Withholding not required on in-kind compensation
Article Abstract:
Taxpayers are no longer required to withhold income tax on the in-kind compensation of an employee. Before, problems were encountered by employers when withholding because property transfers cannot be withheld. With Reg. 1.83-6(a)(2), which introduces a new deemed-inclusion rule for payments made to employees and independent contractors, taxpayers can now simply report the compensation to the IRS and the employee in a timely manner. Under the rule, employees and independent contractors are required to treat as income the amount the taxpayer reports on Forms W-2 or 1099 provided to them by the IRS. Even if the report is not done in a timely fashion, the taxpayer can still get a deduction by demonstrating that the service provider reported the income. The deemed-inclusion rule is automatically satisfied without any special reporting if compensation given to an individual does not have to be reported under normal rules or if another exemption is applicable.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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Finals regs. explain $1 million cap on compensation
Article Abstract:
Final Regulations provide clarification regarding Sec. 162(m) rules which limit the deductibility of certain compensation in publicly held corporations. One exception to the $1 million cap is for compensation payable on a commission basis only on account of the income raised directly through the performance of the specific individual to whom compensation is awarded. Income from specified employee trusts, annuity plans or pensions are also exempted. Exception is also allowed for qualified performance-based compensation. Under this exception, a reduction in the amount payable to an employee may not lead to a raise in the amount payable to any other employee. The Final Regulations also clarify different grandfather and transition rules.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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How to avoid withholding on dividends and interest
Article Abstract:
Temporary IRS regulations suggest that payees notified of being subject to backup withholding may ask for relief under the following conditions: when no underreporting has happened, when underreporting has been corrected, when withholding would mean undue hardship and underreporting will not likely reoccur, or when there is a legitimate dispute about underreporting with the IRS. Withholding is needed when the payee fails to report or underreports dividend or interest income, resulting in a deficiency assessment. Payees may prove no underreporting by providing appropriate documentation or receipts. A list of eight factors is provided that are used in making determinations of undue hardship.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1987
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