Rev. Rul. 81-21
1981-1 C.B. 482, 1981-3 I.R.B. 12.
Internal Revenue Service
Revenue Ruling
LIABILITY FOR TAX; RELATED CORPORATIONS; COMMON PAYMASTER
Published: January 19, 1981
26 CFR 31.3121(s)-1: Concurrent employment by related corporations with common paymaster
(Also Section 3306; 31.3306(p)-1.)
Liability for tax; related corporations; common paymaster. Three related corporations, which concurrently employ the same ten individuals, have the same treasurer who draws separate checks on each corporation's bank account for the employees' salaries. None of the corporations is authorized to disburse remuneration to employees for services performed on behalf of the other corporations and each corporation keeps its own payroll records. None of the three related corporations is a common paymaster for purposes of section 3121(s) and 3306(p) of the Code.
ISSUE
Do three related corporations with the same treasurer have a common paymaster for purposes of sections 3121(s) and 3306(p) of the Internal Revenue Code when the treasurer pays wages to concurrent employees of each of the corporations?
FACTS
An individual is the treasurer of three corporations that are related within the meaning of section 3121(s) and 3306(p) of the Code. The corporations concurrently employ the same ten individuals. Each corporation has a separate bank account on which the treasurer draws separate checks for the ten employees' salaries.
No single member of the related group of corporations is authorized to disburse remuneration to employees for services performed on behalf of the other members of the group. Each member of the group keeps its own payroll records accounting for services performed by the employees on such member's behalf, and keeps no record accounting for services performed on behalf of other members of the group.
LAW AND ANALYSIS
Section 3121(s) of the Code provides that for purposes of section 3102, 3111, and 3121(a)(1), if two or more related corporations concurrently employ the same individual and compensate such individual through a common paymaster that is one of such corporations, each such corporation shall be considered to have paid as remuneration to such individual only the amounts actually disbursed by it to such individual and shall not be considered to have paid as remuneration to such individual amounts actually disbursed to the individual by another of such corporations.
Section 3306(p) of the Code contains similar provisions.
Section 31.3121(s)-1(a) of the Employment Tax Regulations provides that if all the remuneration to the individual from the related corporations is disbursed through the common paymaster, the total amount of taxes imposed with respect to the remuneration under section 3102 and 3111 of the Code is determined as though the individual has only one employer (the common paymaster).
Section 31.3121(s)-1(b)(2) of the regulations defines a common paymaster of a group of related corporations as any member thereof that disburses remuneration to employees of two or more of those related corporations on their behalf and that is responsible for keeping books and records for the payroll with respect to those employees. The common paymaster may pay concurrently employed individuals by one combined paycheck drawn on a single bank account, or by separate paychecks drawn by the common paymaster on the accounts of one or more employing corporations.
In this case, no one corporation is the common paymaster for which the treasurer acts. The treasurer is acting as an agent of each particular corporation when drawing the separate checks. Accordingly, each corporation is actually disbursing its own wage payments to the concurrent employees.
HOLDING
None of the three related corporations is a common paymaster for purposes of section 3121(s) and 3306(p) of the Code and, therefore, each of the three corporations is a separate employer for purposes of determining the total amount of taxes imposed with respect to remuneration under section 3102, 3111, and 3301.
Rev. Rul. 81-21, 1981-1 C.B. 482, 1981-3 I.R.B. 12.