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Go Ask Your New Employer! Administering Payroll in Merged Entities

June 11, 2024 (3 min read)

Mergers and other corporate transactions create complexities in many ways, payroll included. Should FICA restart or is the new corporation a successor to the former entity? Two methods exist in an asset purchase transaction by which a predecessor (seller) and successor (buyer) employer can report payroll in the year of the acquisition, also involving a transfer of employees. Under the standard method, the predecessor performs all the reporting duties for the wages and other compensation that it pays (e.g., filing Form 941, and filing and furnishing Forms W-2 and W-3), and the successor performs all the reporting duties for the wages and other compensation that it pays. Under an alternative method, if the predecessor and successor agree, the successor employer takes over, and the predecessor is relieved from furnishing a Form W-2 to any employee who becomes employed by the successor employer (acquired employees).

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Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.   

  •  Tax Key Legal Developments Tracker (Federal)—keep up to date with key legal developments!
    • Business Entities. IRS and Treasury Department issue proposed regulations that would remove the associated property rule and similar rules from the existing regulations on the interest capitalization requirements for improvements to designated property. Interest Capitalization Requirements for Improvements to Designated Property, 89 Fed. Reg. 42404 (May 15, 2024).
    • Business Entities. IRS provides various prescribed rates for federal income tax purposes for June 2024, including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by R.C. § 1274.Rev. Rul. 2024-12.
    • Business Entities. IRS provides a limited waiver of the addition to tax under R.C. § 6655for underpaying estimated corporate income tax to the extent any underpayment is attributable to a portion of a corporation's corporate alternative minimum tax (CAMT) liability. Notice 2024-33.
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