Prompted by the COVID-19 global health emergency (the “COVID-19 Emergency”), Treasury and the IRS recently issued Rev. Proc. 2020-27 to provide relief for U.S. citizens and residents planning to take advantage of the foreign earned income exclusion under section 911 of the Internal Revenue Code whose expatriate assignments were interrupted due to the pandemic. The … Continue Reading
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
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
The COVID-19 pandemic has caused turmoil throughout the economy as states have issued state-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
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
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
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
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
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
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
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
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
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
UPDATE: President Trump signed the bill into law on Friday afternoon. Earlier this afternoon, the House passed by voice vote the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the third Coronavirus-related piece of legislation, which was passed by the Senate on Wednesday with a 96-0 vote. At $2 trillion, the CARES Act is the … Continue Reading
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
Earlier this evening, the IRS offered informal guidance in IR-2020-57 regarding its administration of the payroll tax credits enacted as part of the Families First Coronavirus Response Act (the “Act”) earlier this week. The Act mandates two forms of paid leave for employees of employers of 500 or fewer employees. Employers of more than 500 … Continue Reading
In an earlier alert, we expressed concern about the applicability of Section 139. Our concern was based on the fact that the President’s declaration of an emergency on March 13, 2020, with respect to the COVID-19 pandemic was under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”) … Continue Reading
UPDATE: President Trump signed the bill into law this evening. This afternoon, the Senate voted 90-8 to approve the House-backed Families First Coronavirus Response Act. The legislation will provide up to ten weeks of paid FMLA leave and two weeks of paid sick leave to certain employees affected by COVID-19. Details on the legislation, which … Continue Reading
This weekend, the House of Representatives passed the Families First Coronavirus Response Act, a relief bill negotiated with the agencies and supported by the President. On Monday night, the House of Representatives substantively modified that bill in a follow-on resolution, H. Res. 904, referred to as technical corrections. Despite the changes, concerns have been expressed … Continue Reading
UPDATE: We have provided an updated analysis of the issues surrounding the availability of Section 139. Our original post is below. On March 13, 2020, the President declared the COVID-19 pandemic to be an emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the “Stafford Act”). The decision to … Continue Reading
For decades, employers and employees have been effectively precluded from using two of the handiest special valuation rules—the fleet-average and vehicle cents-per-mile valuation rules—to value employees’ personal use of employer-provided vehicles. The 1989 fringe benefit regulations imposed modest maximum vehicle values ($16,500 and $12,800, respectively, as adjusted for inflation) to limit the use of the … Continue Reading
Today, the IRS published proposed 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 on his or her Form W-4 (Employee’s Withholding Certificate). The Form W-4 was redesigned for 2020 to reflect the TCJA changes to how income … Continue Reading
Over the last few years, the Justice Department has worked with the IRS to more aggressively prosecute cases involving employment tax noncompliance and the failure to remit trust fund taxes to the U.S. Treasury. Trust fund taxes are taxes withheld from the wages of employees such as federal income tax withholding and FICA tax withholding. … Continue Reading
Earlier this year, the IRS issued IR-2020-09, in which it announced the launch of a new and improved Tax Withholding Estimator. The Tax Withholding Estimator (the “Estimator”) is designed to help employees adjust their federal income tax withholdings by performing a “Paycheck Checkup.” The process also helps employees target the refund they want by adjusting … Continue Reading
