Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
IRS Proposes New Regulations for Third-Party Payroll Providers
Author: Scarinci Hollenbeck, LLC
Date: March 4, 2013
Key Contacts
Back
When it come to ensuring Social Security, Medicare and federal income taxes are deducted from workers’ paychecks and contractors are classified correctly, existing tax law places these obligations solely on employers. However, new guidelines proposed by the Internal Revenue Service may shift some of the liability onto third-party payroll providers, employer organizations and employee leasing companies when violations occur.
The IRS determined scenarios in which a payer who is not a direct employer may – for tax purposes – be considered an agent of the employer, and therefore face some tax liability when it comes to employment taxes. For example, the proposed regulations assert that a payer can be designated as an agent of an employer in regards to employment taxes when they’ve entered into a written or oral agreement to perform the employer’s employment tax obligation, according to Business Finance Magazine. The following conditions must be met for this agreement to be valid: The payer must verify that it is the employer or co-employer of individuals performing services for the client; compensates the individuals for services they performed for the company, and assumes responsibility to collect, report, and pay employment taxes.
When these conditions are met, the IRS proposes that liability for employment taxes must also apply to third-party payroll services, not solely the company that retains workers. The only exception to these proposals states that payers may not fall into this category when filing taxes for a company under its Employer Identification Number (EIN).
Companies face a great deal of tax liability when it comes to managing payroll and independent contractors, even when service providers are involved. Therefore, it can be helpful for companies to consult with professionals to better educate themselves on their rights, responsibilities and liabilities under federal tax law.
- Practices: Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Buying Commercial Property in New Jersey: Legal Guide for Small Businesses
Small businesses considering buying commercial property in New Jersey must evaluate a range of legal, financial, and operational factors. While ownership can offer long-term value and control, it also introduces significant risks if not properly structured. This guide outlines key considerations to help New Jersey business owners make informed decisions, minimize legal exposure, and successfully […]
Author: Robert L. Baker, Jr.
The SEC’s Latest Guidance on Applying Federal Securities Laws to Tokenized Securities
On January 28, 2026, staff of the U.S. Securities and Exchange Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets issued a joint statement clarifying how existing federal securities laws apply to tokenized securities. The SEC’s “Statement on Tokenized Securities” does not establish new law, but it does provide greater clarity on the […]
Author: Dan Brecher
Common Legal Mistakes NYC and New Jersey Business Owners Make
Operating a business in the New Jersey and New York City metropolitan region offers incredible opportunities, but it also requires navigating a dense and highly regulated legal environment. From entity formation to regulatory compliance, seemingly minor legal oversights can expose business owners to significant risk. In our work with businesses throughout the region, our attorneys […]
Author: Dan Brecher
What Founders Can Learn From Start-up Suits
High-profile founder litigation is more than just a media spectacle. For startup founders, these cases underscore the legal and structural risks that can arise when rapid growth outpaces formal oversight. While launching a new company can be both an exciting and deeply rewarding endeavor, founders must be mindful that it also comes with significant risks. […]
Author: Dan Brecher
Corporate Governance Reviews: A Practical Guide for New Jersey Companies
Every New Jersey company should periodically evaluate its governance framework. Strong corporate governance protects directors and officers, builds investor confidence, reduces litigation exposure, and positions a company for sustainable growth. The first quarter of the year is a great time to evaluate your corporate governance practices and perform any routine maintenance needed to keep that […]
Author: Ken Hollenbeck
What to Do After Being Served with a Lawsuit: Steps to Protect Your Legal Rights
Being served with a lawsuit is one of the most stressful legal events a business or individual can face. Whether the claim involves a contract dispute, an employment matter, an intellectual property issue, or another legal challenge, the actions you take in the first few days can significantly shape the outcome of your case. Acting […]
Author: Robert E. Levy
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.