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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Progress
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- Introduced
- Passed House
- Passed Senate
- To President
- Became Law
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)
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