IRS updates process for liability determination, FUTA control

The IRS has updated its procedures that provide information on business master file (BMF) accounts with discrepancy issues related to the Federal Unemployment Tax Act (FUTA). This guidance describes clerical procedures regarding unemployment taxes. This guidance applies to the FUTA clerical staff in the Small Business Self Employed site.

The FUTA provides for cooperation between state and federal governments in the establishment and administration of unemployment insurance. Under this dual system, the employer is subject to a payroll tax levied by the federal and state governments. The taxpayer is allowed a maximum credit of 5.4% against the federal tax of 6%, provided that all payments were made to the state by the due date. Employers whose payments are received by the state after the due date are allowed 90 percent of the credit that would have been allowed had the payments been made on time. As a result of FUTA, the IRS is responsible for receiving and processing the Form 940 and or/or Schedule H. All revenue that is associated with these tax returns is turned over to the Department of Labor (DOL). The DOL is responsible for dispensing the revenue deposited in the FUTA Trust Fund.

The Internal Revenue Code requires that the IRS assess, refund, credit and collect taxes within specific time limits. These limits are known as the Statutes of Limitations. When they expire, the IRS can no longer assess additional tax, allow a claim for refund by the taxpayer or take collection action. The determination of Statute expiration differs for Assessment, Refund, and Collection. Failure to protect an assessment statute can result in disciplinary action against the responsible employee. Even though the IRS strives to improve its systems and provide better service, some taxpayers still have difficulty getting solutions to their problems or appropriate, timely responses to their inquiries. The purpose of all Taxpayer Advocate Service (TAS) is to guide taxpayers through the process resolving tax problems they have not been able to resolve on their own. Information on the new TAS Case Acceptance Criteria and how and when to refer a taxpayer to TAS is available in IRM 13.1.7. Service Level Agreements between TAS and the Operating Divisions are available at the TAS web site. (Internal Revenue Manual IRM 4.19.23, October 1, 2018.)

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