Rev. Proc. 80-4

Section 1. Purpose

The purpose of this revenue procedure is to set forth the procedures to be followed by state and local health and welfare agencies wishing to act as agents, under section 3504 of the Internal Revenue Code, for welfare recipients who become the employers of individuals furnished by the agencies to provide in-home domestic service for the welfare recipients.

Sec. 2. Background

.01 Rev. Proc. 70-6, 1970-1 C.B. 420 sets forth the procedures to be followed in requesting authorization to act as an agent under section 3504 of the Code. Pursuant to section 31.3504-1 of the Employment Tax Regulations, the authorization is applicable to the taxes required to be paid under sections 3101, 3111, and 3403 of the Code.

.02 Titles XIX and XX of the Social Security Act, as amended, 42 U.S.C. sections 1396 and 1397, respectively, (1976), provide for federal grants to states under programs administered either by state or local governments through their health and welfare agencies.

.03 In some instances, workers who perform in-home domestic services paid for with funds supplied by such state or local agencies are the employees of the welfare recipients who receive those services. In cases in which the services are provided under a statewide, uniform program, the state may file one application under Rev. Proc. 70-6 to act as the agent for the recipient/employers; in cases in which the programs vary from local government to local government, each local government that desires to act as an agent should file an application.

.04 Section 3.01 of Rev. Proc. 70-6 provides that application for authorization as agent to perform acts required of an employer should be made in writing by the agent to the Director, Internal Revenue Service Center, with whom the agent will file returns upon approval of the application.

.05 Section 3.04 of Rev. Proc. 70-6 provides that an application (for authorization to act as an agent under section 3504 of the Code) covering more than one employer must be accompanied by a properly executed Form 2678, Employer Appointment of Agent under Section 3504 of the Internal Revenue Code, from each of the employers.

.06 Under sections 3306(a)(3) and 3306(c)(2) of the Code, persons who pay cash remuneration of $1,000 or more during any calendar quarter of the calendar year (or the preceding calendar year) to individuals performing domestic services in private homes are subject to the tax imposed by section 3301 with respect to remuneration paid after December 31, 1977, for services performed after that date.

Sec. 3. Procedure

.01 The large number of welfare recipient/employers who receive in-home domestic services paid for with funds supplied by state and local governments makes it impractical to comply with the requirement that each employer submit a Form 2678. Accordingly, the Internal Revenue Service will not enforce the requirement that each employer must submit that form to the state or local government.

.02 In order for a state or local health or welfare agency to secure the authorization to act as an agent under section 3504 of the Code for welfare recipient/employers, it is sufficient for the agency to include with its application to the Service a reference to the document that the welfare recipient/employers have filed (or will file) with the agency appointing the agency to act as a collection agent. The state or local agency may include such appointment to act as an agent in the application form required to be signed and filed by welfare recipient/employers in order to receive in-home domestic service. The execution of the application by a welfare recipient/employer constitutes an authorization by the employer and becomes (by reference) a part of the agency's application to the Service.

.03 Details with respect to the application for authorization to act as agent should be worked out between the state or local agency and the Director of the Internal Revenue Service Center with whom the employment tax returns are filed. The Director will indicate the length of time that the state or local agency must retain the document filed by the welfare recipient/employer appointing the agent.

.04 In those instances in which a welfare recipient/employer is liable for the tax under section 3301 of the Code, the Service will interpose no objection if the state or local agency acting as an agent under section 3504 for taxes required to be paid under sections 3101, 3111, and 3403 also acts as an agent for the reporting and paying of the taxes imposed by section 3301.

.05 This revenue procedure does not apply to state and local welfare agencies that contract with outside organizations to provide the services or that use their own employees, as in Rev. Rul. 73-268, 1973-1 C.B. 415.

Sec. 4. Effect on Other Revenue Procedures

Rev. Proc. 70-6 is amplified.