Bloomberg Tax
Free Newsletter Sign Up
Bloomberg Tax
Welcome
Go
Free Newsletter Sign Up

Federal Agency Forum Addresses Common Payroll Issues, Questions

May 13, 2022, 12:19 AM

Representatives for the Internal Revenue Service, U.S. Office of Child Support Enforcement, U.S. Citizenship and Immigration Services, and Social Security Administration convened May 11 to answer payroll questions and provide guidance on common payroll scenarios.

Reporting Virtual Currency on Form W-2

Employers that pay employees in virtual currency should report those wages on Form W-2 as the fair market value of the currency in U.S. dollars, said Susan Morris, a policy analyst for the IRS. The fair market value is the amount the virtual currency is worth on the day the employee receives the payment.

Independent contractors that receive virtual currency for their services should also report the fair market value to the IRS, she added. However, independent contractors use Form 1099-NEC instead of Form W-2.

All virtual currency payments are subject to the same federal employment taxes as any other form of wage, including unemployment tax, income tax, and FICA tax, Morris said at the American Payroll Association’s 40th Payroll Congress.

“This treatment is consistent with federal law, which provides that the medium in which compensation services are paid is immaterial in determining whether the compensation constitutes wages for employment tax purposes,” she said.

Income Withholding Order Errors

Income withholding orders sometimes contain an incorrect entity name if the employee is working for a subsidiary of a parent company or if a parent company’s subsidiaries all have separate federal tax identification numbers, said Sherri Grigsby, manager of OCSE’s Employer Services Team. In either case, employers should implement the IWO to prevent the employee from accruing child support arrears.

Employers may contact the state child support agency to obtain an updated order, but they should also review their employment records, she said.

“The child support agencies are getting information about this individual most likely from information reported through new hire or quarterly wage reports,” Grigsby said. “So you may want to take a look at the information that you’re submitting as part of the new hire or quarterly wage reporting processes to ensure that the FEIN and name are associated with that individual.”

Employers sometimes use one FEIN when reporting new hires but another when reporting quarterly wages, she added. Employers should be consistent in their use of FEINs. Otherwise, state child support agencies may believe these employers are violating new-hire reporting laws even if the employer correctly reported all of its new hires.

Form I-9 Storage at an Employee’s Home

Some employers do not have a physical work location and have to store Form I-9 records at an employee’s home, said Alice Jacobsohn, the government relations director for APA. Employees with Forms I-9 in their home sometimes worry that a federal agent may enter their home to review the forms.

Federal agents can make arrangements with employers to inspect Forms I-9 at a separate location, said Susana Gonzalez, a USCIS representative. Inspection locations can be on-site, off-site, or even at a storage facility.

Employers should ensure that Forms I-9 are safely stored no matter their location, Gonzalez added.

“The employer has to make sure that the Forms I-9 are stored in a secure way because the Form I-9 is collecting personal information from the employee,” she said. “The employer should also make sure that the Form I-9 is also available for inspection.”

Employee Name and SSN Verification

When verifying employee Social Security numbers, employers may receive notice that some SSNs do not match the names on file with the SSA, said Darion Waters, director of the agency’s training and program support division.

“If you discover an employee’s SSN is incorrect, you should ask to see the Social Security card to ensure that the name and the SSN match what is in your payroll records,” he said.

If the Social Security card contains the same name and SSN that the employer has in its payroll records, employees should be directed to contact the SSA to resolve the issue, he said. If the employer’s payroll records do not reflect the correct SSN and a Form W-2 was filed containing the error, a Form W-2c should be filed.

To contact the reporter on this story: Emmanuel Elone in Las Vegas at eelone@bloombergindustry.com

To contact the editor on this story: William Dunn at wdunn@bloombergindustry.com; Jazlyn Williams at jwilliams@bloombergindustry.com

To read more articles log in. To learn more about a subscription click here.