Close
Close

Common-law employer and agent should file Forms W-2 if both paid wages

RFP
Tax Hot Topics newsletterThe IRS provided in CCA 201922026 that, in instances where a common-law employer enters into an agency relationship mid-year, both the common-law employer and its agent are subject to Form W-2 reporting if they both paid wages to employees. The IRS provided an example where an employer pays the wages of its employees for the first three quarters of a calendar year. In the fourth quarter, the employer enters into an agency relationship pursuant to Section 3504 and authorizes a representative to file the proper employment tax withholding forms for its employees. Under Treas. Reg. Sec. 31.3504-1, an employer’s fiduciary or agent who pays the compensation of the employer’s employees is authorized to perform other acts required of employers with respect to those paid wages, including Form W-2 reporting and employment tax withholding. Therefore, the IRS concluded that the employer in this scenario should issue Forms W-2 with respect to the wages paid in the first three quarters, and the agent should issue Forms W-2 for wages it paid in the fourth quarter.

Contacts:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.