Earlier this month, the Internal Revenue Service and more than two dozen state workforce agencies – including California’s – announced they have entered into agreements to share the results of employment tax examinations.
California, Michigan, New Jersey, New York and North Carolina all are part of the team that developed the strategy, and they were instrumental in helping make sure the agreements meet the needs of the participating states as well as the needs of the IRS.
The agreements, part of the Questionable Employment Tax Practice (QETP) initiative, provide a centralized, uniform means for the IRS and state employment officials to exchange information and data. As a result, they can leverage resources and encourage businesses to comply with federal and state employment tax requirements.
These agreements present a united front for the IRS and its state partners to improve compliance with filing tax returns and paying employment taxes. Combining resources will help IRS and the states uncover employment tax avoidance schemes, reduce fraudulent filings and ensure proper worker classification.
The state agencies, the U.S. Department of Labor, the National Association of State Workforce Agencies, the Federation of Tax Administrators and the IRS worked together on various facets of the exchange agreements.
So far, 29 states have entered into individual information-sharing agreements with the IRS. The states that have signed partnership agreements with the IRS thus far are:
Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington and Wisconsin.
In addition to coordinating compliance activities, the agreements call for collaborative outreach and education activities designed to help businesses understand their employment and unemployment tax responsibilities.
The exchange agreements are the first result of the QETP initiative. The QETP team will use the results of the project to find new opportunities for collaboration and to work toward improved employment tax compliance.
Do you have federal or California state tax problems? Contact Mitchell A. Port for help at 310.559.5259.