© 2022 American Payroll Institute, Inc. APA Meets With D.C.’s Office of Tax and Revenue on Withholding In a letter to the District of Columbia’s Office of Tax and Revenue (OTR), APA and the National Payroll Reporting Consortium (NPRC) asked OTR and D.C.’s Office of the Chief Financial Officer (OCFO) to clarify Tax Notice 2022-08, which was issued October 17. Notice 2022-08 relates to D.C. Act 24-0176, which was signed into law by Mayor Muriel Bowser in September 2021. D.C. Act 24-0176 raised the tax rate on certain D.C. residents beginning on January 1, 2022 however, OTR has not updated Form FR-230, Income Tax Withholding Instructions and Tables, since 2018 so the tables are out of date. In Notice 2022-08, OTR notes that the federal Tax Cuts and Jobs Act hindered OTR’s ability to issue new tables, but OTR “encouraged” taxpayers to use the 2022 tax rate schedule. Furthermore, OTR informed APA and NPRC that employers were responsible for withholding income tax per Act 24-0176 effective January 1, 2022, even though new tables were not issued. APA and NPRC notified OTR that payroll systems are not modified until the appropriate tax authority issues corrected tables. In addition, payroll systems are limited in the ability to withhold taxes retroactively. In the letter, APA and NPRC requested that OTR and OCFO clarify that employers would not be penalized for underwithholding 2022 taxes if they were within the guidelines set forth by the current Form FR-230. The letter also suggested that OTR look at suspending penalties it might apply to affected taxpayers. Follow up to OTR meeting In its follow-up meeting on November 18, OTR told APA and NPRC that the current D.C. code does not have a penalty provision for employers. OTR explained that individual taxpayers may have to pay the underwithheld amount. However, if the taxpayers are within the safe harbor guidelines, they will not incur any penalties or have to pay interest on the amount owed. OTR also told APA and NPRC if a taxpayer has doubts or other questions about the amount owed at the end of the tax cycle, the taxpayer can contact OTR. OTR indicated it was open to review its current website structure for posting tax notices. Finally, APA and NPRC offered to assist OTR and OCFO in working with the D.C. government as well as the D.C. Council to prevent this issue from occurring again. IRS Engages APA for Recommendations on Inflation Reduction Act At a meeting with the IRS on the Inflation Reduction Act (IRA) in November, APA emphasized the need for outreach to the regulated community, training of existing and new IRS employees, and modernization. Enforcement dollars and compliance approach The IRA provides the IRS with $80 billion in funding over the next 10 years. About 50% of the funds are identified for enforcement. During the meeting, led by the Commissioner of Large Business and International Division Nikole Flax and Acting IRS Commissioner Douglas O’Donnell, the IRS defined enforcement more broadly with a focus on customer service. The intent, according to the IRS, is to help taxpayers comply and avoid the need for an audit. IRS employee training IRS Commissioner of the Wage & Investment Division and Chief, Taxpayer Experience Officer, Ken Corbin said that when new IRS employees come onboard, in particular phone assisters, it takes at least three years to train them. He asked meeting participants how the IRS could speed up this process. The APA answered by suggesting the IRS bring in stakeholders to explain their in-practice experience. In many situations, payroll professionals who contact the IRS are unsuccessful in communicating their employers’ tax issue. The callers may be bounced around to different IRS employees. If phone assisters understood payroll operations a little better, they may be able to answer questions or transfer the caller to the appropriate IRS employee who can help, APA said. Spending plan Treasury Secretary Janet Yellen asked the IRS to provide a report by mid-February on how it plans to spend the $80 billion. With this short timeframe, the IRS is relying on recommendations previously made by stakeholders, including the APA, and is holding a few stakeholder meetings specific to the IRA to garner as much information as quickly as possible. Additional stakeholder meetings will occur after the report is delivered to the Treasury Department as part of an ongoing dialog. Modernization plans The report will likely be an overview of plans identifying priorities, such as systems requiring modernization. Moving more forms to electronic filing systems, especially Form December 2022 A Supplement to Payroll Currently, Issue 12, Volume 30
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