S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.

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Notice 2020-54 Requires Reporting of Qualified Sick Leave Wages and Qualified Family Leave Wages Under FFCRA

By S. Michael Chittenden on July 9, 2020 Posted in Employment Taxes, Information Reporting

The Families First Coronavirus Response Act (“FFCRA”) mandates employers of fewer than 500 employees provide two types of paid leave and includes two employer social security tax credits equal to the amount of paid leave that the employer is required to provide to employees related to the COVID-19 pandemic. (See earlier coverage.) Yesterday, in Notice … Continue Reading

The Curious Case of New Jersey and Ms. Darcey: New Jersey Taxation of Nonqualified Deferred Compensation

By S. Michael Chittenden on July 8, 2020 Posted in Employment Taxes

New Jersey challenges its residents (and their employers) by diverging in significant and meaningful ways from Federal definitions of income. In these ways, New Jersey shares much in common although not all in common) with its western neighbor, Pennsylvania. Fortunately, New Jersey has entered into a reciprocal agreement with its neighbor Pennsylvania so that a … Continue Reading

IRS Provides Guidance on Leave Donation Programs in Response to COVID-19 Pandemic

By S. Michael Chittenden on July 1, 2020 Posted in CARES Act, Employment Taxes, IRS

The IRS recently released Notice 2020-46, providing favorable tax relief for “leave-based donation programs” designed to aid victims of COVID-19 pandemic. Under these programs, employees may elect to forgo vacation, sick, or personal leave in exchange for payments that the employer makes to charitable organizations described under section 170(c). Under this notice, payments employees elect … Continue Reading

IRS Updates FAQs on Employee Retention Credit Enacted as Part of CARES Act

By S. Michael Chittenden and Marianna G. Dyson on June 29, 2020 Posted in CARES Act, Employment Taxes, IRS

On Friday, June 19, the IRS updated several FAQs on its website related to the Employee Retention Credit adopted as part of the Coronavirus Relief, Aid, and Economic Security (“CARES”) Act. The updated FAQs provide additional insight into the IRS’s current thinking regarding employer eligibility for and determination of the credit. Unfortunately, the updated FAQs … Continue Reading

Some Employers Must Act Immediately to Take Advantage of CARES Act Social Security Tax Deferral for Deposits Made Early in the Second Quarter

By S. Michael Chittenden and Michael M. Lloyd on June 26, 2020 Posted in CARES Act, Employment Taxes, IRS

The IRS recently released a second set of draft instructions for Form 941, Employer’s Quarterly Federal Tax Return. The IRS also released the final Form 941, which was revised significantly from the prior form to accommodate the employer social security tax deferral and employer social security tax credits enacted as part of the Coronavirus Aid, … Continue Reading

IRS Revises Administrative Waiver for Late Deposit Penalties Arising from Employment Taxes on Stock Options, SARs, and RSUs

By James Damon, S. Michael Chittenden and Marianna G. Dyson on June 25, 2020 Posted in Employment Taxes, IRS

The IRS has shortened the time in which employers must deposit payroll taxes related to certain stock-settled awards issued to employees, in order to be eligible for an administrative waiver of late-deposit penalties. Through a non-publicized change to its Internal Revenue Manual, the IRS has shortened the applicable deadline for depositing owed and accumulated employment … Continue Reading

Proposed Regulations Regarding TCJA Disallowance for Employee Commuting and Parking Costs a Mixed Bag

By Zachary Schutz, S. Michael Chittenden and Marianna G. Dyson on June 25, 2020 Posted in Employee Benefits, Employment Taxes, Fringe Benefits, Tax Reform

On June 23, Proposed Treasury Regulations §§ 1.274-13 and 1.274-14 were published in the Federal Register addressing the disallowance of employer deductions for the cost of providing commuting and parking benefits to employees. The proposed regulations are a mixed bag with some clarifications being helpful and others less so. Proposed Treasury Regulation § 1.274-13 addresses the … Continue Reading

Much Ado About Nothing Much New: IRS Releases GLAM Addressing Payroll Taxation of Equity Compensation

By James Damon, S. Michael Chittenden and Marianna G. Dyson on June 3, 2020 Posted in Employment Taxes, Executive Compensation, IRS

On May 22, 2020, the IRS released a Generic Legal Advice Memorandum, GLAM 2020-004, which addresses the timing of the taxation and withholding of payroll taxes on certain stock-settled awards issued to employees. Specifically, the GLAM focuses on the treatment of stock options, stock-settled stock appreciation rights (SARs), and stock-settled restricted stock units (RSUs). Employers … Continue Reading

IRS Reverses Course on Health Plan Expenses for Furloughed Employees

By S. Michael Chittenden, Marianna G. Dyson and James Damon on May 8, 2020 Posted in CARES Act, Employment Taxes, IRS

On May 7, the IRS updated its frequently asked questions to reverse its earlier determination that health plan expenses paid or incurred by an employer to provide health benefits to furloughed employees who were not paid other wages were not qualified health plan expenses for which an employer could claim the employee retention credit. The … Continue Reading

IRS Clarifies that Employers Who Repay PPP Loans May Claim Retention Credit

By Marianna G. Dyson and S. Michael Chittenden on May 5, 2020 Posted in CARES Act, Employment Taxes, Information Reporting

On May 4, the IRS revised its newly released frequently asked questions (“FAQs”) to clarify the interaction of the Paycheck Protection Program (“PPP”) with the employee retention credit. FAQ 79 now indicates that an employer that repays its PPP loan by May 7, 2020, in accordance with rules issued by the Small Business Administration (“SBA”), the … Continue Reading

State Approaches to Telework and Withholding Taxes Differ During COVID-19 Pandemic

By Michael M. Lloyd and S. Michael Chittenden on May 5, 2020 Posted in CARES Act, Employment Taxes, IRS

The COVID-19 pandemic has caused turmoil throughout the economy as states have issued stay-at-home, shelter-in-place, and other orders closing offices and forcing employees who traditionally go to work each morning to work from their dining room tables or spare bedrooms of their own homes or from alternative locations such as rentals away from COVID-19 hotspots … Continue Reading

IRS FAQs Provide More Guidance on Employee Retention Credit for Employers Using Third Party Payers

By Joseph Sullivan and S. Michael Chittenden on May 5, 2020 Posted in CARES Act, Employment Taxes, IRS

On April 29, the IRS released extensive new guidance in the form of frequently asked questions (“FAQs”) on the IRS website addressing various aspects of the employee retention credit. Section 2301(l) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) instructs Treasury to issue regulations concerning the application of the credit to employers that … Continue Reading

IRS FAQs Address Income and Deduction Issues around Employee Retention Credit

By Joseph Sullivan and S. Michael Chittenden on May 1, 2020 Posted in CARES Act, Employment Taxes, IRS

Late Wednesday, the IRS released extensive new guidance in the form of frequently asked questions (“FAQs”) on the IRS website addressing various aspects of the employee retention credit. This is the fourth in a series of articles that will address various aspects of the FAQs. This article addresses income and deduction issues related to the … Continue Reading

IRS Employee Retention Credit FAQs Provide Guidance on Calculation of Qualified Wages and Qualified Health Plan Expenses

By James Damon, S. Michael Chittenden and Marianna G. Dyson on May 1, 2020 Posted in CARES Act, Employment Taxes, IRS

On Wednesday, the IRS released extensive new guidance in the form of frequently asked questions (“FAQs”) on the IRS website addressing various aspects of the employee retention credit. This is the third in a series of articles addressing various aspects of these FAQs. This article addresses the determination of qualified wages and allocable qualified health … Continue Reading

IRS FAQs on Retention Credit Provides Guidance on “Significant Decline in Gross Receipts”

By S. Michael Chittenden and Marianna G. Dyson on April 30, 2020 Posted in CARES Act, Employment Taxes, Information Reporting

Late Wednesday, the IRS released extensive new guidance in the form of frequently asked questions (“FAQs”) on the IRS website addressing various aspects of the employee retention credit. This is the second in a series of articles that will address various aspects of the FAQs. This article addresses employer eligibility for the credit based on … Continue Reading

IRS FAQs on Retention Credit Highlight Aggregation Concerns and Narrow Potential Eligibility

By S. Michael Chittenden and Marianna G. Dyson on April 30, 2020 Posted in CARES Act, Employment Taxes, IRS

Late Wednesday, the IRS released extensive new guidance in the form of frequently asked questions (“FAQs”) on the IRS website addressing various aspects of the employee retention credit. Covington continues to analyze the guidance, but employers who have made use of the employee retention credit—which took effect over a month ago with respect to wages … Continue Reading

IRS Released New FAQs on Employee Retention Credit

By S. Michael Chittenden and Marianna G. Dyson on April 30, 2020 Posted in CARES Act, Employment Taxes, IRS

On April 29, 2020, the IRS released new FAQs providing significant guidance on the employee retention credit. We are still analyzing the guidance, but in general, we are concerned that the IRS’s approach to interpreting its application may make it difficult for some employers in difficult financial conditions to claim the credit. Moreover, given that … Continue Reading

A Primer for Employers: How to Stack the Employer Social Security Tax Deferral with the COVID-19 Payroll Tax Credits

By Marianna G. Dyson and S. Michael Chittenden on April 27, 2020 Posted in CARES Act, Employment Taxes, IRS

Employers electing to defer the deposit of the employer share of Social Security taxes on wages, as permitted under section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, are challenged with how to take the deferral in conjunction with the COVID-19 payroll tax credits—the employee retention credit authorized by section 2301 of … Continue Reading

IRS Reiterates Scope of Section 139 Disaster Relief Payments in FAQ

By S. Michael Chittenden on April 24, 2020 Posted in Employment Taxes, IRS

The IRS recently updated its FAQs discussing the two COVID-19-related payroll tax credits under the Families First Coronavirus Response Act (“FFCRA”) to confirm the availability of section 139 disaster relief programs to respond to employee needs during the COVID-19 pandemic. However, the FAQ also serves to remind employers of the scope of Section 139: 58. … Continue Reading

IRS Releases FAQs on Federal Tax Consequences of Payroll Support for Air Carriers and Contractors under CARES Act

By Michael M. Lloyd and S. Michael Chittenden on April 23, 2020 Posted in CARES Act, IRS, Legislation

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) authorizes the Treasury Department to provide payments to passenger air carriers, cargo air carriers, and certain contractors that must be exclusively used for the continuation of payment of employee wages, salaries, and benefits. The Payroll Support to Air Carriers and Contractors Program provides a total … Continue Reading

IRS Releases Guidance on Coronavirus-Related Payroll Tax Credits

By S. Michael Chittenden and Marianna G. Dyson on April 3, 2020 Posted in Employment Taxes, IRS

On March 31, the IRS released multiple pieces of guidance regarding provisions of the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus, Aid, Relief, and Economic Stability (“CARES”) Act. The FFCRA includes two employer social security tax credits for employers of 500 or fewer employees equal to the amount of paid leave that the … Continue Reading

Senate-Passed COVID-19 Legislation Includes Payroll Tax Provisions

By S. Michael Chittenden on March 26, 2020 Posted in Employment Taxes

Late Wednesday night, the Senate passed (96-0) the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the third Coronavirus-related piece of legislation. Early Wednesday, the Senate announced that an agreement had been reached among Senate Republicans, Senate Democrats, and the Trump Administration on the package, but late concerns from a quartet of Republican senators stalled … Continue Reading