HR 3223
To amend the Internal Revenue Code of 1986 to establish procedures relating to the attribution of errors in the case of third party payors of payroll taxes, and for other purposes.
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Bill overview
This bill amends the Internal Revenue Code to clarify how errors in payroll tax payments made by third parties are handled. It establishes procedures for determining responsibility when a third party, such as a professional employer organization, makes an error while paying payroll taxes on behalf of an employer. The bill aims to prevent audits and delays based solely on a third party’s error and ensures that employers remain ultimately responsible for their payroll tax obligations.
Key provisions
- Defines ‘constructive knowledge’ regarding errors in certifications.
- Establishes liability for errors – the employer is responsible if the third party has constructive knowledge of an error, otherwise the employer is solely responsible.
- Prevents audits or examinations of employers solely due to errors by third-party payors.
- Allows the Secretary to request information from third-party payors related to employers.
- Specifies that a third party payor is defined as a fiduciary, agent, or professional employer organization.
- Provides criteria for determining when a third party payor does not have constructive knowledge of an error.
- Sets the effective date for the new rules to audits initiated after enactment.
Who is affected
- Employers
- Third-party payroll tax payors (e.g., professional employer organizations)
- The Internal Revenue Service (IRS)
- Fiduciaries and agents involved in payroll tax administration
Notable changes
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119th CONGRESS — 1st Session
H. R. 3223
IN THE HOUSE OF REPRESENTATIVES
A BILL
To amend the Internal Revenue Code of 1986 to establish procedures relating to the attribution of errors in the case of third party payors of payroll taxes, and for other purposes.
The Internal Revenue Code of 1986 is amended by adding a new section 3513 to read as follows:
A third party payor may, in the course of carrying out any requirement imposed under this subtitle, rely on a certification by the applicable employer unless such third party payor has constructive knowledge of an error in such certification. For purposes of this section, the term certification
includes a representation, attestation, or similar document.
For the purpose of imposing any liability with respect to an act carried out by a third party payor—
in the case of a third party payor with constructive knowledge of an error—
the employer shall be responsible for such liability; and
the third party payor shall be responsible for such liability, but only with respect to so much of the liability as is attributable to a portion of the certification with respect to which the third party payor had constructive knowledge of the error; or
in the case of a certification with respect to which the third party payor did not have constructive knowledge of an error, the employer shall have sole responsibility for any liability arising from such error.
For purposes of subsection (b), the term liability
means any amount due under this subtitle, and any interest or penalties due with respect to such amount under this title.
The Secretary may not delay the processing of any payroll tax credit claimed by a third party payor on behalf of an employer or initiate an audit or examination of such employer solely because such payroll tax credit was claimed by a third party payor that filed an erroneous return of tax in reliance on a certification of another employer.
The Secretary may require a third party payor to provide any information in possession of such third party payor to the Secretary in relation to an employer that the Secretary could require such employer to provide to the Secretary.
For purposes of this section, the term constructive knowledge
means, with respect to a third party payor, that such third party payor knew or should have known of an error in a certification described in subsection (a). However, with respect to any payroll tax credit claimed by a third party payor on behalf of an employer, such third party payor will be deemed not to have constructive knowledge of an error in a certification with respect to such payroll tax credit if—
such certification provides that the employer is entitled to the payroll tax credit;
the third party payor accurately reported the payroll tax credit in accordance with information certified by the employer; and
prior to claiming the payroll tax credit, the third party payor verified the amount of aggregate wages paid by the third party payor used by the employer in establishing the amount of the payroll tax credit.
For purposes of this section, the term third party payor
includes a fiduciary, agent, or other person described in section 3504, a professional employer organization, or a certified professional employer organization.
This section shall apply to audits, examinations, and assessments initiated or made after the date of enactment.