Page 16 - IRS Employer Tax Guide

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Fileid: … ations/P15/2020/A/XML/Cycle07/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
digits (for example, 9NN-7N-NNNN). For more informa- an employee for cancellation of an employment contract
tion about ITINs, see the Instructions for Form W-7 or go and relinquishment of contract rights are wages subject to
to IRS.gov/ITIN. social security, Medicare, and FUTA taxes and income
An individual with an ITIN who later becomes eli- tax withholding. Also, compensation paid to a former em-
ployee for services performed while still employed is wa-
! gible to work in the United States must obtain an ges subject to employment taxes.
CAUTION SSN. If the individual is currently eligible to work
in the United States, instruct the individual to apply for an More information. See section 6 for a discussion of tips
SSN and follow the instructions under Applying for an and section 7 for a discussion of supplemental wages.
SSN, earlier. Don't use an ITIN in place of an SSN on Also, see section 15 for exceptions to the general rules for
Form W-2. wages. Pub. 15-A provides additional information on wa-
ges, including nonqualified deferred compensation, and
Verification of SSNs. Employers and authorized report- other compensation. Pub. 15-B provides information on
ing agents can use the Social Security Number Verifica- other forms of compensation, including:
tion Service (SSNVS) to instantly verify that an employee
name matches an SSN for up to 10 names and SSNs (per • Accident and health benefits,
screen) at a time, or submit an electronic file of up to • Achievement awards,
250,000 names and SSNs and usually receive the results • Adoption assistance,
the next business day. Go to SSA.gov/employer/ssnv.htm
for more information. A person may have a valid SSN but • Athletic facilities,
not be authorized to work in the United States. Employers • De minimis (minimal) benefits,
may use E-Verify at e-verify.gov to confirm the employ-
ment eligibility of newly hired employees. • Dependent care assistance,
Registering for SSNVS. You must register online to • Educational assistance,
use SSNVS. To register, visit the SSA's website at • Employee discounts,
SSA.gov/bso and click on the Register link under Busi- • Employee stock options,
ness Services Online. Follow the registration instructions
to obtain a user identification (ID) and password. You’ll • Employer-provided cell phones,
need to provide the following information about yourself • Group-term life insurance coverage,
and your company. • Health savings accounts,
• Name. • Lodging on your business premises,
• SSN. • Meals,
• Date of birth. • No-additional-cost services,
• Type of employer. • Retirement planning services,
• EIN. • Transportation (commuting) benefits,
• Company name, address, and telephone number. • Tuition reduction, and
• Email address.
When you have completed the online registration proc- • Working condition benefits.
ess, the SSA will mail a one-time activation code to you. Employee business expense reimbursements. A re-
You must enter the activation code online to use SSNVS. imbursement or allowance arrangement is a system by
Your employees must receive authorization from you to which you pay the advances, reimbursements, and
use SSNVS. If your employees register, the one-time acti- charges for your employees' business expenses. How you
vation code will be mailed to you. report a reimbursement or allowance amount depends on
whether you have an accountable or a nonaccountable
5. Wages and Other plan. If a single payment includes both wages and an ex-
pense reimbursement, you must specify the amount of the
Compensation reimbursement.
These rules apply to all allowable ordinary and neces-
sary employee business expenses.
Wages subject to federal employment taxes generally in-
Accountable plan. To be an accountable plan, your
clude all pay you give to an employee for services per- reimbursement or allowance arrangement must require
formed. The pay may be in cash or in other forms. It in-
cludes salaries, vacation allowances, bonuses, your employees to meet all three of the following rules.
commissions, and taxable fringe benefits. It doesn't matter 1. They must have paid or incurred allowable expenses
how you measure or make the payments. Amounts an while performing services as your employees. The re-
employer pays as a bonus for signing or ratifying a con- imbursement or advance must be payment for the ex-
tract in connection with the establishment of an penses and must not be an amount that would have
employer-employee relationship and an amount paid to otherwise been paid to the employee as wages.

Publication 15 (2020) Page 15