As it does every year, APA sent in its recommendations for the IRS’s Priority Guidance Plan. One item APA wanted clarification about is that the IRS consider how income tax withholding, depositing, and reporting requirements should apply to early wage access (on‑demand pay).
Each year, the IRS and the U.S. Department of the Treasury use the Priority Guidance Plan to identify and rank the tax issues to be addressed during the next fiscal year. The agencies ask stakeholders to help them with this focus by submitting public comments.
On-demand pay offers employees access to accrued earnings in advance of their regular payday. This emerging trend raises regulatory questions not yet answered by the IRS. APA asked the IRS for guidance to help payroll professionals and their employers determine when these arrangements constitute payment of wages subject to payroll tax withholding, depositing, and reporting requirements. In other words, under what circumstances does an employee’s access to accrued earnings trigger actual or constructive payment of wages?
APA also recommended other priorities to the IRS to improve electronic capabilities, including for levies and filing the adjusted Form 94x series and Form 1099-MISC. As part of the IRS’s multiyear Modernization Business Plan, APA requested electronic delivery of IRS tax levies to employers and the capability for employers to submit responses and payments electronically. APA’s request for a free-filing process for Forms 1099-MISC was supported by Congress in the recently enacted Taxpayer First Act.
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