Roundup of Updates and Resources from the IRS

Complying with New USMCA Trade Agreement

Announcement 2020-06 (click here) provides the Treasury Department and IRS view on how to interpret references in US income tax treaties to the North American Free Trade Agreement (NAFTA) once it is replaced by the Agreement between the United States Canada and Mexico (the USMCA).  The announcement provides that once the USMCA goes into force, the IRS and Treasury will interpret any references to NAFTA in a US income tax treaty as a reference to the USMCA.

Deferral of Employment Tax Deposits and Self-Employment Payments FAQs

Under the Coronavirus, Aid, Relief and Economic Security Act (CARES Act), employers can defer the deposit and payment of their share of Social Security taxes. The Act also allows self-employed individuals to defer payment of certain self-employment taxes.

The IRS created deferral of deposit and payment of employment taxes FAQs to address specific issues related to this topic.  Click here.

Also, find more payroll-related FAQs and information on the IRS Coronavirus and Economic Impact Payments: Resources and Guidance page clicking here. 

New Employee Retention Credit Fact Sheet and FAQs

The CARES Act encourages businesses to keep employees on their payroll by providing them an Employee Retention Credit. It also helps to make sure workers aren’t forced to choose between their paychecks and the public health measures needed to combat the coronavirus.

Eligible employers can claim this credit for wages paid after March 12, 2020, and before January 1, 2021. 

The IRS’s Employee Retention Credit fact sheet (click here) provides important information about the credit including:

  • Who are eligible employers
  • What’s the amount of credit
  • What are qualified wages
  • How to claim the credit
  • How to keep good records about the credit

The IRS continues to update the Employee Retention Credit FAQs (click here) with new information:

  • Updated FAQs #64 and #65: How eligible employers treat health care expenses
  • New FAQ #79: Businesses that repay their Paycheck Protection Program loan by May 14, 2020 

Paid Sick and Family Leave Credits FAQs

The IRS posted and continues to update the paid sick and family leave credit FAQs. Stay up-to-date about these tax credits by bookmarking them and checking them often.  Click here.

These credits reimburse small and midsize employers for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19 under the Families First Coronavirus Response Act.

Technical guidance:  Paycheck Protection Program

Notice 2020-32, Deductibility for Federal income tax purposes of certain otherwise deductible expenses (PDF).  This notice (click here) provides guidance regarding the deductibility of certain otherwise deductible expenses incurred in a taxpayer’s trade or business when the taxpayer receives a covered loan under the Paycheck Protection Program.

Specifically, this notice clarifies that no deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan in accordance with the CARES Act. And the income associated with the forgiveness is excluded from gross income under this Act.