“COMMON” MISCONCEPTIONS WITH MULTI-ENTITY …

1 Equifax Confidential and Proprietary common MISCONCEPTIONS with MULTI-ENTITY EMPLOYMENT TAX REPORTINGC ommon Paymaster, common Pay Agent & Relation to common Law Employer 2017 Midwest Regional Payroll ConferenceSt. Louis, MO October 13, 2017 Scott Bankert Equifax Workforce SolutionsConfidential and ProprietaryWhat is Employment & Employee Why is this important? Tax-free benefits can only be provided to employees! Independent contractor vs. employee common -law employee test Statutory employee Statutory non-employee2 Confidential and ProprietaryJurisdictional TestsLocalization of servicesBase of OperationsDirection & ControlResidence3 Confidential and ProprietaryWho is an Employer Why is this important? Determines which legal entity is entitled to claim deduction for corporate income tax purposes. Determining Employer type tells us if entity is responsible for: Paying wages Depositing taxes Filing tax returns Direction and control of worksite employees Restarting taxable wages bases when new employee are hired4 Confidential and ProprietaryClassification of EntitiesClassification of Entities that Process/Control Payroll for Federal Employment Tax Purposes common Law Employer Statutory Employer Co-Employer (not recognized by IRS) Authorized Pay Agent Payroll Processor AgentDetermination of Employer status may vary for different tax types (FIT, FICA, FUTA, SIT, SUI)5 Confidential and ProprietaryCommon Law EmployerCommon Law Employer provides direction and control of worksite employeesRev.

2 Rul. 87-41 20 Factor test Form SS-86 Confidential and ProprietaryStatutory EmployerIRC Sec. 3401(d)(1)Statutory Employer is solely responsible for payment of wages, depositing taxes, and filing tax to the entity that holds the cash!7 Confidential and ProprietaryCommon PaymasterSec. 3306.(p) For purposes of sections 3301, 3302, and 3306(b)(1), if two or more related corporations concurrentlyemploy the same individual and compensate such individual through a common paymaster which is one of such corporations, each such corporation shall be considered to have paid as remuneration to such individual only the amounts actually disbursedby it to such individual and shall not be considered to have paid as remuneration to such individual amounts actually disbursed to such individual by another of such corporations. Note: Sec. 3301 = FUTA tax rate, Sec. 3302 = FUTA credit, Sec. 3306(b)(1) = FUTA wage base8 Confidential and ProprietaryCommon Paymaster IllustratedCompany ACompany BCompany CCompany DEmployee 1 Employee 2 Employee 3 Employee 4 Employee 1 Employee 2 Employee 3 Employee 4 Employee 8 Employee 9 Employee 1 Employee 10 Employee 8 Employee 9 Employee 1 Employee 10 Employee 5 Employee 1 Employee 6 Employee 7 Employee 5 Employee 1 Employee 6 Employee 7 Employee 11 Employee 12 Employee 13 Employee 1 Employee 11 Employee 12 Employee 13 Employee 19 Confidential and ProprietaryCommon Pay AgentElection for Federal Income Tax Withholding and FICA Technically not permitted for FUTA Election made through Form 2678 Recognized for mostState Income Tax Withholding.

3 But not State Unemployment Insurance10 Confidential and ProprietaryCommon Pay Agent Illustrated11 Company ECompany ACompany BCompany CCompany DEmployeesEmployeesEmployeesEmployeesEmp loyeesEmployeesEmployeesEmployees11 Confidential and Proprietary Co-Employment Professional Employer Organizations (PEOs)Term not recognized by Internal Revenue Service/CodeCurrent IRS opinions argue that, at best, a PEO is a Statutory EmployerFor SUI taxation, approximately 2/3 of states define PEO as a statutory employer, other 1/3 follow common law rules12 Confidential and ProprietaryOther Non-Traditional Employment RelationshipsPayroll Processor Agent Captive leasing No statutory support for thisEmployment Management CompaniesDisregarded entities (Single-member LLCs) 99-6, New Treasury regulations13 Confidential and ProprietaryCurrent Audit Focus Payrolling Reporting of employment and employment taxes to entity other than true employer Disconnect between employment reporting and financial reporting Targeted by USDOL as part of SUTA Dumping fraudulent reporting common law employer may not be unique FEIN CA, CO, MI, MN, NC14 Confidential and ProprietaryFor more information please contact:Scott BankertDirector, Employment Tax ServicesEquifax Workforce SolutionsPhone: 314-684-2075 Cell: and Answers15