Regulation Review for a Fiscal/Employer Agent Managing
Public Funds and Private Pay for a Single Participant
Government Agents
State or local government agencies that act as employer agents of program participants
IRS Applicable Regulation: Rev. Proc. 70-6, Rev. Proc. 80-4, Notice 95-18, Notice 2003-70
Rev. Proc. 70-6 – Establishes procedures to be followed by agents wishing to apply for authorization from the IRS to serve as agents of employers for Federal Income Tax and FICA withholding, reporting and depositing (not FUTA). Agents file for authorization to act as agents for recipients/employers and obtain a separate EIN to be used for reporting and depositing FICA and Federal Income Tax. A form 2678 is required from each employer.
Silent on source of funds.
Rev. Proc. 80-4 – amplifies Rev. Proc. 70-6
Establishes that state or local health or welfare agencies that supply workers to employers/recipients and serve as the employer agent of employers/recipients under 3504 of the IRC need not file a Form 2678 for each employer/recipient represented, but rather must include an appointment to act as agent in the forms executed between the government agency and recipient in order to receive in-home domestic service.
Rev. Proc. 80-4 also establishes that state or local government agencies who furnish workers to and fund services for recipients/employers can file and deposit FUTA tax for all recipients/employers as an employer agent using a single separate EIN. Agents under 70-6 cannot file and deposit FUTA on behalf of employers.
80-4 states Titles XIX and XX of the Social Security Act provide for federal grants to states under programs administered by either state or local governments through their health and welfare agencies.
80-4 establishes that in-home domestic services provided by employees of welfare recipients who receive those services are paid for with funds supplied by state or local agencies.
Notice 95-18 – amplifies Rev. Proc. 80-4
Establishes Schedule H annual reporting and payment requirements for household employers who do not use a state or local government agent. Procedures for state and local government agents per Rev. Proc. 80-4 remain the same, except state and local government agents are instructed to obtain a separate EIN for purposes of reporting and depositing Federal Income, FICA and FUTA taxes for recipient/employers.
Silent on source of funds except for referring to workers as “individuals furnished by the agencies to provide household services for recipients of public assistance.”
Notice 2003-70 – modifies and amplifies Rev. Proc. 80-4, amplifies 95-18
2003-70 extends the procedures of 80-4 to apply even when a worker is not supplied by a state or local government agency but also when the worker is recruited, hired and trained by the service recipient. 2003-70 also provides for a state or government agency to contract with a third party ‘sub-agent’ or ‘reporting agent’ to perform the employer agent duties of the state or local government agency. In addition, 2003-70 makes clear that a service recipient need not obtain an EIN for purposes of appointing a state or local government agency to act as the employer agent (although an EIN may be required for State Unemployment or State Income Tax purposes).
Notice 2003-70 describes state and local government agencies as “providing some or all of the funds to pay the home-care service providers.”
More specifically, 2003-70 describes the programs to which it applies as, “program that provides in-home domestic services and is partially funded with federal grants under Titles XIX and XX of the Social Security Act”. Specifically, in programs for the purposes of 2003-70, the state or local government agency serves as the employer agent of service recipients.
In the definitions, a “Service Recipient” is defined as: an individual participating in an in-home domestic services program administered by a state or local agency and all or part of the services received are paid for with funds supplied by the Federal, state or local government.
A “Home Care Service Provider” is defined as: a worker that provides domestic services to a service recipient under a state or local government agency in-home domestic services program funded in whole or in part with Federal, state or local funds.
Vendor Agents
Third parties that act as employer agents of program participants
IRS Applicable Regulation: Rev. Proc. 70-6
Rev. Proc. 70-6 – establishes procedures to be followed by agents wishing to apply for authorization from the IRS to serve as agents of employers for Federal Income Tax and FICA withholding, reporting and depositing (not FUTA). Agents file for authorization to act as agents for recipients/employers and report and deposit FICA and Federal Income Tax using the agent’s single EIN. A form 2678 is required from each employer.
Rev. Proc. 70-6 applies in self-direction programs when the state or local government agency does not wish to serve as the agent of the recipient employer, but rather the service recipient executes a form 2678 with the F/EA and the F/EA represents the service recipient as his/her agent per Section 3504 of the IRC.
Agents under 70-6 are not authorized to file and pay FUTA in the aggregate. Since FUTA must be paid individually, a mismatch between FICA and FUTA exists.
In 2005, the IRS announced that agents operating per 70-6 for home health care programs could file and pay FUTA in the aggregate for CY 2006 to avoid FICA/FUTA mismatch problems. Recipients of “mismatch letters” can also contact the IRS to report the erroneous letter and IRS staff place a flag in the employer’s record to override the mismatch and ensure future notices are not sent. This is a patch until a better solution is determined.
Silent on source of funds.