Tag Archives: COVID-19

Notice 2021-20 Limits Employee Retention Credit For Many PPP Borrowers

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

A Look at IRS Guidance on the Employee Retention Credit: Part I—Broad and Pragmatic Interpretations in the Pandemic’s Early Days

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 … Continue Reading

Notice 2021-11 Implement’s CAA’s Extension of Time for Employers to Collect Employee Social Security Tax

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] . . . ratably … Continue Reading

Notice 2021-7 Provides Employers Relief and Potential Opportunities on Valuation of Employer-Provided Vehicles in Light of COVID-19 Pandemic

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 … Continue Reading

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

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

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

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

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

IRS Warns Employers Claiming New Tax Credits of Erroneous Penalty Notices

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

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

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

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

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

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

Recapture of Excess COVID-19 Payroll Tax Credits Addressed in New Regs

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

Senate Republican Proposal Would Expand WOTC to Spur Hiring

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

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

DAC 6 Implementation Imminent in Finland and Germany Despite Delays in Other EU Countries and the UK Due to COVID-19

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 … Continue Reading

IRS Provides Guidance on Leave Donation Programs in Response to COVID-19 Pandemic

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

IRS Updates FAQs on Employee Retention Credit Enacted as Part of CARES Act

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

Proposed Regulations Regarding TCJA Disallowance for Employee Commuting and Parking Costs a Mixed Bag

On June 23, Proposed Treasury Regulations §§ 1.274-13 and 1.274-14 were published in the Federal Register addressing the disallowance of employer deductions for the cost of providing commuting and parking benefits to employees.  The proposed regulations are a mixed bag with some clarifications being helpful and others less so.  Proposed Treasury Regulation § 1.274-13 addresses the … Continue Reading

IRS Adds Employment Tax Corrections to Expanding List of Postponed Time-Sensitive Actions Due to COVID-19

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

IRS Provides COVID-19 Emergency Relief for Individuals Planning to Claim the Foreign Earned Income Exclusion

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

IRS Provides Relief for Nonresidents Unable to Depart U.S. Due to Pandemic

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

State Approaches to Telework and Withholding Taxes Differ During COVID-19 Pandemic

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

A Primer for Employers: How to Stack the Employer Social Security Tax Deferral with the COVID-19 Payroll Tax Credits

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
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