IRC §3504 Fiscal/Employer Agent Rules (FMS Legal Framework)

IRS rules allowing a fiscal management services (FMS) vendor to act as the authorized employment-tax agent for a household employer — the legal mechanism behind every consumer-directed and self-directed Medicaid program that pays family caregivers. Explains why family caregivers in self-direction programs receive W-2s from an FMS vendor rather than from the state or the care recipient. Two models: Fiscal/Employer Agent (F/EA — participant is common-law employer) and Agency with Choice (co-employment). Every state self-direction program routes paychecks through an enrolled FMS.

This is a reference record for the employment-tax plumbing behind many paid family caregiver and self-directed home-care arrangements. IRS says employers can arrange for a third party to perform federal employment-tax withholding, return preparation, reporting, and payment responsibilities. Under IRC Section 3504 and Treas. Reg. 31.3504-1, an employer uses Form 2678 to request IRS authorization for a third party to act as the employer's agent. A Section 3504 agent can withhold, report, and pay employment taxes and file aggregate returns using its own EIN and address. IRS also notes a home-care-services exception under Rev. Proc. 2013-39 that can allow Section 3504 agents representing employers who receive federally, state, or locally funded home care services to file aggregate Form 940. For caregiver routing, this explains why wages from Medicaid self-direction or similar programs may be reported through a fiscal/employer agent or FMS entity rather than directly by the state program.

Services

This is a reference record for the employment-tax plumbing behind many paid family caregiver and self-directed home-care arrangements. IRS says employers can arrange for a third party to perform federal employment-tax withholding, return preparation, reporting, and payment responsibilities. Under IRC Section 3504 and Treas. Reg. 31.3504-1, an employer uses Form 2678 to request IRS authorization for a third party to act as the employer's agent. A Section 3504 agent can withhold, report, and pay employment taxes and file aggregate returns using its own EIN and address. IRS also notes a home-care-services exception under Rev. Proc. 2013-39 that can allow Section 3504 agents representing employers who receive federally, state, or locally funded home care services to file aggregate Form 940. For caregiver routing, this explains why wages from Medicaid self-direction or similar programs may be reported through a fiscal/employer agent or FMS entity rather than directly by the state program.

How to apply

Use the official program page for application details: official program page.