A few Clark County commissioners are saying you can count them out of this enforcement nightmare.

Could the IRS step in where the county can’t?  I doubt cabbies fall under the same rules as hotel concierges, but I bet the IRS would like it if they did.

Hotel concierge desks receive referral fees for sending business to various proprietors all the time, but the hotel employee and/or hotel is supposed to report the income and pay taxes.  Not surprisingly, the IRS has had trouble with reporting and enforcement.  Case and point, this blurb from an IRS training document:

The Internal Revenue Service has discovered a major pocket of non-compliance with the tax laws involving payments made to hotel employees who book tourist services. Millions of dollars in payments that should have been reported to the Internal Revenue Service over the last few years have gone unreported. We believe that most of the hotel employees who received these payments failed to report them on their income tax returns.

While conducting a routine check of the financial records of a tour bus company in San Francisco, IRS agents discovered more that $1.2 million in “commissions” paid to hotel workers who booked guests from their respective hotels on tours with the tour bus company. The $1.2 million was paid during a single year. A News Release was issued at the request of the tour bus company as a notice to all companies in the industry of IRS’ compliance efforts and to inform payees of their obligations under those efforts.

On examination of other companies in the tour bus industry, IRS agents determined that virtually none of the payments made by these companies had been reported to the IRS as required. They also learned that many of the hotel workers specifically requested that their commissions be paid in cash. One owner told IRS agents, “If I told a bellman or a concierge that I wanted his or her Social Security Number so I could report the commission I pay them to the IRS, they would never call me again. They would just call one of my competitors.”

Tour bus companies are now facing severe penalties for failing to file the required 1099 forms. Each company is facing a penalty of $50 ($100 if failure was intentional) for each form that should have been filed, as well as 31% of the amount of the commission payments made. The 31% is called backup withholding. Backup withholding is required on payments where the company does not identify the recipient of the payments by taxpayer identification number (TIN) (usually the Social Security Number). To avoid backup withholding tour bus companies will have to contact hotel employees to whom they made payments to obtain their name, address and Social Security Number. The companies will then have to file delinquent 1099 forms with the IRS if they want to avoid the penalty.

Hotel employees who are contacted by the tour bus companies will be required to provide their names and accurate taxpayer identification numbers. Those hotel employees who fail to do so will be subject to penalties, and payments to them will be subject to backup withholding.

In addition to the tour bus industry, IRS has also determined that similar non-compliance with the 1099 filing requirements has occurred in the airport shuttle, limousine, car rental, entertainment agent, and several other industries who routinely pay commissions to hotel employees.

I’ve got a call in to an IRS spokesperson and will report back with his comments if they’re of interest.