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 or the homes of relatives. Among those employees include employees in the human resources, payroll, and tax departments of employers. Similarly, employees of payroll processors—both large and small—may be working remotely and processing payroll using new processes and systems. Throw in a series of new federal payroll tax credits, the deferred deposit of employer social security taxes, new section 139 plans, and millions of furloughed and laid off employees, and the stage is set for a host of unintentional payroll processing errors that may subject employers to tax penalties. While the IRS is hard-at-work on a new Form 941 to reflect the changes adopted as part of the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) some states have taken steps to address some of the payroll difficulties caused by the COVID-19 pandemic.
Continue Reading State Approaches to Telework and Withholding Taxes Differ During COVID-19 Pandemic
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Proposed Regulations Provide Guidance for Classification of Digital Content Transactions and Cloud Transactions
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.
Continue Reading Proposed Regulations Provide Guidance for Classification of Digital Content Transactions and Cloud Transactions