The IRS released a modified private letter ruling superseding a ruling issued in late 2015 under Section 6050W.  That ruling had determined that the party requesting the ruling was a third-party settlement organization.  The new ruling does not change the conclusion, but removes one rationale upon which the earlier ruling had based its determination.

In PLR 201604003, the IRS indicated that the party requesting the ruling was a third-party settlement organization, in part because it was the only party that had all the information necessary to report on Form 1099-K accurately.  This is because it was the only party who was aware of the gross amount of the reportable payment transactions.  PLR 201619006 removed this paragraph from the ruling.  The rationale in the original ruling raised questions for practitioners because it is a factor that is not present in the 6050W statute or regulations.  It was unclear whether the IRS would consider a party that might not otherwise be a third-party settlement organization to be a third-party settlement organization if it was the only party with the required information.  Similarly, if a party that otherwise would have been a third-party settlement organization lacked the required information, would it not be required to file Forms 1099-K?  It is unclear whether the IRS removed the language because it was an invalid basis for its determination or if the IRS learned that the facts differed from those in the original ruling.

Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on withholding taxes, including state and federal employment taxes, Chapter 3, and the Foreign Account Tax Compliance Act (FATCA) and information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on withholding taxes, including state and federal employment taxes, Chapter 3, and the Foreign Account Tax Compliance Act (FATCA) and information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S.

Michael advises large employers on their employment tax compliance obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, and executive perquisites, such as the taxation of company cars, corporate aircraft (including the use of SIFL valuations), and employer-provided housing. In addition, he has worked with clients to submit voluntary corrections of employment tax mistakes and seek abatement of late deposit and information reporting penalties. Michael has extensive controversy experience representing clients in IRS examinations and before the IRS Independent Office of Appeals in employment tax, late deposit, and information reporting penalty cases.

As part of Covington’s Global Workforce Solutions practice, Michael counsels clients on all aspects of mobile workforce issues including state income tax withholding for remote workers and mobile employees. He also advises on treaty claims and various tax issues related to expatriate and inpatriates.