The following are some resources and guidance recently released or updated by the IRS:
Employers Who Have Received a PPP Loan May Defer Deposit and Payment of the Employer’s Share of Social Security Tax
The Paycheck Protection Program Flexibility Act, enacted on June 5, amends section 2302 of the CARES Act. It strikes the rule that would have prevented an employer from deferring the deposit and payment of the employer’s share of Social Security tax after the employer receives a decision that its PPP loan was forgiven by the lender. Therefore, an employer that receives a PPP loan is entitled to defer the payment and deposit of the employer’s share of Social Security tax, even if the loan is forgiven.
Prior to the enactment of the PPP Flexibility Act, an employer that received a PPP loan was not permitted to defer deposit and payment of the employer’s share of Social Security tax after the receipt of the lender’s decision forgiving all or a portion of the employer’s PPP loan.
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Who Qualifies for Which New Employer Tax Credit and Deferral of Employment Tax Deposits and Payments
Some employers may be confused about the qualifications for different tax credits and the deferral of employment tax deposits and payments provided in the CARES Act. IRS COVID Tax Tip 2020-67, “Who qualifies for which new employer tax credit?” provides a brief explanation about these topics with links to more information. Click here.
Credits for Paid Sick and Family Leave
Businesses and tax-exempt organizations that have less than 500 employees and provide one or both types of leave can claim the refundable credits. Self-employed people can also claim similar credits. Some public employers must provide paid sick and family leave but aren’t eligible for the credits.
Employee Retention Credit
The Employee Retention Credit is available to employers of any size, including tax-exempt organizations. Self-employed people can’t receive the credit for their own earnings but may be able to claim the credit for wages paid to their employees. Federal agencies, state and local governments and businesses that receive Paycheck Protection Program loans don’t qualify.
Eligible employers are defined as those who operate a trade or business and experienced one of these:
- Fully or partially suspended operations because of a government order due to COVID-19
- A significant decline in gross receipts in a calendar quarter when compared to 2019
Deferral of employment tax deposits and payments
Employers may defer the deposit and payment of their share of Social Security tax and certain Railroad Retirement taxes. However, employers who receive a Paycheck Protection Program loan can’t defer their share of Social Security tax due after the lender forgives their loan.
Flowchart helps employers understand new tax credits
The IRS recently issued Publication 5419, New Employer Tax Credits to help employers understand the tax credits available to them due to the coronavirus pandemic. Click here.
The two-page document breaks down the details of the Employer Retention Credit and the credits for paid sick and family leave in easy-to-follow charts. Using the document, employers can quickly determine whether they’re eligible for the credits, the amount of the credits and which wages apply to the credits.
Notice 2020-35, Additional Administrative Relief with Respect to Deadlines Applicable to Employment Taxes, Employee Benefits and Exempt Organizations Affected by the Ongoing Coronavirus Disease 2019 Pandemic. This notice postpones deadlines for certain specified time-sensitive actions with respect to certain employment taxes, employee benefit plans, exempt organizations and Coverdell education savings accounts in response to the ongoing COVID-19 pandemic. The notice also provides a temporary waiver of the requirement for a Certified Professional Employer Organization to file certain employment tax returns and their accompanying schedules electronically. Click here.
Notice 2020-46, Treatment of Amounts Paid to Section 170(c) Organizations under Employer Leave-Based Donation Programs to Aid Victims of the Coronavirus Disease (COVID-19) Pandemic. This notice provides guidance under the Internal Revenue Code on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the ongoing COVID-19 pandemic. The notice provides that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees forgo will not be treated as wages (or compensation, as applicable). Click here.