S. Michael Chittenden

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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IRS FAQs Provide Welcome Guidance on Employee Retention Credit and PPP Loans in M&A Transactions

By S. Michael Chittenden on Posted in CARES Act, Employment Taxes, IRS
On November 16, the IRS added two new FAQs to its website that address an issue that has been concerning employers since the CARES Act was adopted.  For purposes of the employee retention credit (“ERC”), Section 2301(d) of the CARES Act includes an aggregation rule that treats all employers required to be aggregated under section … Continue Reading

Preamble to Final Regulations on the Mechanics of Income Tax Withholding Provide Transition Method for Pre-2020 Forms W-4

By Marianna G. Dyson and S. Michael Chittenden on Posted in Employment Taxes, IRS, Tax Reform
On October 6, the IRS published final regulations addressing changes made by the Tax Cuts and Jobs Act of 2017 (the “TCJA”) to how an employee instructs an employer to withhold income taxes based on the employee’s Form W-4 (Employee’s Withholding Certificate).  These final regulations were issued only 8 months after the proposed regulations were … Continue Reading

IRS Provides Guidance on Preparation of Forms W-2 for Employees with Deferred Social Security Tax Withholding

By S. Michael Chittenden and Marianna G. Dyson on Posted in Employment Taxes, Information Reporting, IRS
On Friday, October 30, the IRS provided guidance regarding the proper reporting on Form W-2 for employers who deferred the withholding of the employee share of Social Security tax under Notice 2020-65. (See earlier coverage.)  Based on the IRS guidance, employers should report FICA wages up to the OASDI (Social Security) wage base in Box … Continue Reading

New D.C. Transportation Benefits Law Creates Potentially Bumpy Road for Employer Compliance

By Sarah Friedman and S. Michael Chittenden on Posted in Employee Benefits, Fringe Benefits
Soon, many District of Columbia employers will be subject to a new “parking cash-out” law designed to promote environmentally friendly commuting options, i.e., other than individual commutes by automobile.  At a high-level, parking cash-out laws generally require employers that provide free or subsidized parking to offer to pay employees cash in lieu of the subsidized … Continue Reading

IRS Updates Guidance on Qualified Plan Distributions to State Unclaimed Property Funds

By S. Michael Chittenden and Julie Edmond on Posted in Employment Taxes, Information Reporting, IRS
The IRS recently published new guidance on the tax withholding and reporting consequences associated with qualified retirement plan distributions to state unclaimed property funds.  In Revenue Ruling 2020-24, the IRS clarified that distributions from qualified retirement plans to state unclaimed property funds are subject to both federal income tax withholding and 1099-R reporting requirements.  In … Continue Reading

Bad News for New York Nonresident Telecommuters: New York Issues COVID-19 Telecommuting Guidance

By S. Michael Chittenden and Michael M. Lloyd on Posted in Employment Taxes, Legislation
Without notice or fanfare, the New York Department of Taxation updated guidance on its website to address the application of its “convenience of the employer” rule to COVID-19 telecommuters.  The question of whether New York would consider employees who are working remotely due to the pandemic as doing so for “convenience” or “necessity,” has been … Continue Reading

New Hampshire Brings COVID-19 Tax Dispute to Supreme Court; Case Highlights Challenges Facing Employers and Employees

By S. Michael Chittenden and Marianna G. Dyson on Posted in Employment Taxes
On Monday, October 19, the State of New Hampshire filed a bill of complaint in the Supreme Court of the United States asserting that its southern neighbor, Massachusetts, is violating its state sovereignty.  The suit attacks Massachusetts’s emergency regulations governing the taxation of income during the COVID-19 state of emergency. Massachusetts enacted a rule pursuant to … Continue Reading

Final Regulations Address TCJA Disallowance for Meal and Entertainment Expenses

By Zachary Schutz, S. Michael Chittenden and Marianna G. Dyson on Posted in Fringe Benefits, IRS, Tax Reform
On October 9, the IRS published final Treasury Regulations addressing the deduction disallowance of expenses associated with providing entertainment, business meals, and other food and beverages in the Federal Register.  The final regulations, which track the proposed regulations published on February 26, 2020, preserve, with certain limitations, taxpayers’ ability to deduct 50 percent of the … Continue Reading

IRS Posts Tax Tip on Backup Withholding

By Michael M. Lloyd and S. Michael Chittenden on Posted in Backup withholding, Information Reporting, IRS, Penalties
On October 14, 2020, the IRS posted Tax Tip 2020-136 entitled, “Helpful information for taxpayers on backup withholding.”  This particular Tax Tip serves as a great reminder for payers making payments for which backup withholding is required, especially if they are unaware of the troubling consequences of noncompliance.… Continue Reading

IRS Final Regulations on Default Withholding Rates for Periodic Deferred Income Distributions: No Changes for 2021, but Future Rates Not Clarified

By Sarah Friedman and S. Michael Chittenden on Posted in Employment Taxes, IRS, Tax Reform
The Treasury and IRS have published final regulations governing federal income tax withholding from periodic payments of deferred income made after December 31, 2020. The new regulations follow changes made by the Tax Cuts and Jobs Act of 2017 (TCJA) to the default withholding rate rules. Payors and plan administrators who hoped that the IRS … Continue Reading

IRS Issues Notice 2020-65 Providing Guidance on Employee Social Security Tax Deferral

By S. Michael Chittenden and Michael M. Lloyd on Posted in Employment Taxes, IRS, Penalties
Late Friday, the IRS released Notice 2020-65 providing guidance to employers regarding the implementation of President Trump’s presidential memorandum issued on August 8, 2020.  The memorandum directed the Secretary of the Treasury to defer the withholding, deposit, and payment of employee Social Security taxes for the period from September 1 to December 31, 2020 (see … Continue Reading

IRS Warns Employers Claiming New Tax Credits of Erroneous Penalty Notices

By Michael M. Lloyd and S. Michael Chittenden on Posted in CARES Act, Employment Taxes, IRS, Legislation, Penalties
The IRS recently announced that it erroneously sent failure-to-deposit (“FTD”) penalty notices to certain employers that reduced their employment tax deposits on Form 941 (Employer’s Quarterly Federal Tax Return) in anticipation of claiming sick and family leave credits under the Families First Coronavirus Response Act (“FFCRA”) or the employee retention credit (“ERC”) under the Coronavirus, … Continue Reading

IRS Releases Additional FAQs on Deferral of Employment Tax Deposits Under Section 2302 of the CARES Act

By James Damon, S. Michael Chittenden and Marianna G. Dyson on Posted in CARES Act, Employment Taxes, IRS
On July 30, 2020, the IRS released guidance in the form of new frequently asked questions (“FAQs”)  addressing the deferral of the employer portion of Social Security taxes under section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.  These FAQs are broad in nature, providing guidance on various considerations relevant to section … Continue Reading

Mnuchin Confirms Trump Payroll Tax Deferral is not Mandatory

By S. Michael Chittenden on Posted in Employment Taxes
Secretary Mnuchin acknowledged in an interview today that the employee Social Security tax deferral envisioned in President Trump’s Presidential Memorandum will not be mandatory.  The memorandum instructs the Treasury Department to issue guidance under Section 7508A permitting employers to suspend the withholding, depositing, and payment of the employee’s share of social security taxes (and the … Continue Reading

Trump Executive Action to Defer Employee Share of Social Security Taxes Raises Significant Legal Questions for Employers

By S. Michael Chittenden, Michael M. Lloyd and Marianna G. Dyson on Posted in CARES Act, Employment Taxes, IRS
On Saturday, August 8, President Trump signed a Presidential Memorandum directing the Secretary of the Treasury to “use his authority pursuant to [Code section] 7508A to defer the withholding, deposit, and payment of the tax imposed by [Code section] 3101(a) . . . on wages . . . paid during the period of September 1, 2020, through December 31, 2020,” subject … Continue Reading

Senate Bill Would Ignore COVID-19 Assistance in Determining Worker Classification; Treat Certain Benefits as Qualified Disaster Relief Payments

By S. Michael Chittenden and James Damon on Posted in Legislation, Worker Classification
Is an individual service provider an employee or an independent contractor?  As our employee benefits colleagues have noted previously in Covington’s Inside Compensation blog, the IRS test is complicated and just one of many for determining worker status under federal and state laws.  The American Workers, Families, and Employers Assistance Act (the “Bill”), one of … Continue Reading

Senate Republican Proposal Includes Payroll Tax Credit to Defray Employer Expenses for COVID-19 Prevention

By Joseph Sullivan and S. Michael Chittenden on Posted in Employment Taxes, Legislation
On July 27, Senate Republicans released a series of COVID-19 relief bills, including the “American Workers, Families, and Employers Assistance Act” (the “Bill”).  The Bill is a successor to several provisions in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, passed in March of this year, which attempted to blunt the early effects of the … Continue Reading

Senate Republican Proposal Would Enhance Employee Retention Credit

By James Damon and S. Michael Chittenden on Posted in CARES Act, Employment Taxes, Legislation
As we noted in an earlier post, on July 27, Senate Republicans introduced new legislation in response to the continued COVID-19 pandemic.  One of the introduced bills, titled the American Workers, Families, and Employers Assistance Act (the “Bill”), would enhance the existing employee retention credit.… Continue Reading

Senate Republican Proposal Would Expand WOTC to Spur Hiring

By S. Michael Chittenden and Marianna G. Dyson on Posted in CARES Act, Employment Taxes, IRS, Legislation
On July 27, Senate Republicans introduced a series of bills intended as their opening salvo in what appears likely to be contentious negotiations among Senate Republicans, the White House, and House and Senate Democrats over the next legislative response to the COVID-19 pandemic.  Along with another round of direct stimulus payments to individual taxpayers, extended … Continue Reading

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

By S. Michael Chittenden on 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 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 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
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