STAWRS and the harmonized wage code project: making employment tax laws more consistent across federal and state boundaries.

• Author: Corn, Philip M.
• Position: Simplified Tax and Wage Reporting System

The Simplified Tax and Wage Reporting System (STAWRS) Program is a multi-agency partnership between the Department of Labor, Internal Revenue Service, Department of the Treasury, Small Business Administration, Social Security Administration, Office of Management and Budget, various states, and private organizations. The STAWRS mission is to reduce the tax and wage reporting burden on employers and government agencies while improving the efficiency and effectiveness of government operations. The goals of STAWRS are:

* provide timely and accurate tax information to employers to strengthen customer service;

* decrease the number of tax- and wage-related forms that employers must file;

* provide employers more opportunities to file tax-and wage-related forms electronically;

* simplify federal and state tax employment laws;

* provide employers the opportunity to file employment-related returns to one location;

* increase voluntary compliance; and

* support federal and state electronic tax strategies.

To achieve its mission and goals, STAWRS established three major initiatives: single point filing, streamlined customer service, and simplified requirements. The Harmonized Wage Code (HWC) project falls under the simplified requirements initiative. In support of the STAWRS mission, the HWC project works to make federal and state employment tax and wage reporting laws more consistent and, therefore, easier for employers to follow. The HWC project supports the IRS's strategic objectives of revolutionizing how taxpayers transact and communicate with the IRS by simplifying employer tax laws and strengthening federal-state partnership in tax code reform.

Background

The HWC project was established to harmonize the federal and state employment tax laws, primarily by providing uniform definitions of key provisions. The HWC project encompasses a total of 96 employment tax laws including the tax laws of the federal government, the 50 states, and the District of Columbia. The covered employment tax laws include federal and state income tax withholding (ITW) laws; the Federal Insurance Contributions Act (FICA), which encompasses Social Security and Medicare taxes; the Federal Unemployment Tax Act (FUTA); and state unemployment insurance (SUI) tax laws.

The HWC project has garnered support from employers, trade organizations, payroll companies, and federal and state agencies, all of which agree that the current employment tax laws are complex and inconsistent...