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
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
On August 19, 2020, the IRS urged employers to exercise caution in selecting their payroll service providers (“PSPs”) following ongoing concerns that some disreputable PSPs may fail to deposit employment taxes, leaving businesses vulnerable to unpaid payroll taxes as well as penalties.… Continue Reading
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
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
On July 27, 2020, the IRS published Information Release 2020-169 announcing the issuance of new temporary and proposed regulations to implement procedures to assess, reconcile, and recapture any portion of the credits under the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) erroneously credited, paid, or … Continue Reading
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
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
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
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
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
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
On May 28, 2020, the IRS issued Notice 2020-35, postponing deadlines for more time-sensitive actions until July 15, 2020. Notice 2020-35 is the latest in a series of IRS notices issued since mid-March providing for delays under the authority of section 7508A due to the COVID-19 emergency declaration. Specifically, the relief relates to employment tax … Continue Reading
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 March 13, 2020, the President issued a proclamation declaring a national emergency regarding the global outbreak of the COVID-19 virus (the “COVID-19 Emergency”). Subsequently, FEMA approved all states and the District of Columbia for major disaster declarations to provide federal emergency assistance. The Federal Government and state governments have also taken unprecedented preventative and … 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
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
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. 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
