IRS Extends Employment Tax Exceptions for Relatives, Religious Objectors

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IRS unveils proposed, final, and temporary rules (REG-136565-09, T.D. 9554) extending employment tax exceptions for relatives and members of religious faiths to disregarded entities. IRS says it is extending exceptions to these entities under both the Federal Insurance Contributions Act and the Federal Unemployment Tax Act. The entities covered are those that are disregarded as separate from their owners for federal tax purposes. The guidance also clarifies the existing rule that owners of disregarded entities, except for qualified Subchapter S subsidiaries, are responsible for backup withholding and related information reporting requirements under tax code Section 3406.