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

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.

Jeff Martin
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

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