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IRS disagrees with Paychex holding

In Action on Decision (AOD) 2020-01, the IRS issued its nonacquiescence to the holding of a district court in Paychex Business Solutions, LLC, No. 8:15-cv-1455-T-24-TGW (M.D. Fla. 5/2/18). The court held that professional employer organization Paychex, as the statutory employer of its client companies' workers, was entitled to a refund of Social Security taxes overpaid on their behalf (see "Tax Matters: PEO is Statutory Employer," JofA, Aug. 2018). In the AOD, the IRS said a statutory employer exists under Sec. 3410(d)(1) only when the common law employer does not control wage payments. In this case, the IRS said, the client companies had control of the payments, since Paychex received funds from the clients before paying the wages, and the clients remained liable for the payments if the funds they electronically debited to Paychex were insufficient. Also, the IRS stated, the court used an incorrect standard by focusing on control of the bank account used rather than control of the wage payments.

OIC fee is higher, but with more low-income assistance

In final regulations promulgated in March (T.D. 9894), the IRS raised its user fee for offers in compromise (OICs) from $186 to $205. It also adopted rules under Sec. 7122(c)(3) as amended by the Taxpayer First Act, P.L. 116-25, exempting taxpayers from the fee whose adjusted gross income in the most recent tax year for which information is available is at or below 250% of the applicable poverty level as determined by the IRS. Under the final regulations, the Service will not charge the fee if an offer is based solely on doubt as to liability (as defined in Regs. Sec. 301.7122-1(b)(1)) or is made by a low-income taxpayer, defined either by comparing the taxpayer's income to poverty guidelines published annually by the U.S. Department of Health and Human Services, or, for offers submitted after July 1, 2019, under Sec. 7122(c)(3).

KPMG director is named national taxpayer advocate

Erin M. Collins, a managing director of KPMG's Tax Controversy Services practice for the Western area, was named national taxpayer advocate, replacing Nina Olson, who retired in July after serving 18 years in the post. Bridget Roberts served as acting national taxpayer advocate until Collins's appointment became effective March 30. Before spending 20 years in her most recent post at KPMG, Collins was an attorney in the IRS Office of Chief Counsel for 15 years. She also has provided pro bono services to taxpayers with IRS disputes.


Get your clients ready for tax season

These year-end tax planning strategies address recent tax law changes enacted to help taxpayers deal with the pandemic, such as tax credits for sick leave and family leave and new rules for retirement plan distributions, as well as techniques for putting your clients in the best possible tax position.


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