Payroll Deduction Agreements

An individual seeking tax relief may be in a position to make installment payments to the IRS. There are three primary methods of making installment agreement payments: mail in a check, electronic debit, and payroll deduction. The taxpayer can initiate the electronic debit method directly on Form 9465 or Form 433-D. However, a payroll deduction agreement requires the use of a separate form (IRS Form 2159). There are three parts to this form: the Acknowledgement Copy (to be returned to the IRS), the Employer’s Copy, and the Taxpayer’s Copy. The front page of each copy is identical. However, there is an instructional second page to each copy, each containing different information. The second page of the IRS Copy contains a list of internal codes and number designations. The second page of the Taxpayer’s Copy contains some rather redundant instructions on how to fill out the form and what to do with it after it is completed. The second page of the Employer’s Copy is the most interesting. The employer is instructed to “continue to make payments unless the IRS notifies [the employer] that the liability has been satisfied.” This could be prejudicial to the taxpayer. First, the likelihood that the IRS will notify the employer in a timely manner is not very high. Second, if the taxpayer’s financial situation changes and he is unable to continue with the IA, it could be potentially very difficult to cancel the payroll deduction agreement.

 

Summer Day Camp Expenses

For some parents, the summer months mean additional child care expenses for their children under 13 years old who would normally be in school. If this sounds familiar, you should be aware of the Child and Dependent Care Credit, which is really available year round. This Credit may be applicable to Summer Day Camp too. Here are some IRS tips for you to consider:

1. The cost of day camp may count as an expense towards the child and dependent care credit.

2. Expenses for overnight camps do not qualify.

3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.

4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.

5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

A Little Good News for Employers

The “FUTA surtax” was finally laid to rest this week. After 35 years and 8 separate extensions, the “temporary” tax expired and was NOT renewed this time, providing a little tax relief to employers.

I say “little” because it never was a huge tax. The 0.2% FUTA surtax was enacted in 1976 for the purpose of paying for unemployment benefits following the recession of the early 1970s. Mission accomplished by 1987, but the tax stayed on the books. Dave Camp of the House Ways and Means Committee led the opposition to renewal of the tax. Current or future unemployment benefits will not be affected.