notification as provided in paragraph (a)(2) of this section. Each return required under this section shall be made on the form prescribed for making the return which would otherwise be required of the employer (or other person) under the provisions of § 31.6011(a)-1 or § 31.6011(a)-4, except that, if some other form is furnished by the IRS for use in lieu of such prescribed form, the return shall be made on such other prescribed form. The IRS may notify any employer (or other person)—
(i) Who by reason of notification as provided in § 301.7512-1, is required to comply with the provisions of such § 301.7512-1; or
(ii) Who failed to—
(A) Make any return required pursuant to § 31.6011(a)-1 or § 31.6011(a)-4;
(B) Pay tax reportable on any such form; or
(C) Deposit any such tax as required under the provisions of § 31.6302-1.
(2) Termination of requirement. The IRS, in its discretion, may notify the employer in writing that the employer shall discontinue the filing of monthly returns under this section. If the employer is so notified, the IRS will provide the employer with instructions for filing the final monthly return. Afterwards, the employer shall make quarterly or annual returns in accordance with the provisions of § 31.6011(a)-1 or § 31.6011(a)-4.
(b) Information returns on Form W-3 and Social Security Administration copies of Form W-2. See § 31.6051-2 for requirements with respect to information returns on Form W-3 and Social Security Administration copies of Form W-2.
(c) Time and place for filing returns. For provisions relating to the time and place for filing returns, see §§ 31.6071 (a)-1 and 31.6091-1, respectively.
§ 31.6011(a)-6   Final returns.
(a) In general —(1) Federal Insurance Contributions Act; income tax withheld from wages and nonpayroll payments. An employer (or other person) who is required to make a return on a particular form pursuant to § 31.6011(a)-1, § 31.6011(a)-4, or § 31.6011(a)-5, and who in any return period ceases to pay wages or nonpayroll payments in respect of which he is required to make a return on that form, must make the return for the period as a final return. Each return made as a final return shall be marked “Final return” by the person filing the return. Every such person filing a final return (other than a final return on Form 942 or Form 943) must furnish information showing the date of the last payment of wages (as defined in section 3121(a) or section 3401(a)), and, if appropriate, the date of the last payment of nonpayroll payments defined in § 31.6011(a)-4(b). An employer (other than an employer making returns on Form 942) who has only temporarily ceased to pay wages, because of seasonal activities or for other reasons, shall not make a final return but shall continue to file returns. If (i) for any return period an employer makes a final return on a particular form, and (ii) after the close of such period the employer pays wages, as defined in section 3121(a) or section 3401(a), in respect of which the same or a different return form is prescribed, such employer shall make returns on the appropriate return form. For example, if an employer who has filed a final return on Form 941 pays wages only for domestic service in his private home not on a farm operated for profit, the employer is required to make returns on Form 942 in respect of such wages.
(2) Railroad Retirement Tax Act —(i) Form CT-1. An employer required to make returns on Form CT-1 who in any return period ceases to pay taxable compensation shall make the return on Form CT-1 for such period as a final return. Such return shall be marked “Final return” by the person filing the return, and such person shall furnish information showing the date of the last payment of taxable compensation. An employer who has only temporarily ceased to pay taxable compensation shall continue to file returns on Form CT-1.
(ii) Form CT-2. An employee representative required to make returns on Form CT-2 who in any calendar quarter ceases to be paid taxable compensation for services as an employee representative shall make the return on Form CT-2 for such quarter as a final return. Such return shall be marked “Final return” by the person filing the return, and such person shall furnish information showing the date of the last payment of taxable compensation. An employee representative who only temporarily ceases to be paid taxable compensation for services as an employee representative shall continue to file returns on Form CT-2.
(3) Federal Unemployment Tax Act. An employer required to make a return on Form 940 for a calendar year in which he ceases to be an employer, as defined in § 31.3306(a)-1, because of the discontinuance, sale, or other transfer of his business, shall make such return as a final return. Such return shall be marked “Final return” by the person filing the return.
(b) Statement to accompany final return. There shall be executed as a part of each final return, except in the case of a final return on Form 942, a statement showing the address at which the records required by the regulations in this part will be kept, the name of the person keeping such records, and, if the business of an employer has been sold or otherwise transferred to another person, the name and address of such person and the date on which such sale or other transfer took place. If no such sale or transfer occurred or the employer does not know the name of the person to whom the business was sold or transferred, that fact should be included in the statement. Such statement shall include any information required by this section as to the date of the last payment of wages or compensation. If the statement is executed as a part of a final return on Form CT-1 or Form CT-2, such statement shall be furnished in duplicate.
(c) Time and place for filing returns. For provisions relating to the time and place for filing returns, see §§ 31.6071 (a)-1 and 31.6091-1, respectively.
§ 31.6011(a)-7   Execution of returns.
(a) In general. Each return required under the regulations in this part, together with any prescribed copies or supporting data, shall be filled in and disposed of in accordance with the forms, instructions, and regulations applicable thereto. The return shall be carefully prepared so as fully and accurately to set forth the data required to be furnished therein. Returns which have not been so prepared will not be accepted as meeting the requirements of the regulations in this part. The return may be made by an agent in the name of the person required to make the return if an acceptable power of attorney is filed with the internal revenue office with which such person is required to file his returns and if such return includes all taxes required to be reported by such person on such return for the period covered by the return. Only one return on any one prescribed form for a return period shall be filed by or for a taxpayer. Any supplemental return made on such form in accordance with § 31.6205-1 shall constitute a part of the return which it supplements. Except as may be provided under procedures authorized by the Commissioner with respect ot taxes imposed by the Railroad Retirement Tax Act, consolidated returns of two or more employers are not permitted, as for example, returns of a parent and a subsidiary corporation. For provisions relating to the filing of returns of the taxes imposed by the Federal Insurance Contributions Act and of income tax withheld under section 3402 in the case of governmental employers see §§ 31.3122 and 31.3404-1.
(b) Use of prescribed forms —(1) In general. Copies of the prescribed return forms will so far as possible be regularly furnished taxpayers by the Internal Revenue Service. A taxpayer will not be excused from making a return, however, by the fact that no return form has been furnished to him. Taxpayers not supplied with the proper forms should make application therefor to an internal revenue office in ample time to have their returns prepared, verified, and filed on or before the due date with the internal revenue office with which they are required to file their returns. See §§ 31.6071 (a)-1 and 31.6091-1, relating, respectively, to the time and place for filing returns. In the absence of a prescribed return form, a statement made by a taxpayer disclosing the aggregate amount of wages or compensation reportable on such form for the period in respect of which a return is required and the amount of taxes due may be accepted as a tentative return. If filed within the prescribed time, the statement so made will relieve the taxpayer from liability for the addition to tax imposed for the delinquent filing of the return, provided that without unnecessary delay such tentative return is supplemented by a return made on the proper form. For additions to the tax in case of failure to file a return within the prescribed time, see the provisions of § 301.6651-1 of this chapter (Regulations on Procedure and Administration).
(c) Signing and verification. For provisions relating to the signing of returns, see § 31.6061-1. For provisions relating to the verifying of returns, see § 31.6065(a)-1.
(d) Reporting of identifying numbers. For provisions relating to the reporting of identifying number on returns required under the regulations in this part, see § 31.6109-1.
§ 31.6011(a)-8   Composite return in lieu of specified form.
The Commissioner may authorize the use, at the option of the employer, of a composite return in lieu of any form specified in this part for use by an employer, subject to such conditions, limitations, and special rules governing the preparation, execution, filing, and correction thereof as the Commissioner may deem appropriate. Such composite return shall consist of a form prescribed ty the Commissioner and an attachment or attachments of magnetic tape or other approved media. Notwithstanding any provisions in this part to the contrary, a single form and attachment may comprise the returns of more than one employer. To the extent that the use of a compsoite return has been authorized by the Commissioner, references in this part to a specific form for use by the employer shall be deemed to refer also to a composite return under this section.
§ 31.6011(a)-9   Instructions to forms control as to which form is to be used.
Notwithstanding provisions in this part which specify the use of a particular form for a return or other document required by this part, the use of a different form may be required by the latter form's instructions. In such case, the latter form shall be completed in accordance with its instructions.
§ 31.6011(a)-10   Instructions to forms may waive filing requirement in case of no liability tax returns.
Notwithstanding provisions in this part which require that a tax return be filed, the instructions to the form on which a return of tax is otherwise required by this part to be made may waive such requirement with respect to a particular class or classes of no liability tax returns. Returns in a class for which such requirement has been so waived need not be made.
This Treasury decision is not adverse to any taxpayer. For this reason, it is found unnecessary to issue this Treasury decision with notice and public procedure under subsection (b) of section 553 of title 5 of the United States Code or subject to the effective date limitation of subsection (d) of that section.
§ 31.6011(b)-1   Employers' identification numbers.
(a) Requirement of application —(1) In general —(i) Before October 1, 1962. Except as provided in paragraph (b) of this section, every employer who on any day after December 31, 1954, and before October 1, 1962, has in his employ one or more individuals in employment for wages subject to the taxes imposed by the Federal Insurance Contributions Act, but who prior to such day neither has been assigned an identification number nor has applied therefor, shall make an application on Form SS-4 for an identification number.
(ii) On or after October 1, 1962. Except as provided in paragraph (b) of this section, every employer who on any day after September 30, 1962, has in his employ one or more individuals in employment for wages which are subject to the taxes imposed by the Federal Insurance Contributions act or which are subject to the withholding of income tax from wages under section 3402, but who prior to such day neither has been assigned an identification number nor has applied therefor, shall make an application on Form SS-4 for an identification number.
(iii) Method of application. The application, together with any supplementary statement, shall be prepared in accordance with the form, instructions, and regulations applicable thereto, and shall set forth fully and clearly the data therein called for. Form SS-4 may be obtained from any district director or director of a service center or any district office of the Social Security Administration. The application shall be filed with the internal revenue officer designated in the instructions applicable to Form SS-4, or with the nearest district office of the Social Security Administration. The application shall be signed by ( a ) the individual, if the employer is an individual; ( b ) the president, vice president, or other principal officer, if the employer is a corporation; ( c ) a responsible and duly authorized member or officer having knowledge of its affairs, if the employer is a partnership or other unincorporated organization; or ( d ) the fiduciary, if the employer is a trust or estate. An identification number will be assigned to the employer in due course upon the basis of the information reported on the application required under this section.
(2) Time for filing Form SS-4. The application for an identification number shall be filed on or before the seventh day after the first payment of wages to which reference is made in paragraph (a)(1) of this section. For provisions relating to the time when wages are paid, see § 31.3121(a)-2 and paragraph (b) of § 31.3402(a)-1.
(b) Employers who are assigned identification numbers without application. An identification number may be assigned, without application by the employer, in the case of an employer who has in his employ only employees who are engaged exclusively in the performance of domestic service in his private home not on a farm operated for profit (see § 31.3121(a)(7)-1. If an identification number is so assigned, the employer is not required to make an application on Form SS-4 for the number.
(c) Crew leaders. Any person who, as a crew leader within the meaning of section 3121(o), furnishes individuals to perform agricultural labor for another person shall, on or before the first date on which he furnishes such individuals to perform such labor for such other person, advise such other person of his name; permanent mailing address, or if none, present address; and identification number, if any.
(d) Use of identification number. The identification number assigned to an employer (other than a household employer referred to in paragraph (b) of this section) shall be shown in the employer's records, and shall be shown in his claims to the extent required by the applicable forms, regulations, and instructions. For provisions relating to the inclusion of identification numbers in returns, statements on Form W-2, and depositary receipts, see § 31.6109-1.
§ 31.6011(b)-2   Employees' account numbers.
(a) Requirement of application —(1) In general —(i) Before November 1, 1962. Every employee who on any day after December 31, 1954, and before November 1, 1962, is in employment for wages subject to the taxes imposed by the Federal Insurance Contributions Act, but who prior to such day has neither secured an account number nor made application therefor, shall make an application on Form SS-5 for an account number.
(ii) On or after November 1, 1962. Every employee who on any day after October 31, 1962, is in employment for wages which are subject to the taxes imposed by the Federal Insurance Contributions Act or which are subject to the withholding of income tax from wages under section 3402 but who prior to such day has neither secured an account number nor made application therefore, shall make an application on Form SS-5 for an account number.
(iii) Method of application. The application shall be prepared in accordance with the form, instructions, and regulations applicable thereto, and shall set forth fully and clearly the data therein called for. The employee shall file the application with any district office of the Social Security Administration or, if the employee is not working within the United States, with the district office of the Social Security Administration at Baltimore, Maryland. Form SS-5 may be obtained from any district office of the Social Security Administration or from any district director. An account number will be assigned to the employee by the Social Security Administration in due course upon the basis of information reported on the application required under this section. A card showing the name and account number of the employee to whom an account number has been assigned will be furnished to the employee by the Social Security administration.
(2) Time for filing Form SS-5. The application shall be filed on or before the seventh day after the occurrence of the first day of employment to which reference is made in paragraph (a)(1) of this section, unless the employee leaves the employ of his employer before such seventh day, in which case the application shall be filed on or before the date on which the employee leaves the employ of his employer.
(3) Changes and corrections. Any employee may have his account number changed at any time by applying to a district office of the Social Security Administration and showing good reasons for a change. With that exception, only one account number will be assigned to an employee. Any employee whose name is changed by marriage or otherwise, or who has stated incorrect information on Form SS-5, should report such change or correction to a district office of the Social Security Administration Copies of the form for making such reports may be obtained from any district office of the administration.
(b) Duties of employee with respect to his account number —(1) Information to be furnished to employer. An employee shall, on the day on which he enters the employ of any employer for wages, comply with the provisions of paragraph (b)(1)(i), (ii), (iii), or (iv) of this section, except that, if the employee's services for the employer consist solely of agricultural labor, domestic service in a private home of the employer not on a farm operated for profit, or service not in the course of the employer's trade or business, the employee shall comply with such provisions on the first day on which wages are paid to him by such employer, within the meaning of § 31.3121(a)-2.
(i) Employee who has account number card. If the employee has been issued an account number card by the Social Security Administration and has the card available, the employee shall show it to the employer.
(ii) Employee who has number but card not available. If the employee does not have available the account number card issued to him by the Social Security Administration but knows what his account number is, and what his name is, exactly as shown on such card, the employee shall advise the employer of such number and name. Care must be exercised that the employer is correctly advised of such number and name.
(iii) Employee who has receipt acknowledging application. If the employee does not have an account number card but has available a receipt issued to him by an office of the Social Security Administration acknowledging that an application for an account number has been received, the employee shall show such receipt to the employer.
(iv) Employee who is unable to furnish number or receipt. If an employee is unable to comply with the requirement of paragraph (b)(1)(i), (ii), or (iii) of this section, the employee shall furnish to the employer a statement in writing, signed by the employee, setting forth the date of the statement, the employee's full name, present address, date and place of birth, father's full name, mother's full name before marriage, and the employee's sex, including a statement as to whether the employee has previously filed an application on Form SS-5 and, if so, the date and place of such filing. The information required by this subdivision shall be furnished on Form SS-5, if a copy of Form SS-5 is available. The furnishing of such a Form SS-5 or other statement by the employee to the employer does not relieve the employee of his obligation to make an application on Form SS-5 and file it with a district office of the Social Security Administration as required by paragraph (a) of this section. The foregoing provisions of this subdivision are not applicable to an employee engaged exclusively in the performance of domestic service in a private home of his employer not on a farm operated for profit, or in the performance of agricultural labor, if the services are performed for an employer other than an employer required to file returns of the taxes imposed by the Federal Insurance Contributions Act with the office of the United States Internal Revenue Service in Puerto Rico. However, such employee shall advise the employer of his full name and present address.
(2) Additional information to be furnished by employee to employer. Every employee who, on the day on which he is required to comply with paragraph (b)(1)(i), (ii), (iii), or (iv) of this section, has an account number card but for any reason does not show such card to the employer on such day shall promptly thereafter show the card to the employer. An employee who does not have an account number card on such day shall, upon receipt of an account number card from the Social Security Administration, promptly show such card to the employer, if he is still in the employ of that employer. If the employee has left the employ of the employer when the employee receives an account number card from the Social Security Administration, he shall promptly advise the employer of his account number and name exactly as shown on such card. The account number originally assigned to an employee (or the number as changed in accordance with paragraph (a)(3) of this section) shall be used by the employee as required by this paragraph even though he enters the employ of other employers.
(3) Furnishing of account number by employee to employer. See § 31.6109-1 for additional provisions relating to the furnishing of an account number by the employee to his employer.
(c) Duties of employer with respect to employees' account numbers —(1) Employee who shows account number. Upon being shown the account number card issued to an employee by the Social Security administration, the employer shall enter the account number and name, exactly as shown on the card, in the employer's records, returns, statements for employees, and claims to the extent required by the applicable forms, regulations, and instructions.
(2) Employee who does not show account number card. With respect to an employee who, on the day on which he is required to comply with paragraph (b)(1)(i), (ii), (iii), or (iv) of this section, does not show the employer an account number card issued to the employee by the Social Security Administration, the employer shall request such employee to show him such card. If the card is not shown, the employer shall comply with the applicable provisions of paragraph (c)(1)(i), (ii), (iii), (iv), or (v) of this section:
(i) Employee who has not applied for account number. If the employee has not been assigned an account number and has not made application therefor with a district office of the Social Security Administration, the employer shall inform the employee of his duties under this section.
(ii) Employee who has account number. If the employee advises the employer of his number and name as shown on his account number card, as provided in paragraph (b)(1)(ii) of this section, the employer shall enter such number and name in his records.
(iii) Employee who has receipt for application. If the employee shows the employer, as provided in paragraph (b)(1)(iii) of this section, a receipt issued to him by an office of the Social Security Administration acknowledging that an application for an account number has been received from the employee, the employer shall enter in his records with respect to such employee the name and address of the employee exactly as shown on the receipt, the expiration date of the receipt, and the address of the issuing office. The receipt shall be retained by the employee.
(iv) Employee who furnishes Form SS-5 or statement. If the employee furnishes information to the employer as provided in paragraph (b)(1)(iv) of this section, the employer shall retain such information for use as provided in paragraph (c)(3)(ii) of this section.
(v) Household or agricultural employees. If the employee advises the employer of his full name and present address in accordance with those provisions of paragraph (b)(1)(iv) of this section which are applicable in the case of employees engaged exclusively in the performance of domestic service in a private home of the employer not on a farm operated for profit, or agricultural labor, the employer shall enter such name and address in his records.
(3) Account number unknown when return is filed. In any case in which the employee's account number is for any reason unknown to the employer at the time the employer's return is filed for any return period with respect to which the employer is required to report the wages paid to such employee—
(i) If employee has shown receipt for application. If the employee has shown to the employer, as provided in paragraph (b)(1)(iii) of this section, a receipt issued to him by an office of the Social Security Administration acknowledging that an application for an account number has been received from the employee, the employer shall enter on the return, with the entry with respect to the employee, the name and address of the employee exactly as shown on the receipt, the expiration date of the receipt, and the address of the issuing office.
(ii) If employee furnished Form SS-5 or statement. If the employee has furnished information to the employer as provided in paragraph (b)(1)(iv) of this section, the employer shall prepare a copy of the Form SS-5 or statement furnished by the employee and attach the copy to the return.
(iii) If employee did not furnish receipt, Form SS-5, or statement. If neither paragraph (c)(3)(i) nor (ii) of this section is applicable, the employer shall, except as provided in paragraph (c)(4) of this section, attach to the return a Form SS-5 or statement, signed by the employer, setting forth as fully and clearly as practicable the employee's full name, his present or last known address, date and place of birth, father's full name, mother's full name before marriage, the employee's sex, and a statement as to whether an application for an account number has previously been filed by the employee and, if so, the date and place of such filing. The employer shall also insert in such Form SS-5 or statement an explanation of why he has not secured from the employee the information referred to in paragraph (b)(1)(iv) of this section and shall insert the word “Employer” as part of his signature.
(4) Household or agricultural employees. The provisions of paragraph (c)(3)(iii) of this section are not applicable with respect to an employee engaged exclusively in the performance of domestic service in a private home of his employer not on a farm operated for profit, or in the performance of agricultural labor, if the services are performed for an employer other than an employer required to file returns of the taxes imposed by the Federal Insurance Contributions Act with the office of the United States Internal Revenue Service in Puerto Rico. If any such employee has not furnished to the employer the information required by paragraph (b) (1) (i), (ii), or (iii) of this section prior to the time the employer's return is filed for any return period with respect to which the employer is required to report wages paid to such employee, the employer shall enter the word “Unknown” in the account number column of the return and (i) file with the return a statement showing the employee's full name and present or last known address, or (ii) enter such address on the return form immediately below the name of the employee.
(5) Where to obtain Form SS-5. Employers may obtain copies of Form SS-5 from any district office of the Social Security Administration or from any district director.
(6) Prospective employees. While not mandatory, it is suggested that the employer advise any prospective employee who does not have an account number of the requirements of paragraphs (a) and (b) of this section.