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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 2020-54, the IRS announced that employers will have to report wages paid for leave mandated under the FFCRA either on Forms W-2 or on a separate statement.  The rules are intended to enable employees who also have self-employment income to properly determine the amount of any Self-Employment Contributions Act (“SECA”) tax credits to which they are entitled under the FFCRA.
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Continue Reading Notice 2020-54 Requires Reporting of Qualified Sick Leave Wages and Qualified Family Leave Wages Under FFCRA

At the end of June, the European Union (“EU”) amended EU Council Directive 2011/16/EU and its cumulative amendments (referred to in the aggregate, as the Directive on Administrative Cooperation “DAC 6” or the “Directive”) to give EU Member States the option to defer imminent DAC 6 reporting deadlines by up to six months due to disruptions caused by COVID-19.  (Various sources, including the European Union, refer to the Directive as “DAC6” without a space between DAC and 6.  We use the alternative format in this post.)  The amendment to the Directive also includes language potentially allowing for an additional three-month extension depending upon how the pandemic unfolds, but cautions that further delays are unlikely.  Many EU Member States promptly announced a full six-month deferral, including Belgium, Croatia, Cyprus, the Czech Republic, Hungary, Ireland, Luxembourg, the Netherlands, Sweden, and the UK.  To date, Finland and Germany have announced that DAC 6 reporting will commence without any delay on August 31, 2020.

If U.S. multinationals with affiliates in the UK or EU countries have not taken steps to identify reportable tax planning and other arrangements caught up in the DAC 6 dragnet, they should do so immediately because the reporting requirements are onerous.

For readers unfamiliar with DAC 6, an overview of this new reporting regime follows.
Continue Reading DAC 6 Implementation Imminent in Finland and Germany Despite Delays in Other EU Countries and the UK Due to COVID-19

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”),…

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 a significant decline in gross receipts.  In our first article, we discussed the IRS’s interpretation of the aggregation rules under section 2301(d) of the CARES Act and the determination of employer eligibility based on a full or partial suspension of operations due to a government order.  Subsequent articles will address the determination of qualified wages and allocable qualified health plan expenses, issues related to the income and deduction treatment of qualified wages for employees and employers, and issues related to the use of third-party payers.  Before the release of the IRS FAQs, we addressed how employers can claim the employee retention credit and its interaction with the deferral of employer social security tax deposits (see earlier article).

Employers should carefully consider the FAQs, but remain mindful that although they represent the current thinking of the IRS, the FAQs are not binding guidance.
Continue Reading IRS FAQs on Retention Credit Provides Guidance on “Significant Decline in Gross Receipts”

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 declare an emergency is addressed in a letter from the President to Administration officials in which he explained that his decision to issue an emergency declaration was “based on the fact that our entire country is now facing a significant public health emergency.”…
Continue Reading COVID-19 Emergency Declaration: Code Section 139 Uncertain; Leave-Sharing Policies Permitted

Holding true to its holiday tradition, the IRS yet again decided to extend the deadline by which providers of minimum essential coverage (including certain applicable large employers (“ALEs”)) must furnish information statements to individuals regarding their 2019 insurance coverage. However, due to the effective elimination of the ACA’s individual mandate penalty through the Tax Cuts and Jobs Act (“TCJA”), the IRS went one step further than in past years by allowing certain providers to forgo the individual furnishing requirement, if certain notice requirements are met instead.
Continue Reading Notice 2019-63 Delivers Relief for Providers of Minimum Essential Coverage

On November 14, 2019, the IRS announced that it has redesigned Notices CP2100 and CP2100A with the goal of providing more information to affected payers. These Notices are used to alert payers that the IRS received Forms 1099 containing incorrect or missing Taxpayer Identification Numbers (TINs) for payees and that the payer may need to contact payees regarding their name and TIN information and/or backup withhold at a rate of 24% as a result. Payments potentially subject to backup withholding are reportable payments, such as interest (including tax-exempt interest), dividends, broker and barter exchange transactions, rents, royalties, nonemployee compensation, payments made in settlement of payment card and third party network transactions, and certain payments from fishing boat operators.
Continue Reading The IRS Introduces More Informative Backup Withholding Notices for Payers

On August 9, 2019, Treasury and the IRS issued proposed regulations under section 861 of the Code to clarify how transactions involving digital content and cloud computing are classified for tax purposes.  The new rules propose to revise and expand upon Treasury Regulation § 1.861-18 regarding digital content transactions and establish new Treasury Regulation § 1.861-19 regarding cloud computing transactions.  The proposed regulations also propose changes to Treasury Regulation § 1.861-7 regarding the source rules for sales of personal property.  Collectively, the rules are intended to address whether a digital transaction is characterized as a sale, lease, license, or provision of services for purposes applying various provisions of the Code, including the source rules, which are critical for purposes of determining whether withholding is required under Chapter 3 and reporting obligations under sections 6041 and 6050N, and Subpart F.
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Continue Reading Proposed Regulations Provide Guidance for Classification of Digital Content Transactions and Cloud Transactions

In the category of “everything old is new again,” the IRS announced in late July that it intends to require that nonemployee compensation (“NEC”) paid during the 2020 calendar year be reported on new Form 1099-NEC, instead of being reported in Box 7 of Form 1099-MISC.  A draft of Form 1099-NEC was posted on the IRS website for public comments, which are due by September 30.  The change comes in response to statutory changes made in 2015 by the Protecting Americans from Tax Hikes (PATH) Act.
Continue Reading IRS Plans to Resuscitate Long-Dead Form 1099-NEC

On July 10, the IRS updated the Instructions for Form 8975 and Schedule A (Form 8975).  Form 8975 (Country-by-Country Report) is used by taxpayers that are the parent entity of a U.S. multinational enterprise (“U.S. MNE”) with annual revenue of $850 million or more.  Taxpayers must file Form 8975 to report information related to the taxpayer’s MNE’s constituent entities on a country-by-country basis, including (i) each entity’s tax jurisdiction; (ii) country of organization and main business activity; and (iii) financial and employee information for each tax jurisdiction in which the U.S. MNE does business (i.e., revenues, profits, income taxes paid, accumulated earnings, and tangible assets).
Continue Reading IRS Updates Country-by-Country Reporting Instructions