Common Paymaster Solves Multiple Employment Tax Problem of Related Insurance Corporations

The Internal Revenue Service recently issued final regulations that allow related corporations to reduce their employment tax liabilities for common employees through the use of a "common paymaster." This article discusses the elements of the common paymaster system that must be satisfied to enjoy its benefits, outlines the unanswered issues, and suggests where double tax consequences may still result.

Avoiding multiple payments of FICA and FUTA taxes has long been a concern of affiliated insurance companies. When a group of related companies has common officers or employs a single insurance agent to represent several of the companies, the employment tax provisions contain the potential for significant double taxation problems for the corporate family.