This sub-chapter identifies general policies for Consumer Employers in participant-directed programs served by a Fiscal/Employer Agent.
A participant need only operate as an employer or designate a representative to serve as an employer on the participant's behalf if the participant chooses to directly hire employees. In general, any worker who is not employed by another entity when he/she provides service to a participant and does not have a specific license to provide the service provided to the participant and who the participant directs is an employee of the participant employer.
The Internal Revenue Service generally views consumers or their representatives as common law employers of workers that the participant or representative directs as part of the participant-directed program.
<<Insert program specific policy for who can be an employer on the participant's behalf in the program>>
For purposes of acting in the official capacity as the employer of workers who provide service to the participant, the participant or someone the participant designates can act as the employer. If the participant chooses to designate someone to act on the participant's behalf as the employer, that individual is referred to as the 'employer' or 'representative.'
Employer tax registration and F/EA authorization forms are completed using the employer's name and identifying information. If the participant operates as the employer, the participant's information is populated on employer tax registration and F/EA authorization forms as the "employer." If the representative operates as the employer, the representative's information is populated on employer tax registration and F/EA authorization forms as the "employer."
In many cases throughout this manual, the employer may be referred to as the "employer", "participant", "participant employer" or "representative" depending on the context.
In programs served by the F/EA, participant employers are considered "Household" or "Domestic" employers by the Internal Revenue Service, Department of Labor and State Departments of Labor.
<<Before making changes to this chapter, identify who is authorized to operate as an employer in the program. Some programs only allow consumers to be employers while others allow the participant to authorize another person (often called a representative) to operate as the employer>> See General Policies for Consumer Employers
The Employer Start Up Package includes important introductory forms for the participant and all required forms for the participant or his/her representative to be established with tax agencies as an employer. This package also includes forms for the participant or representative to designate tax filing and payment responsibilities for the participant's employer accounts to F/EA.
A new participant receives the Start Up package from <<the participant's Counselor only after the Counselor has received a referral from Program Administrator.>> <<This package is provided to the participant or representative by the Counselor at the intake and orientation meeting.>> The Counselor goes over each form with the participant, helping the participant to understand and complete them.
<<Insert Process for how Employer Start-Up Packages are Distributed to Consumer Employers>>
The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.
F/EA includes an agreement between the F/EA and the participant in every Employer Start-up Package. The intent of the Consumer Agreement is to ensure that both the participant and F/EA clearly understand each other's roles in the participant direction program and both agree to their roles. This form is included as a standard part of every employer packet produced.
F/EA includes IRS Form SS-4, Application for Employer Identification Number, in every employer start up package.
On line 1 of Form SS-4, after listing the employer's name, "HCSR" must be written. HCSR is the IRS' term for participant employers. It stands for Home Care Service Recipient. Line 1 of Form SS-4 should appear like the below:
"John Doe, HHCSR"
Otherwise, Form SS-4 should be completed per the attached example.
F/EA includes IRS Form 2678, Employer Appointment of Agent, in every Employer start up package. F/EA completes Form 2678 per attached example. This form is included as a standard part of every employer packet produced.
F/EA includes IRS Form 8821,Tax Information and Authorization, in every employer start up package. Form 8821 is completed per attached example. This form is included as a standard part of every employer packet produced.
Note that an executed Form 8821 is no longer required by the IRS for Fiscal/Employer Agent services, but it is a best practice to obtain executed Forms 8821 and file them with the IRS.
F/EA should update this sub-chapter per State requirements. Verify with your state if a Power of Attorney or similar form is needed for the F/EA to operate on behalf of an employer to file and pay withheld state income taxes. If so, update this sub-chapter to reflect the appropriate policy, procedure and internal controls.
F/EA should update this sub-chapter per State requirements. Verify with your state if a Power of Attorney or similar form is needed for the F/EA to operate on behalf of an employer to file and pay state unemployment taxes. If so, update this sub-chapter to reflect the appropriate policy, procedure and internal controls.
The F/EA Start-Up Package includes all forms that a participant must complete to become an employer in the participant direction program. F/EA receives Fiscal/Employer Agent Start-Up Packages, as completed by consumers, via the Counselors. Original signatures must be on all forms, so original packages are only accepted via mail and drop-off at F/EA. All packages are quality checked within 2 business days of receipt. F/EA Start-Up Packages that are incomplete or inaccurate are returned to consumers within 2 business days of receipt.
Quality Check the F/EA Start-Up Package
10. Review the Consumer Agreement
11. Ensure that the following information is complete:
12. Review Form SS-4, Application for Employer Identification NumberEnsure that the requisite information is complete.
13. Review Form 2678, Employer Appointment of Agent
14. Ensure that the requisite information is complete.
17. Review Form 8821
18. Ensure that the requisite information is complete.
1. Sort the package under the participant’s last name
1. Any forms for consumers with packages in the sorter are added to those packages and quality checked
2. The complete F/EA Start-Up Package, with added form (s) is processed through the steps in Quality Check the F/EA Start-Up Package
The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.
F/EA obtains applicable employer account numbers with the Internal Revenue Service (IRS) and State Department of Revenue (DOR) on behalf of each active participant served by F/EA in the participant direction program. F/EA registers consumers with the State Department of Labor (DOL) for State Unemployment Insurance, but only after the participant has been determined liable for State Unemployment Insurance (See Register Consumer with State Department of Labor (Unemployment)).
Create Consumer Folder
The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.
Applying for an Employer Identification Number (EIN) from the IRS is the first step in registering the employer with tax agencies and authorizing the F/EA to file and pay taxes on the employer’s behalf. An Employer Identification Number is required on all other employer tax forms. As of 2013, the IRS now allows Fiscal/Employer Agents to apply for EINs online.
If applying for EIN online:
If applying for EIN via fax:
A participant is registered with the State Department of Revenue (DOR) to allow the participant to deposit and file state income taxes that are withheld from the participant’s workers(s). Registration with DOR occurs after obtaining an EIN on the participant employer's behalf.
Filing a completed Form 2678 with the IRS authorizes F/EA to withhold, file and pay employment and Federal Withholding taxes on behalf of the participant. Form 2678 is not effective until the IRS approves F/EA to act on behalf of the participant employer. This approval is submitted to the F/EA with Notice LTR-1997C.
Because Form 2678 is not effective until the IRS approves the F/EA as an agent of the employer and therefore F/EA does not have joint liability for federal employer taxes until the IRS approves the Form 2678, F/EA includes language in each participant contract stating that F/EA is liable per the participant contract for employer taxes even before the IRS approves Form 2678.
<<Insert address from IRS "Where to File" chart based on location of F/EA>>
Filing a completed Form 8821 with the IRS authorizes officers/staff of the F/EA to discuss employer tax matters on the participant’s behalf with the IRS. 8821 Appointee status does not authorize F/EA officers to represent the participant for the IRS. Note that an executed Form 8821 is no longer required by the IRS for Fiscal/Employer Agent services, but it is a best practice to obtain executed Forms 8821 and file them with the IRS.
3. Mail Forms 8821, list of officers and 8821 Letter to:
4. <<Staff Title>> opens forms tracking module in Payroll System
5. The IRS does not notify of 8821 approval
Employers are not registered for Unemployment Insurance (UI) with the State Department of Labor until the employer has paid at least $1000 in gross wages in a single calendar quarter. The payroll department produces the <<report>> <<weekly>> that shows any employers who do not have a UI account number and have just crossed the $1000 per calendar quarter threshold. After reaching this limit, the employer is liable for all wages previously paid in the calendar year and all wages going forward up to the taxable wage base for each workers.
The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.