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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.

On March 10, 2021, the House passed the fifth major COVID-relief legislation, the American Rescue Plan Act (the “Act”), which it originally passed last week before its amendment and passage by the Senate on March 6.  President Biden is expected to sign the Act on Friday, March 12, 2021.

The Act adopts a new payroll tax credit that is similar to the employee retention credit, which was originally enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and amended by the Consolidated Appropriations Act, 2021 (the “CAA”).  The new credit will be in effect from July 1, 2021, through December 31, 2021.  In addition, the Act significantly increases the exclusion for employer-provided dependent care assistance for 2021, and makes prospective changes to extend the availability of paid leave credits similar to those originally adopted as part of the Families First Coronavirus Response Act (the “FFCRA”) and that are set to expire on March 31.  Finally, the Act will extend the deduction limitation under section 162(m) to additional employees.
Continue Reading American Rescue Plan Act Goes to Biden for Signature: Includes Changes to Employee Retention Tax Credit, Employer-Provided Dependent Care, Paid Leave Credits, and Deduction Limitations for Executive Compensation

Almost a year after the employee retention credit was adopted as part of the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”), and nearly a month after the final Form 941, Employer’s Quarterly Federal Tax Return, claiming the credit for 2020 was due, the IRS issued Notice 2021-20 (the “Notice”), providing guidance on

Recently released IRS Notice 2021-20 (the “Notice”) provides guidance on the interaction between the Paycheck Protection Program (“PPP”) and the employee retention credit.  Unfortunately, the Notice may limit the ability of many PPP borrowers to claim an employee retention credit that employers may have believed they would be entitled to claim.
Continue Reading Notice 2021-20 Limits Employee Retention Credit For Many PPP Borrowers

Almost a year after the employee retention credit was adopted as part of the Coronavirus, Aid, Relief, and Economic Security Act (“CARES Act”), and nearly a month after the final Form 941, Employer’s Quarterly Federal Tax Return, claiming the credit for 2020 was due, the IRS issued Notice 2021-20 (the “Notice”).  This is the first of three articles looking at the evolution of IRS guidance on the employee retention credit.  This article focuses on Congress’s intention in enacting the employee retention credit and the guidance the IRS provided in the frequently asked questions (“FAQs”) it issued in April 2020.  The second article focuses on the first signs of trouble for employers that appeared when the IRS updated the FAQs in June 2020.  The final article focuses on how Notice 2021-20 builds on those FAQs to narrow the scope of the credit and limit its availability.
Continue Reading A Look at IRS Guidance on the Employee Retention Credit: Part I—Broad and Pragmatic Interpretations in the Pandemic’s Early Days

Recently released IRS Notice 2021-11, implements the extension of the period for collecting from employees and depositing employee Social Security tax that was deferred in the last four months of 2020.  IRS Notice 2020-65 (see earlier coverage) had specified that the employer “must withhold and pay the total [deferred 2020 taxes] . .

In Announcement 2021-2, released on February 1, the IRS instructed lenders not to report loan relief payments made by the Small Business Administration under Section 1112(c) of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.  The Announcement reflects a provision in the Consolidated Appropriations Act, 2021 (the “CAA”), excluding such payments from gross income for purposes of U.S. federal income tax.  The Announcement also instructs lenders who have already furnished and/or filed Forms 1099-MISC reporting the relief payments to issue corrected Forms 1099-MISC. Given that February 1, 2020, was the deadline for furnishing Forms 1099-MISC to payees, many lenders may have to issue corrected returns.
Continue Reading IRS Requires Lenders to Correct Forms 1099-MISC Reporting SBA Payments on Certain Loans

As described in our previous post, on December 21, 2020, another round of COVID relief legislation was passed, providing an enhanced employee retention credit (“ERC”) with various new features and greater benefit amounts.  The legislation was subsequently enacted when President Trump signed the law on December 27.  On January 26, the IRS issued a news release, containing some informal guidance on how it will operationalize this enhanced program.
Continue Reading IRS Issues Guidance on Implementation of Expanded Employee Retention Credit

On January 4, 2021, the Internal Revenue Service issued Notice 2021-7 pertaining to the valuation of the personal use of employer-provided vehicles.  The Notice permits employers who rely on the special valuation rule of Treasury Regulation § 1.61-21(d), known as the Automobile Lease Valuation (ALV) method, to retroactively apply the vehicle cents-per-mile method of Treasury Regulation § 1.61-21(e) for purposes of valuing an employee’s personal use of a company vehicle in 2020.  Due to decreased business use of employer-provided vehicles during the COVID-19 pandemic, the IRS agreed with employers that the application of the ALV method may have resulted in higher income imputation than usual for many employees and that the use of the vehicle cents-per-mile method may provide a “more accurate reflection of the employee’s income . . [,]” particularly in 2020.  The ability to switch from the ALV method to the vehicle cents-per-mile method for 2020 applies only to a vehicle with a fair market value not exceeding $50,400 in 2020 and with respect to which the employer would reasonably have expected its regular use in the employer’s trade or business, were it not for the pandemic.

In addition, Notice 2021-7 provides employers, who switch from the ALV method to the vehicle cents-per-mile method for purposes of calculating personal use of the vehicle in 2020, with the option of continuing to apply the vehicle cents-per-mile method in 2021.  If the employer decides to continue using the vehicle cents-per-mile method in 2021, that method must be used by the employer and employee for all subsequent years, except to the extent the commuting valuation rule applies.  This decision will require employers to carefully evaluate whether the vehicle will continue to meet all of the requirements of Treasury Regulation § 1.61-21(e), other than the consistency requirement, and whether the value of the employee’s personal use of the vehicle will actually be calculated more favorably under the vehicle cents-per-mile method as compared to the ALV method, once the pandemic recedes in 2021 and vehicle use increases.
Continue Reading Notice 2021-7 Provides Employers Relief and Potential Opportunities on Valuation of Employer-Provided Vehicles in Light of COVID-19 Pandemic

As the end of the year approaches, many accounts payable departments are gearing up to complete their annual Form 1099 filings.  For 2020, a new form, Form 1099-NEC, will be used to report payments of non-employee compensation to vendors. (See earlier coverage.)  The IRS resurrected the Form 1099-NEC, which had not been used in decades, to replace Box 7 reporting on Form 1099-MISC because the Protecting Americans from Tax Hikes (PATH) Act accelerated the filing deadline for non-employee compensation to January 31.  The rules for reporting on Form 1099-NEC are generally the same as for reporting in Box 7 of Form 1099-MISC in the past.  However, the reporting requirements for the two may differ at the state level.

Continue Reading Form 1099-NEC Creates State Filing Headaches

After months of gridlock, the House and Senate, on December 21, both passed another round of COVID relief legislation (H.R. 133).  The 5,593-page bill, which gained momentum following the introduction of bipartisan compromise legislation, provides an enhanced employee retention credit (“ERC”), which is easier for employers to qualify during the first six months of 2021, as compared to the ERC enacted as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

The bill also includes extensions to a number of workforce-related tax credits, including the work opportunity tax credit (“WOTC”), the paid family and medical leave tax credit included in the Tax Cuts and Jobs Act as a two-year pilot program, and the paid leave credits enacted as part of the Families First Coronavirus Response Act (“FFCRA”).  The bill would also extend the period during which employers may make student loan payments or reimbursements under an Internal Revenue Code Section 127 educational assistance plan, permit employers to provide additional flexibility under flexible spending accounts, and provide employers with a longer period in which to collect employee Social Security tax which was deferred during 2020 under IRS Notice 2020-65.

The bill would also add an employer income tax credit for qualified wages paid to employees in qualified disaster areas in 2020 for disasters other than COVID-19.  Finally, the bill addresses the deductibility of expenses paid with forgiven PPP loans.
Continue Reading Fourth (and Final?) COVID Relief Measure Clears House and Senate