Tax Reform and Accelerating Deductions: Payroll Tax Accruals and Permanent Tax Savings

Proposed tax reform gives tax counsel and advisers an opportunity to develop significant tax-saving strategies for business clients specifically and uniquely related to payroll tax deductions and deferred compensation. Knowledge of the IRS safe harbor requirements and tactics available to accrual-method employers opens the door to accelerating payroll tax deductions on year-end wages accrued in one year but paid in the next year.

The IRS allows a payroll tax deduction of year-end wages if the accrual-method taxpayer satisfies specific exceptions to the economic performance rules. Satisfying this requirement hinges on establishing payroll tax liability with an amount determined by year end.

This can be difficult to discern for any given employee, leading to the development of specific guidelines allowing accrual-method employers to obtain automatic IRS consent to change under the safe harbor method of accounting for accrued payroll tax liabilities.

Listen as our panel navigates through the requirements of Regs. Sec. 1.461-5, Section 19.04(1)(a)(i)(A) of Rev. Proc. 2017-30, Rev. Proc. 2008-25 and other relevant provisions associated with payroll tax liability, deduction, treatment, capitalization, and their effect on current and deferred compensation.

1. Payroll tax deduction, treatment and capitalization (Section 162, Section 469 and Section 263A)
2. Deductibility of year end wages and the recurring item exception (Rev. Rul. 96-51 and Regs. Sec. 1.461-5)
3. Deferred compensation and payroll tax liability (Section 19.04(1)(a)(i)(A) of Rev. Proc. 2017-30)
4. IRS safe harbor and procedure

The panel will review these and other key issues:

• Identifying the methods and processes of payroll tax deductions and potential tax liability
• Recognizing the deductibility of year end wages and IRS exceptions
• Understanding the payroll tax implications of failing to properly plan and account for deferred compensation
• Discerning the deduction deferral rules provided under Section 267 as such relates to employee benefit plans

Learning Objectives

After completing this course, you will be able to:

• Recognize the methods and procedures available to secure payroll tax deductions and permanent tax savings
• Identify the requirements of the IRS’ all-events and recurring-items exceptions
• Ascertain the necessary methods required to obtain the IRS’ safe harbor method of accounting for payroll tax liabilities

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Working knowledge of partnership/corporate structure, payroll taxes, and economic effect test.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.