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Proposed Rev. Proc. Clarifies Employee Consent Procedures for FICA Tax Refunds.

(Parker Tax Publishing March 6, 2015)

The IRS has released a proposed revenue procedure providing guidance to employers on employee consents used to support a claim for refund under Code Sec. 6402 and Reg. Sec. 31.6402(a)-2 for overpaid taxes under the Federal Insurance Contributions Act (FICA) and the Railroad Retirement Tax Act (RRTA). Notice 2015-15.

The proposed revenue procedure clarifies that, in addition to providing the relevant name, address, and taxpayer identification number, valid employee consent must identify the basis of the claim for refund and be signed by the employee under penalties of perjury. The proposed revenue procedure also provides guidance as to what constitutes "reasonable efforts" to secure employee consent when consent is not obtained. The proposed revenue procedure permits, but does not require, the employee consent to be requested, furnished, and retained in an electronic format, as an alternative to a paper format.


In general, employers may choose to correct FICA and RRTA tax (referred to collectively as "FICA tax" for simplicity) overpayment errors by either making an interest-free adjustment or filing a claim for refund. Reg. Sec. 31.6402(a)-2 provides rules under which a refund claim for an overpayment of FICA tax may be made. For examples showing how the claim for refund process operates, see Rev. Rul. 2009-39.

An employer may not receive a refund of the employer share of overpaid FICA tax without making reasonable efforts to protect its employee's interests. Reg. Sec. 31.6402(a)-2(a)(1)(ii) specifically provides that no refund for the employer share of the overpaid FICA taxes will be allowed unless the employer has first repaid or reimbursed its employee or has secured the employee's consent to the allowance of the claim for refund and includes a claim for the refund of such employee tax.

Although employers must secure employee consent to request and receive a refund of overpaid FICA taxes, the regulations do not provide details on what such consent must entail. In response to numerous questions surrounding this issue, the proposed revenue procedure provides guidance concerning what information must be provided in employee consent and whether employee consent may be requested, furnished, and retained in an electronic format.

Requirements for a Request for Consent and Requirements for Employee Consent

In general, a request for consent may be solicited on paper or in an electronic format. The request must clearly inform the employee of the purpose of the employee consent. It must provide a name and contact information for any questions by the employee and must give the employee at least 45 days from the date of consent to respond. A request for consent may include an express presumption that if an employee's response has not been received by the employer during this time period, the employee will be considered to have refused to provide consent. In no case, however, will a failure to respond be deemed consent.

The employer may furnish a paper request for consent by personal delivery or by mail to the employee's last known address. An electronic request for consent may be sent to the employee's email address. In all cases, employee consent must meet the following requirements:

(1) Contain the name, address, and social security number of the employee;

(2) Contain the name, address, and employer identification number of the employer;

(3) Contain the tax period(s), type of tax (e.g., social security and Medicare taxes), and the amount of tax for which the employee consent is provided;

(4) Affirmatively state that the employee authorizes the employer to claim a refund for the overpayment of the employee's share of tax;

(5) For amounts collected in a prior year, include the employee's written statement;

(6) Identify the basis of the claim for refund; and

(7) Be dated and contain the employee's signature under penalties of perjury.

Employers may establish an electronic system to request, furnish, and retain employee consents, including submission by fax. Employers may also retain in an electronic format requests and employee consents submitted in a paper format. The electronic system must be reasonably accessible to the employee and must be reasonably designed to preclude anyone other than the employee from giving consent. Electronic records and signatures are given the same legal effect as their paper counterparts.

Reasonable Efforts to Secure Consent

The requirements do not apply if, after the employer's reasonable efforts to obtain the employee's consent, the employer cannot locate the employee or the employee does not furnish either the employee consent or a response indicating that the employee is not authorizing the employer to claim a refund of FICA taxes on his or her behalf.

The employer will be deemed to have made reasonable efforts to obtain employee consent if:

(1) The employer properly requests consent of the employee, including acknowledgement of receipt of an email message;

(2) The employer retains records of requests for employee consent, including replies from the employee;

(3) If the mailing is undeliverable, the employer makes an effort to determine the employee's current address and, if a new address is discovered, resends requests for consent; and

(4) In the event of an email delivery failure or in the event that the employee does not acknowledge receipt of the email message, the employer either mails a paper request for consent or provides a request for consent by personal delivery.

The proposed revenue procedure applies to employee consents requested on or after the date of final publication, but will not affect the validity of any employee consent received pursuant to a request made prior to the final publication. The proposed revenue procedure is not intended to require employers to solicit new employee consents for those requested prior to the date of final publication. However, an employer may rely on the proposed revenue procedure for employee consents requested before the date that the final revenue procedure is published.

For a discussion of employment tax reporting requirements, see Parker Tax ¶216,000. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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