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CCH® PAYROLL — 06/03/09

Federal 2010 budget proposal contains some payroll items

The President’s recently released 2010 budget proposal contains some payroll-related provisions.

Information return penalties

The first-tier penalty would be increased from $15 to $30, and the calendar year maximum would be increased from $75,000 to $250,000. The second-tier penalty would be increased from $30 to $60, and the calendar year maximum would be increased from $150,000 to $500,000. The third-tier penalty would be increased from $50 to $100, and the calendar year maximum would be increased from $250,000 to $1,500,000. For small filers, the calendar year maximum would be increased from $25,000 to $75,000 for the first-tier penalty, from $50,000 to $200,000 for the second-tier penalty, and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard would be increased from $100 to $250. Every five years the penalty amounts would be adjusted to account for inflation. The proposal would be effective for information returns required to be filed after December 31, 2010.

Employee leasing companies

Currently, there is uncertainty as to whether the employee leasing company or its client is liable for unpaid federal employment taxes arising with respect to wages paid to the client’s workers. When an employee leasing company files employment tax returns using its own name and employer identification number, but fails to pay some or all of the taxes due, or when no returns are filed with respect to wages paid by a taxpayer that uses an employee leasing company, there can be confusion as to how federal employment taxes are assessed and collected. The proposal sets forth standards for holding employee leasing companies jointly and severally liable with their clients for federal employment taxes. The proposal also provides standards for holding employee leasing companies solely liable for such taxes in some cases. The provision would be effective for employment tax returns required to be filed with respect to wages paid after December 31, 2009.

Bad check penalty

The bad check penalty would be expanded to cover all commercially acceptable instruments of payment that are not duly paid, effective for returns required to be filed after December 31, 2009.

(General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals, Department of the Treasury, May 2009.)

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