IRS REVENUE PROCEDURE
2013-39
Author: Mollie Murphy
Q& A
FMS Membership Edition
In December 2013, the IRS released Revenue Procedure, 2013-39 titled “Designation of Agent by
Application.” This Revenue Procedure:
“Describes and updates the procedure for requesting the IRS to authorize an
agent under Section 3504 of the Internal Revenue Code and Section 31.3504-1
of the Employment Tax Regulations for purposes of FICA tax, RRTA tax, FUTA,
collection of income tax, and general provisions related to employment taxes.”
In December 2013, the National Resource Center for Participant-Directed Services hosted a
webinar to explain the new Revenue Procedure and present some questions on which we were
following up with the IRS. Since then, we have had some excellent and helpful discussions with
the IRS and received clarity on our questions. This document outlines those questions and
answers. Please contact us if you have any follow-up questions or concerns.
Q1
Throughout Revenue Procedure 2013-39, the word “person” is used when it seems it should
really be “entity” since “person” is used then referring to authorizing an agent. For example,
the Revenue Procedure says, “authorize a person to act as agent under section 3504.” Most
of the time in self direction if an agent is authorized under Section 3504 of the Internal
Revenue Code, that agent is an organization or a company. It seems odd here then to
repeatedly read “person.”
Answer: The Internal Revenue Code refers to any taxpaying entity as a “person”. This comes
directly from the Internal Revenue Code and “person” can mean at least, a human, entity, company
or organization. We can read this as “entity” when we consider it for agents.
Q2
In Section 4.03 of the Revenue Procedure, it states that the agent must complete an
allocation schedule and list “the name and EIN of each employer for whom the agent is
authorized to act…” However, the Schedule R for Forms 941 and 940 does not have a field
for the employer’s name. What are we supposed to do?
Answer: This was a typo in the Revenue Procedure. The employer’s name does not need to be
listed on Schedule R for Forms 941 or 940.
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Q3
The Revenue Procedure says that the employer is responsible for maintaining records
that show the wages paid by the agent to the employer’s employees. In self direction,
often the Fiscal/Employer Agent would keep these records. Is it sufficient to meet the
requirements of this notice if the Fiscal/Employer Agent keeps the records instead of the
employer?
Answer: Yes. For the employees of an HCSR (that is, the employees providing service to a
participant in self direction when a Fiscal/Employer Agent (F/EA) model is used), it is acceptable
for the F/EA to maintain the records. According to the IRS, the language regarding records in
Rev. Proc. 2013-39 is a relic of Rev. Proc. 70-6 and can be ignored for purposes of HCSRs and
their employees.
Q4
The Revenue Procedure 2013-39 lists three criteria that seemingly must be met in order
for an agent to issue a separate Form W-2 to an employee for each HCSR employer for
whom the employee works. That is, the notice is written as though all three conditions
must be met in order to give Sally two Forms W-2 if Sally is employed by Paul Participant
and Carrie Client in a self-direction program. The language in the notice is:
“Generally, an agent who has an approved Form 2678, Employer/Payer Appointment of Agent,
should enter the agent's name as the employer in box c of Form W-2 and file only one Form W-2 for
each employee. However, if the agent (a) is acting as an agent for two or more employers or is an
employer and is acting as an agent for another employer, and (b) pays social security wages to an
individual on behalf of more than one employer, and (c) the total of the individual's social security
wages from these employers is greater than the social security wage base, the agent must file
separate Forms W-2 for the affected employee reflecting the wages paid by each employer.”
Answer: The IRS has clarified that all three conditions need not be met in order to issue a
separate Form W-2 to an employee for each employer for which the employee works. If Sally
works for Paul Participant and Carrie Client in the same tax year, Sally can receive two Forms W2 for her wages.
Q5
This Revenue Procedure allows an agent to appoint a sub-agent. If an agent appoints a
sub-agent, with which agent does the HCSR employers execute an IRS Form 2678,
Employer Appointment of Agent?
Answer: The HCSR employers only execute and= IRS Form 2678, Employer Appointment of Agent
with the first agent, not also with the sub-agent. If ABC Fiscal/Employer Agent has a contract
with the state Medicaid agency to perform Fiscal/Employer Agent services for a self-direction
program, and ABC Fiscal/Employer Agent hires XYZ Sub-Agent to function as a sub-agent for
them per this Revenue Procedure, the HCSR employers would execute an IRS Form 2678 only
with ABC Fiscal/Employer Agent. ABC Fiscal/Employer Agent and XYZ Sub-Agent would execute
a single Form 2678 between themselves.
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Q6
Can non-government (or Vendor) Fiscal/Employer Agents obtain a separate “special EIN”
or continue to use a separate “special EIN” if the non-government agent already has one?
Answer: Yes. Vendor Fiscal/Employer Agents can still obtain separate “special EINs” to be used
solely for their Federal tax filings as an IRC Section 3504 HCSR agent and can continue to use the
separate “special EINs” that they had prior to this Revenue Procedure being issued.
Q7
This Revenue Procedure makes clear that sub-agents who had been filing for “first agents”
using the first agent’s name and EIN should now transition to using the sub-agent’s own
name and EIN on returns and with deposits when the sub-agent works on behalf of the
first agent. Should sub-agents that had been filing as the first agent file a final return of
each type (i.e. 941 and 940) before switching to filing for the first agent using the subagent’s own EIN?
Answer: Yes. If a sub-agent had been a sub-agent to a government agent historically and in so
doing had filed Forms 940 and 941 for the government agent using the government agent’s name
and EIN, the sub-agent should now file a final Form 941 and 940 for the government agent’s
name and EIN prior to the sub-agent filing returns for the government agent under the subagent’s own name and EIN.
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