Final regs. permit agents to withhold FUTA for home care service recipients.

• Author: Schreiber, Sally P.
• Position: Federal Unemployment Tax Act

The IRS issued final regulations permitting an agent authorized by the IRS under Sec. 3504 to perform certain acts normally required of employers to withhold Federal Unemployment Tax Act (FUTA) taxes owed by home care service recipients (T.D. 9649). Under prior regulations, agents that paid wages to home health care workers were permitted to withhold income, Federal Insurance Contributions Act (FICA), and Railroad Retirement Ta Act taxes, but not FUTA taxes.

Recipients of home care services are usually elderly or physically or mentally disabled, but they are nonetheless considered to be the employer of their home health care aides, with the result that they are responsible for withholding employment taxes from the aides' wages, even though the wages are paid in whole or in part by a government agency. The final rules fully relieve the recipients of this burden.

These rules adopt with a few minor changes proposed regulations issued in 2010 (REG-137036-08). A number of the comments on the proposed regulations were concerned with different procedural issues beyond the regulations' scope, which the IRS addressed in a revenue procedure released at the same time (Rev. Proc. 201339). The revenue procedure updates the rules that apply to authorize a person to act as a service recipients' agent.

Most of the comments on the proposed rules were addressed by further explanation in the preamble to the final...