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Employment taxes in successor business

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    #1

    Employment taxes in successor business

    Have a client, a doctor; he was 50% owner of a medical clinic. He split with his former partner and took most of the staff and started a new office under a new corporation.

    His bookkeeper seeing that his wages with the new company combined with the old company exceeded the FICA limit stopped withholding FICA on his wages.
    Is this correct?
    Does the new company qualify as a successor company?
    Is any explanation needed to notify the IRS and/or Social Security Administration of this?
    In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
    Alexis de Tocqueville
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    #2
    I may be wrong, but I was always under the impression that the withholding was supposed to be done according to the particular company that you are receiving wages, without regard to what is happening in some other company. Then at the time of filing a return is when the overpayment is settled.

    I would assume that the new company has a different EIN. If that is the case, then I would think that the end of year reporting is going to be off with regards to the company portion of FICA, etc.

    TTB page 3-9 has a discussion of excess fica.
    Only in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut".

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      #3
      Originally posted by thomtax View Post
      I may be wrong, but I was always under the impression that the withholding was supposed to be done according to the particular company that you are receiving wages, without regard to what is happening in some other company. Then at the time of filing a return is when the overpayment is settled.

      I would assume that the new company has a different EIN. If that is the case, then I would think that the end of year reporting is going to be off with regards to the company portion of FICA, etc.

      TTB page 3-9 has a discussion of excess fica.
      There is something out there about "Common paymaster" to accommodate a situation like this. Was also mentioned in a recent post. That's all I know about this issue.

      Comment

        #4
        No common paymaster in this case.

        Originally posted by Gabriele View Post
        There is something out there about "Common paymaster" to accommodate a situation like this. Was also mentioned in a recent post. That's all I know about this issue.
        A new corporation starts FICA from ground zero.
        or... from the "get go".
        ChEAr$,
        Harlan Lunsford, EA n LA

        Comment

          #5
          Common Paymaster

          Thanks Gabriele,
          The link to the ADP article provide exactly the information I needed.
          In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
          Alexis de Tocqueville

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