IRS Revenue Ruling
2000-6

  Code Secs. 6041, 3121, 3401, 6051)

<<FULL TEXT>>

(Also sections 3121, 3401, 6051)

26 CFR 1.6041-2: Return of information as to payments to employees. (Also
section 1.6041-1)

Information reporting requirements applicable to election workers. The
requirements for information reporting applicable to election workers
whose compensation is not subject to FICA tax are found in Code section
6041(a). As a result, reporting is generally not required for election
workers earning less than $600 annually. Rev. Rul. 88-36, 1988-1 C.B. 343,
modified.


REV. RUL. 2000-6

ISSUE

How do the information reporting requirements of sections 6041(a) and
6051(a) of the Internal Revenue Code apply to election workers?


FACTS

Election workers are individuals who are generally employed to perform
services for state and local governments (governments) at election booths
in connection with national, state, or local elections. Governments
typically pay election workers a set fee for each day of work. Election
workers' wages are includible in gross income as compensation for
services. Section 61(a)(1). An individual employed as an election worker
may also perform services for the government in another capacity.

A state and the Social Security Administration may agree to extend
social security coverage to services of employees of the state or its
political subdivisions under section 218 of the Social Security Act
(section 218 agreement). A section 218 agreement may cover the services of
election workers. If so, the section 218 agreement may specify the level
of fees the election workers must receive to be entitled to coverage.
Information about a state's section 218 agreement can be obtained from the
State Social Security Administrator.

Situation 1: Government A pays V $200 in a calendar year for services
as an election worker. A does not employ V in any other capacity. The
services of A's election workers are not covered by a section 218
agreement. V is not covered by a retirement plan maintained by A.

Situation 2: Government B pays W $200 in a calendar year for services
as an election worker. B does not employ W in any other capacity. The
services of B's election workers are covered by a section 218 agreement if
their remuneration is $100 or more in a calendar year. W is not covered by
a retirement plan maintained by B.

Situation 3: Government C pays X $1,100 in calendar year 2000 for
services as an election worker. C does not employ X in any other capacity.
The services of C's election workers are not covered by a section 218
agreement. X is not covered by a retirement plan maintained by C.

Situation 4: Government D pays Y $200 in a calendar year for services
as an election worker. D also employed Y in another capacity, in which Y
earned wages of $300 that are subject to income tax withholding. The
services of D's election workers are not covered by a section 218
agreement. Y is not covered by a retirement plan maintained by D.

Situation 5: Government E pays Z $200 in a calendar year for services
as an election worker. E also employed Z in another capacity, in which Z
earned wages of $500 that are subject to income tax withholding. The
services of E's election workers are not covered by a section 218
agreement. Z is not covered by a retirement plan maintained by E.


LAW

Taxes under the Federal Insurance Contribution Act (FICA) apply to
"wages" as defined in section 3121(a). That section provides that the term
wages includes only remuneration for "employment." Section
3121(b)(7)(F)(iv) provides that the services of an election worker are not
employment for FICA purposes if the worker's remuneration is less than
$1,000. For calendar years beginning on or after January 1, 2000, the
amount is indexed for inflation. The applicable amount for the year 2000
is $1,100. Because service performed by an election worker for calendar
year 2000 for an amount less than $1,100 is excluded from employment for
FICA purposes, that amount is not wages for FICA purposes unless covered
under a section 218 agreement.

Similarly, section 3121(u)(2)(B)(ii)(V) provides that the services of
an election worker are not employment for purposes of the Medicare tax
portion of the FICA if the worker's remuneration is less than $1,000 in a
calendar year. For calendar years beginning on or after January 1, 2000,
the amount is indexed for inflation. The applicable amount for the year
2000 is $1,100. For services performed before January 1, 1995, the section
3121(u)(2)(B)(ii)(V) exclusion was for remuneration of less than $100.
Rev. Rul. 88-36, 1988-1 C.B. 343, A2, provides that an election worker is
subject to Medicare tax unless the remuneration paid to the worker in a
calendar year is less than $100.

Section 3401(a) provides that, for purposes of income tax withholding,
the term "wages" means all remuneration (other than fees paid to a public
official) for services performed by an employee for an employer. Section
31.3401(a)-2(b)(2) of the Employment Tax Regulations states that amounts
paid to precinct workers for services performed at election booths are "in
the nature of fees paid to public officials" and not subject to income tax
withholding.

Sections 6041(a) and 6051(a) both impose a duty to file information
reports of compensation paid to workers.

Section 6041(a) provides:

All persons engaged in a trade or business and making payment in the
course of such trade or business to another person, of rent, salaries,
wages, premiums, annuities, compensations, remunerations, emoluments, or
other fixed or determinable gains, profits, and in come . . . of $600 or
more in any taxable year . . . shall render a true and accurate return to
the Secretary, under such regulations and in such form and manner and to
such extent as may be prescribed by the Secretary, setting forth the
amount of such gains, profits, and income, and the name and address of the
recipient of such payment.


Under section 1.6041-1(b)(1) of the Income Tax Regulations, the term
"all persons engaged in a trade or business," as used in section 6041(a),
includes organizations the activities of which are not for the purpose of
gain or profit.

The general rule stated in section 1.6041-1(a)(2) is that the required
return is made on Forms 1096 and 1099, except that section
1.6041-1(a)(2)(ii) provides that compensation paid to an employee by an
employer shall be reported on Forms W-3 and W-2 under the provisions of
section 1.6041-2 (relating to return of information as to payments to
employees).

Under section 1.6041-2(a)(1), payments of wages not subject to income
tax withholding must be reported on Form W-2 if the total of those
payments and the amount of the employee's wages subject to income tax
withholding, if any, is $600 or more in a calendar year. For example, if a
payment of $700 was made to an employee and $400 thereof represents wages
subject to withholding under section 3402 and the remaining $300
represents compensation not subject to withholding, such wages and
compensation must both be reported on Form W-2. If the employee has no
wages subject to income tax withholding, the employer is required to file
Form W-2 for that employee if payments to that employee equal $600 or more
in a calendar year.

Section 1.6041-2(a)(1) provides that, at the election of the employer,
components of amounts required to be reported on Form W-2 pursuant to this
subparagraph may be reported on more than one Form W-2. Thus the amounts
paid to an individual for services as an election worker may be reported
on a separate W-2 from amounts paid to the individual for service in
another capacity, even though the amounts are aggregated to determine
whether reporting applies.

Section 6051(a) imposes a reporting requirement on the following two
categories of payors of remuneration:

Every person required to deduct and withhold from an employee a tax under
section 3101 [employee FICA tax] or 3402 [income tax withholding], . . .
or every employer engaged in a trade or business who pays remuneration for
services performed by an employee . . ..


Section 6051(a) does not require reporting of compensation that is not
subject to withholding of FICA tax or income tax.

Section 6051(c) provides that the Secretary may prescribe by
regulations the reporting of additional items. No regulations requiring
employers to furnish additional information have been published.


ANALYSIS

Compensation of an election worker is not subject to income tax
withholding. Sections 3401(a) and 31.3401(a)-2(b)(2). If an election
worker's compensation is less than $1,100 for calendar year 2000, it is
generally not subject to FICA tax. Sections 3121(b)(7)(F)(iv) and
3121(u)(2)(B)(ii)(V). However, under a state's section 218 agreement, an
election worker's compensation may be subject to both the old-age,
survivors and disability insurance (OASDI) and the Medicare portions of
the FICA tax at a level below $1,100 for calendar year 2000.

Section 6041(a) applies to payments of compensation that are not
subject to withholding of FICA or income tax. If an election worker's
compensation is not subject to withholding of FICA tax, the section
6041(a) reporting requirement applies to payments that aggregate $600 or
more in any taxable year. Under section 1.6041-2(a)(1), compensation
subject to income tax withholding is taken into account in determining
whether the $600 reporting requirement applies.

Section 6051(a) requires reporting of compensation subject to either
FICA tax or income tax withholding. No reporting is required by sections
6051(a) and 31.6051-1(a) and (b) for items of income that are not subject
to withholding of FICA tax or income tax. If an election worker's
compensation is subject to withholding of FICA tax, reporting is required
by section 6051(a), regardless of the amount of compensation.


HOLDINGS

The reporting requirements applicable to governments that employ
election workers are as follows:

Situation 1: Neither FICA tax nor income tax withholding applies to the
$200 paid to V. The reporting requirements of section 6041(a) apply.
Because V earns fees that are less than $600, Government A is not required
to issue Form W-2 to V.

Situation 2: FICA tax, but not income tax withholding, applies to the
$200 paid to W because the fees exceed the $100 threshold in the section
218 agreement. Government B must follow the reporting requirements of
section 6051(a), reporting on Form W-2 the fees of $200 and the FICA tax
withheld.

Situation 3: FICA tax, but not income tax withholding, applies to the
$1,100 paid to X for calendar year 2000. Government C must follow the
reporting requirements of section 6051(a), reporting on Form W-2 the fees
of $1,100 and the FICA tax withheld.

Situation 4: Neither FICA tax nor income tax withholding applies to the
$200 paid to Y for services as an election worker, but the $300 payment is
subject to income tax withholding. Government D must follow the reporting
requirements of section 6051(a), reporting on Form W-2 the $300 payment
and the income tax withheld. Section 6041(a) does not require reporting of
the $200 payment because the total of the two payments is less than $600
for the calendar year.

Situation 5: Neither FICA tax nor income tax withholding applies to the
$200 paid to Z for services as an election worker, but the $500 payment is
subject to income tax withholding. Government E must follow the reporting
requirements of sections 6041(a) and 6051(a), reporting on Form W-2 both
the $200 and the $500 payments and the amount of income tax withheld.


EFFECT ON OTHER REVENUE RULING(S)

This ruling modifies Rev. Rul. 88-36, A2, to reflect the increase in
the amount of remuneration applicable for purposes of the Medicare tax
exclusion under section 3121(u)(2)(B)(ii)(V), currently $1,100 for
calendar year 2000.


DRAFTING INFORMATION

The principal author of this revenue ruling is Elizabeth Edwards of the
Office of Chief Counsel (Employee Benefits & Exempt Organizations). For
further information regarding this revenue ruling, contact Elizabeth
Edwards at (202) 622-6040 (not a toll-free call).

<<END RULING>>
 

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