payroll practice

IRS Offer Guidance on ERC for 2021

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The IRS has released Notice 2021-23 which provides guidance on the employee retention credit provided under Section 2301 of the Coronavirus Aid, Relief, and Economic Security Act, as amended by section 207 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, for qualified wages paid after December 31, 2020, and before July 1, 2021.  Notice 2021-23 amplifies Notice 2021-20 and provides employers with guidance on how to determine their eligibility for and the amount of the employee retention credit they may claim for the first and second calendar quarters of 2021.

 

IRS: What Employers Need to Know About Repayment of Deferred Payroll Taxes

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The IRS has provided guidance on the repayment of the deferred employee’s social security.  This guidance was provided in the e-News for Payroll professionals March 26, 2021 newsletter. 

The Background

To give people a needed temporary financial boost, the Coronavirus, Aid, Relief and Economic Security Act allowed employers to defer payment of the employer’s share of Social Security tax. IRS Notice 2020-65 PDF allowed employers to defer withholding and payment of the employee’s Social Security taxes on certain wages paid in calendar year 2020. Employers must pay back these deferred taxes by their applicable dates.

The employee deferral applied to people with less than $4,000 in wages every two weeks, or an equivalent amount for other pay periods. It was optional for most employers, but it was mandatory for federal employees and military service members.

Repayment of the employee’s portion of the deferral started January 1, 2021 and will continue through December 31, 2021. Payments made by January 3, 2022, will be timely because December 31, 2021, is a holiday. The employer should send repayments to the IRS as they collect them. If the employer does not repay the deferred portion on time, penalties and interest will apply to any unpaid balance.

Employees should see their deferred taxes in the withholdings from their pay. They can check with their organization’s payroll office for details on the collection schedule.

How to repay the deferred taxes

Employers can make the deferral payments through the Electronic Federal Tax Payment System or by credit or debit card, money order or with a check. These payments must be separate from other tax payments to ensure they applied to the deferred payroll tax balance. IRS systems won’t recognize the payment if it is with other tax payments or sent as a deposit.

EFTPS will soon have a new option to select deferral payment. The employer selects deferral payment and then changes the date to the applicable tax period for the payment. Employers can visit EFTPS.gov, or call 800-555-4477 or 800-733-4829 for details.

If the employee no longer works for the organization, the employer is responsible for repayment of the entire deferred amount. The employer must collect the employee’s portion using their own recovery methods.

Let the Podcasts Begin

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Recently I was asked to do my first podcast ever.  Outgrowth a Slice of Pro Beauty Podcast, a group that caters to beauty salon owners and workers, asked me to come on the podcast to discuss the payroll pitfalls when working in or running a salon.  The discuss is in two parts and covers misclassifying workers and the resulting legal ramifications in addition to a whole range of payroll areas that can cause compliance problems. Though generally geared to the beauty salon business, my discussion would be useful to anyone who needs to worry about compliance issues.

I hope you find it useful and informative.

 

 

Be sure to register for our first payroll lecture/webinar of the year.  The topic is the 2021 Form 941 and is being held on Wednesday, March 24th starting at 10:00 am Pacific.  Click here for more details and to register.  Use coupon code CJYFRQA6 at check out to receive a 10% discount as a Payroll 24/7 BLOG FOLLOWER.  The webinar is pending approval by the APA for 1.5 RCHs.

 

What the IRS Thinks You Need to Know About Repayment of Deferred Payroll Taxes

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The IRS published in its e-News for Tax Professionals on March 13th the following guidance on repaying of the employee 2020 deferred social security taxes in 2021.  This update includes the provisions of the American Rescue Plan Act signed by President Biden.

The Coronavirus, Aid, Relief and Economic Security Act allowed employers to defer payment of the employer’s share of Social Security tax. IRS Notice 2020-65 allowed employers to defer withholding and payment of the employee’s Social Security taxes on certain wages paid in calendar year 2020. Employers must pay back these deferred taxes by their applicable dates.

The employee deferral applied to people with less than $4,000 in wages every two weeks, or an equivalent amount for other pay periods. It was optional for most employers, but it was mandatory for federal employees and military service members. Repayment of the employee’s portion of the deferral started Jan. 1, 2021, and will continue through Dec. 31, 2021. Payments made by Jan 3, 2022, will be timely because Dec. 31, 2021, is a holiday. The employer should send repayments to the IRS as they collect them. If the employer does not repay the deferred portion on time, penalties and interest will apply to any unpaid balance.

Employers can make the deferral payments through the Electronic Federal Tax Payment System (EFTPS) or by credit or debit card, money order or with a check. These payments must be separate from other tax payments to ensure they are applied to the deferred payroll tax balance. IRS systems won’t recognize the payment if it is with other tax payments or sent as a deposit. EFTPS will soon have a new option to select deferral payment. The employer selects deferral payment and then changes the date to the applicable tax period for the payment. Employers can visit  EFTPS.gov, or call 800-555-4477 or 800-733-4829 for details.

If the employee no longer works for the organization, the employer is responsible for repayment of the entire deferred amount. The employer must collect the employee’s portion using their own recovery methods.

Join us on March 24, 2021 at 10:00 am Pacific for this information-packed webinar

Be sure to register for our first payroll lecture/webinar of the year.  The topic is the 2021 Form 941 and is being held on Wednesday, March 24th starting at 10:00 am Pacific.  Click here for more details and to register.  Use coupon code CJYFRQA6 at check out to receive a 10% discount as a Payroll 24/7 BLOG FOLLOWER.  The webinar is pending approval by the APA for 1.5 RCHs.

 

2021 Payroll Lecture Series Has Begun

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I have schedule my first payroll lecture webinar to kick off the 2021 series.  My first topic is the 2021 Form 941.  The lecture will be held on Wednesday March 24, 2021 starting at 10:00 am Pacific time.  The lecture covers:

  • What’s New for 2021
  • Families First Act: Extension of existing credits into 2021 for Paid Sick Leave and Paid Family Leave
  • CARES Act: Status of  deferring employer’s and employee’s social Security
  • IRS Form 7200: Purpose for the form and how it applies to you in 2021
  • Line by line review of the latest Revised Form 941

Register on my website.  Use coupon code CJYFRQA6 at check out to receive a 10% as one of my blog followers.

The webinar has been submitted to the APA for approval for 1.5 RCHs.

Join us on March 24, 2021 at 10:00 am Pacific for this information-packed webinar

DOL: Change of Administrations…Change of Opinions

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The U.S. Department of Labor announced plans on March 11, 2021 to rescind two final rules that would significantly weaken protections afforded to American workers under the Fair Labor Standards Act.

The first Notice of Proposed Rulemaking proposes the withdrawal of the Independent Contractor Final Rule issued by the department on issued on Jan. 7, 2021, for several reasons. They include the following:

  • The rule adopted a new “economic reality” test to determine whether a worker is an employee or an independent contractor under the FLSA.
  • Courts and the department have not used the new economic reality test, and FLSA text or longstanding case law does not support the test.
  • The rule would narrow or minimize other factors considered by courts traditionally; making the economic test less likely to establish that a worker is an employee under the FLSA.

Among its provisions, the FLSA requires covered employers to pay employees at least the federal minimum wage for every hour worked and overtime premium pay of at least one and one-half times their regular rate of pay for every hour worked over 40 in a workweek. An independent contractor has no FLSA protections.

The second Notice of Proposed Rulemaking seeks to rescind a current regulation on joint employer relationships under the Fair Labor Standards Act, published in the Federal Register and which took effect on March 16, 2020. In February 2020, 17 states and the District of Columbia filed a lawsuit in the U.S. District Court for the Southern District of New York against the department, arguing that the Joint Employer Rule violated the Administrative Procedure Act. The court vacated the majority of the Joint Employer Rule on Sept. 8, 2020, stating that the rule was contrary to the FLSA and was “arbitrary and capricious” due to its failure to explain why the department had deviated from all prior guidance or consider the effect of the rule on workers.

The department invites comments from the public on both proposed rules at www.regulations.gov. The comment periods end on April 12, 2021.

Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record. The division will post comments without change at www.regulations.gov and include any personal information provided. The division posts comments gathered and submitted by a third-party organization as a group, using a single document ID number at the site.

More information about the proposed rules is available at https://www.dol.gov/agencies/whd/flsa/2021-independent-contractor and at https://www.dol.gov/agencies/whd/flsa/2020-joint-employment.

 

Register for my first lecture of 2021.  I am starting with the 2021 Form 941 on Wednesday, March 24th at 10:00 am Pacific.  Use coupon code CJYFRQA6 at checkout to receive a 10% discount.

SUI Wage Bases for 2021

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It’s that time of year again where we ring out the old year and ring in the new. To ensure that we have our calculations for our state unemployment insurance correct, payroll needs the wage bases for all states where they currently have employees located. The chart below lists the SUI wage bases that have been released so far. I will be updating this blog new wage bases come in.

Making Sense of COVID-19 FAQs Part 1

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Since the pandemic of COVID-19 began I have been getting a tremendous amount of questions about the different tax credits and how those tax credits relate to the Form 941. Although I posted quite a few blog items concerning these credits I thought what I might do now is go through the different FAQs that are on the IRS website and take a closer look at specific information the IRS has provided. Over the next several blogs I will pick one or two of the FAQs and discuss them and how they affect payroll and/or the 941 form. I am not going to be covering them in numerical order but rather picking the ones that I think are the most relevant to the questions I have been receiving. I will give the FAQ number and under what topic they can be found, as well as the link if you want more information. One bad thing about the FAQs on this website is if they do jump around quite a bit. You start off at question four and then must wander off to question 44 to get the remainder of the answer. So, what I am going to try to do is put it all in one place. Today’s blog gets us started with our first question.

Under the IRS topic Covid-19-Related Tax Credits: General Information FAQs. FAQ number 4 deals with documentation. The question reads:

What documentation must an eligible employer retain to substantiate eligibility to claim the tax credits?

In this case the question is asking about the tax credits under the paid family leave and paid sick leave along with the allocable qualified health plan expenses and the eligible employer share of Medicare taxes. In answering this question, the IRS is not giving us any specifics when it comes to the type of records that we need to maintain. They simply list the normal records that we would maintain in a payroll department including Form 941. However, they do refer to another FAQ, specifically number 44 under the IRS Topic Covid-19-Related Tax Credits: How To Substantiate Eligibility And Periods Of Time For Which Credits Are Available FAQs. But to truly answer the question we not only need number 44 but also number 45 and number 46 under this topic.

Number 44 reads: what information should an eligible employer received from an employee and maintain to substantiate eligibility for the sick leave our family leave credits? The answer provided is as follows: An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if the employer receives a written request for such leave from the employee in which the employee provides:

  1. The employee’s name
  2. The date or dates for which leave is requested
  3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason
  4. A statement that the employee is unable to work, including by means of telework, for such reason.

In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.

In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

But that still does not tell us exactly what that documentation should look like. That is addressed in question number 45, which reads: what additional records should an eligible employer maintained to substantiate eligibility for the sick leave or family leave credit? This answer gets down to the actual documentation from the payroll system. The employer would need to create and maintain records that include the documentation to show how the employer determine the amount of qualified second family leave wages paid to employees are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave. The documentation should also show how the employer determine the amount of qualified health plan expenses that the employer allocated to those wages. This of course is in addition to the completed 941 form and any copies of Form 7200. These records could come from your payroll system directly via a report, or if that is not possible, an Excel spreadsheet.

Finally question number 46 deals with record retention time limits. Covid-19 related records fall under the same category as all other employment tax records. This is basically four years plus current.