Achieving the Goal of Compliance with the Government Tax Laws How - PowerPoint PPT Presentation

Achieving the Goal of Compliance with the Government Tax Laws

How to Achieve the Goal Athlete Finance Officer Program: Schedule Identify and Practice Prioritize Issues Diet / Sleep Plan: Win Local Establish an Win Regional “Action Plan” Win National Goal: Win Olympics! Tax Compliance! 5

Key Topics • Correction of Errors • IRS Audits • Government Autos/Vehicles • ACA / Opt-Out Arrangements • Flexible Spending Account Issues • 457(b) Deferred Comp Plans • Accrued Leave Programs • Proposed Tax Law Changes 6

Components of the Tax Law • Internal Revenue Code (Law of the Land) • IRS Interpretations - Regulations, Revenue Rulings & Private Letter Rulings (PLRs) • Court Cases – Court Can Rule in Favor of IRS or the Taxpayer • IRC Sec. 61 - All Income Taxable, Except… • Statutory Exclusions • Doctrine of “Constructive Receipt” • “Economic Substance” Doctrine 7

Correction of Errors (Page 7) • Form 941-X • Statute of Limitations • Correcting Overpayments • Employee Consents for Refunds • Misclassified Workers • Overpaid Wages • Should the Agency Correct Errors Going Forward? 8

IRS Employment Tax Audits (PAGE 11) How Are Agencies Selected for Audit? • Media Attention • Special IRS Compliance Projects • Target List • Random Selection • Whistleblowers 9

Key Issues (Page 13) • Form 1099 Compliance • Form W-9 • TIN Matching Program • Employee v. Independent Contractor • Contract City Attorneys • Exempt Form W-4 • Information Document Requests (IDRs) 10

How to Handle Audit (Page 14) • Establish Trust; Fully Cooperate • Respond Quickly to Document Requests • IRS Agents Have “Subpoena Powers” • Answer Questions Openly and Honestly • However, Do Not Volunteer Information About Plans Not Under Examination • Accept Assessment If IRS Is Right. 11

Challenging the IRS (Page 14) • Dispute Proposed Assessments Where the Agency Has a Sound Tax Position • Should the Statute of Limitations Be Extended? • Fast Track Settlement Program • IRS Office of Appeals • Tax Court 12

Form 1099 Reporting (Page 234) • Form 1099-MISC • Form 1099-C (Cancellation of Debt) • Form 1099-G (Taxable Grants) • Form 1099-INT (Interest Payments) • Form 1099-K (Payment Card Transactions) • Form 1099-S (Real Estate Transactions) • Form W-9 (Back-Up Withholding / TIN Matching Program) • Reporting Lawsuits, Judgments & Settlements.

Employee vs. Independent Contractor (Page 22) • Facts and Circumstances • Three-Part, Common Law Test • Right to Control and Direct Work of the Individual (the Method, Manner and Means) 14

Checklist (Page 24) Is Worker an Independent Contractor? • Written Agreement? • Separate Identifiable Business? • Is Worker Part-Time? Is Worker an Employee? • Employment Agreement? • Under Direct Supervision and Control? • Is Worker Full Time?

Contract City Attorneys (Page 35 ) • Independent Contractor or Employee? • “Public Official” Under State Laws • Not an “Appointed Public Official” Under Federal Income Tax Law • What Is Section 530 Relief? • Contractual Arrangements with City Attorneys. 16

Expense Reimbursement Plans (Page 43) • Accountable Plans • Substantiation • Documentation • Return of Excess Advances 17

Expense Reimbursement Plans (Pages 45-47) • General Per Diem Rates for 2017-2018 • Rates for Meals and Incidental Expenses (M&IE) • Rates for “High - Low” Method • “Reasonable Hours” Standard 18

Automobile Fringe Benefits (Page 50) • Personal vs. Business Travel • Annual Lease Value • $1.50 Per Commute • Cents Per Mile • Substantiation/ Documentation 19

“Personal Use” (Page 54) “Commuting” – Travel From a Residence to One or More Regular Work Locations is Personal Use. “Business Travel”: • Travel Between Two Places of Business • If Travel Has a “Business Purpose”, It Is Business Travel. Travel from a Residence to a “ Temporary Work Location ” ( and Back) Is Not Taxable, Regardless of the Distance Traveled. New Development (Page 55) 20

$3.00 Per Day (Page 58) Control Employees (2017 Wages Equal or Exceed $151,700) Are Not Eligible Gross Wages, Form W-2, Box 1 Plus : “Employee Elective Deferrals” • Cafeteria Plan Contributions • Transportation Fringe Benefits • 457 Plan Contributions • 403(b) Annuity Contributions 21

Cents Per Mile Method ( Page 60) • Cents Per Mile Method May Be Used If Vehicle Value Is $15,900 or Less If Placed Into Use in 2017 • Pickup Truck or Van Value Must Be $17,700 or Less If Placed Into Use in 2017 • Definition of a “Truck or Van” 22

Special Exemptions (Pages 62-67) • What Is the “Physical Design” of the Vehicle? What Does It Look Like? • “Clearly - Marked” Police, Fire and Public Safety Officer Vehicles • Unmarked Fire Vehicles • Special Rules for Pick-up Trucks • Special Circumstances for “Utility Workers” 23

Workers’ Compensation (Page 75) • California Workers’ Compensation Act • “A Statute in the Nature of Workers’ Compensation Act” Can Be Created • Cannot Exclude Payments Based On: - Age - Length of Service - Prior Contributions • 2017 Tax Court Case (Page 76) 29

Affordable Care Act (Page 83)

“Play or Pay” Mandate (Page 87) • Effective Date : January 1, 2016 • Large Employers (50 or More FTEs) Must Offer Their Full-Time Employees and Dependents a Health Plan with “Minimum Essential Coverage” (MEC) that Is “Affordable” and Has “Minimum Value” (“Play”). Otherwise, the Employer Is Subject to a Monthly Assessment (“Pay”). • An FTE’s Required Contribution to the Health Plan Is Considered “Affordable” if the Contribution Does Not Exceed 9.69% (for 2017) of Household Income. • An Employee’s Health Coverage Has “Minimum Value” if the Employer Pays 60% or More of the Cost of Covered Claims, and the Plan Provides Substantial Coverage for Inpatient Hospital and Physician Services. 31

ALE Status of Related Entities (Page 91) • Primary Government Entities May Have Formed Related Entities or Control Related Entities. • All Related Entities Need to Be Combined for Purposes of Determining the “Over 50” ALE Status. • Each Entity that Has a Separate EIN Would Generally Need to File Form 1095-C for their Full-Time Employees. 32

“Household Income” (Page 93) A Full- Time Employee’s Required Contribution to a Health Plan is Considered “Affordable” If it Does Not Exceed 9.69% (for 2017) of Household Income. The IRS Has Established Three “Safe Harbor” Methods for Determining Household Income: • Form W-2 Wages Method • “Rate of Pay” Method • “Federal Poverty Level” Method

Cash-Out Arrangements • Where “Employer Flex Credits” Are Available to Employees for Health Benefits, But Benefits Are Not Conditioned on a Waiver of Coverage (Page 94) • Where Employers Offer Additional Compensation In Exchange for Employees Declining Health Coverage (Cash-In-Lieu Benefits)(Pages 95-97) • Flores v. City of San Gabriel Case (Page 97)

Forms 1094-C (Page 99) Form 1094-C (Transmittal Form for Forms 1095-C) • Qualifying Offer Method Simplified Reporting Allowed • 98% Offer Method Simplified Reporting Allowed 35

Forms 1095-C (Pages 100-103) • Line 14 - Offers of Coverage - Code Series 1 • Conditional Offers of Spousal Coverage • Line 15 - Employee’s Required Contribution • Line 16 – Code Series 2 • Post-Employment or COBRA Coverage • Special Issues for Elected Officials 36

Health Reimbursement Plans (Page 105) Group Health Plans • Cannot Place Annual Limits on Essential Health Benefits, and • Must Provide Free Preventive Care Medical Care Reimbursement Plans that: • Have Annual Limits or Do Not Provide Free Preventive Care, and Are Not Integrated with the Group Health Plan 37 Are Subject to Excise Taxes.

Health Reimbursement Plans (Page 105) • ACA Market Reforms Do Not Apply to Retiree Only Plans that Had Fewer Than Two Current Employees On First Day of Plan Year. • 2017 Development: Small Employers May Set Up HRA that Is Not Subject to ACA Penalties 38

Health Reimbursement Plans (Page 107) To Prevent ACA Penalties: • Convert Medical Care Reimbursement Arrangements to ACA-Compliant Plans • Eliminate the Non-Compliant Plan(s) and Increase the Taxable Salaries of Employees to Purchase Individual Insurance Policies. 39

ACCIDENT AND HEALTH PLANS (PAGE 109) • Employer-Provided Coverage Is Nontaxable • Medical “Reimbursements” Nontaxable under Qualified Plan • Cash Rewards to Encourage Participation in “Wellness Programs” • Any Taxable Benefits for Retired or Former Employees Are Generally Reported on Form W-2, Not Form 1099-MISC. (Page 110) • Fixed-Indemnity Health Plans (Page 111) 40