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Employers Have Questions And Concerns About Deferring Employees’ Social Security Taxes

The IRS has provided guidance to employers regarding the recent presidential action to allow employers to defer the withholding, deposit and payment of certain payroll tax obligations.

The three-page guidance in Notice 2020-65 was issued to implement President Trump’s executive memorandum signed on August 8.

Private employers still have questions and concerns about whether, and how, to implement the optional deferral. The President’s action only defers the employee’s share of Social Security taxes; it doesn’t forgive them, meaning employees will still have to pay the taxes later unless Congress acts to eliminate the liability. (The payroll services provider for federal employers announced that federal employees will have their taxes deferred.)

Deferral basics

President Trump issued the memorandum in light of the COVID-19 crisis. He directed the U.S. Secretary of the Treasury to use his authority under the tax code to defer the withholding, deposit and payment of certain payroll tax obligations.

For purposes of the Notice, “applicable wages” means wages or compensation paid to an employee on a pay date beginning September 1, 2020, and ending December 31, 2020, but only if the amount paid for a biweekly pay period is less than $4,000, or the equivalent amount with respect […]

By Linkenheimer LLP|2020-09-08T23:07:39+00:00September 8th, 2020|employer, New Tax Laws, social security, tax|0 Comments

Paycheck Protection Program Loan Forgiveness

Dear Clients and Friends:

Congratulations if you received a Paycheck Protection Program (PPP) loan! We hope it provides much needed cash during these uncertain times. Now that you have the funds, we want to point out certain steps you should take over the next eight weeks to ensure maximum forgiveness of your PPP loan.

Use the Funds for Forgivable Purposes. Forgiveness of your PPP loan depends largely on whether you use the money to pay forgivable expenses. These include (1) payroll costs (if you’re self-employed, these costs include the net profit amount from your business, as reported on your 2019 tax return), (2) interest payments on mortgages incurred before 2/15/20, (3) rent payments on leases dated before 2/15/20, and (4) utility payments under service agreements dated before 2/15/20. However, according to the Small Business Administration (SBA), not more than 25% of the forgivable loan amount (the amount of the loan used to pay forgivable expenses) may be attributable to nonpayroll costs. In other words, at least 75% of the loan must be used for payroll costs.

To help you meet this requirement, consider implementing the following best practices:

Set up a separate bank account for […]

By Linkenheimer LLP|2020-09-03T20:03:00+00:00May 4th, 2020|business, employer, liability, New Tax Laws|0 Comments

What Are The Key Distinctions Between Layoffs And Furloughs?

As businesses across the country grapple with the economic fallout from the novel coronavirus (COVID-19) pandemic, many must decide whether to downsize their workforces to lower payroll costs and stabilize cash flow. If your company is contemplating such a move, you’ll likely want to consider the choice within the choice: that is, should you lay off workers or furlough them?

Basic difference

The basic difference between the two is simple. Layoffs are the ostensibly permanent termination of employees from their positions, though you can rehire some of these individuals when business improves. Meanwhile, a furlough is a mandatory or voluntary suspension from work without pay for a specified period.

In most states, furloughed workers are still considered employees and, therefore, don’t receive a “final” paycheck. Check with an employment or labor attorney, however, to make sure your state’s furlough laws don’t trigger final pay requirements.

Employee benefits are another issue to explore. Reach […]

By Linkenheimer LLP|2020-09-03T20:03:06+00:00April 15th, 2020|business, New Tax Laws, tax deadlines, tax implications|0 Comments

Answers to Questions About the CARES Act Employee Retention Tax Credit

The recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 pandemic. The employee retention credit is available to employers, including nonprofit organizations, with operations that have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings.

The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.

IRS issues FAQs

The IRS has now released FAQs about the credit. Here are some highlights.

How is the credit calculated? The credit is 50% of qualifying wages paid up to $10,000 in total. So the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000.

Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Therefore, an employer may be able to claim it for qualified wages paid as early as March 13, 2020. Wages aren’t limited to cash payments, but also include part of the cost of employer-provided health care.

When is the operation of a […]

By Linkenheimer LLP|2020-09-03T20:03:10+00:00April 6th, 2020|business, credit, employer, New Tax Laws, relief, small business, tax credit, tax planning|0 Comments

California COVID-19 Tax Updates and the WARN Act

Update 1

An important employment law, the WARN Act, is suspended in California for now. The WARN Act requires employers with 75 or more employees to provide 60 days’ written notice of a mass layoff, relocation or termination affecting 50 or more employees. CA Governor Gavin Newsom has issued an executive order suspending the law in light of the coronavirus (COVID-19) pandemic. Per the order, businesses must still provide employees with written notice, but are not subject to the 60-day advanced notice. Employers must give as much notice as practicable and must contain a brief statement that the termination is COVID-19-related. Here’s more: https://bit.ly/3aizZVA

Update 2

California Governor Gavin Newsom recently issued an executive order on the coronavirus (COVID-19) including certain tax relief. His order suspends interest and penalties for individuals and businesses who are unable to file a timely tax return or make timely payments due to compliance with COVID-19 guidance. Suspension […]

By Linkenheimer LLP|2020-09-03T20:03:11+00:00April 1st, 2020|california, employer, filing deadline, New Tax Laws|0 Comments