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IRS Issues Updated FAQs on Certain COVID-Related Employer Tax Credits

The IRS recently issued updated FAQs related to the expanded paid sick and family leave tax credits authorized under the Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥). Specifically, the CAA extends through March 31, 2021, the availability of paid sick and family leave credits, which were first adopted in the Families First Coronavirus Response Act in March 2020. The extended paid leave tax credits are not new benefits and simply extend the period of time during which eligible employers may claim the credits. Consequently, if an employer has already claimed the maximum amount of these tax credits, they will not be eligible to claim additional paid leave tax credits. For additional information on the paid sick and family leave tax credits, please see our prior blog posts here and here.  The IRS has yet to update its FAQs for changes made in the CAA to the terms and conditions of… Continue Reading

Last Day for Coronavirus-Related Distributions is December 30, 2020

As a reminder, the last day that coronavirus-related distributions may be made from an eligible retirement plan to a qualified individual is December 30, 2020, and not December 31, 2020.?á Distributions may be included in income ratably over the 2020, 2021, and 2022 tax years or, if the participant elects, may be included entirely in income in 2020.?á For more information on coronavirus-related distributions, please see the IRS FAQs here.

IRS Issues Additional Guidance on Certain Coronavirus-Related Tax Credits

In a new series of FAQs, the IRS issued additional guidance on tax credits for qualified family leave wages and qualified sick leave wages provided under the Families First Coronavirus Response Act (the ?Ç£FFCRA?Ç¥). The first set of FAQs explains what amounts can be counted as qualified family leave wages for purposes of the tax credit granted for such amounts. The second set of FAQs explains how to determine the amount of qualified health plan expenses for purposes of the tax credits for qualified family leave wages and qualified sick leave wages, including how health plan expenses may be calculated for self-funded and fully insured plans, as well as how to calculate health plan expenses when an employer offers more than one health plan or other health-related benefits, such as health flexible spending accounts and health savings accounts. Links to the guidance are below, and more detailed information on the… Continue Reading

Additional Federal Guidance Regarding COVID-19 and Telehealth Coverage: Some Employer Take-Aways

The U.S. Departments of Labor, Treasury, and Health and Human Services (the ?Ç£Departments?Ç¥) recently issued FAQs regarding the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and COVID-19. A number of these FAQs address a group health plan?ÇÖs required coverage of COVID-19 tests, including which tests must be covered, related facility fees, reimbursement rates, and balance billing to patients. Employers should ensure that the third party administrators of their group health plans have incorporated this guidance for plan administration purposes. In addition, some of the other FAQs may be of interest to employers. For example, the FAQs provide that, if a group health plan reverses the increased coverage of COVID-19 or telehealth after the COVID-19 public health emergency period is over, the Departments will consider the plan to have satisfied the requirement to provide advance notice of changes to the Summary of Benefits… Continue Reading

CARES Act: Calculating Qualified Health Plan Expenses for Purposes of the Employee Retention Credit

Under the CARES Act, employers are eligible to claim an employee retention credit if certain conditions are met (see our prior blog post on the employee retention credit, as well as other employee benefits and executive compensation changes made by the CARES Act, here). The tax credit is equal to 50% of ?Ç£qualified wages?Ç¥ paid to employees of up to $10,000. Qualified wages include (i) wages actually paid to covered employees (other than qualified paid sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act) and (ii) the ?Ç£qualified health plan expenses?Ç¥ allocable to such employees. On May 11, 2020, the IRS published new FAQs clarifying how qualified health plan expenses should be calculated for purposes of the employee retention credit. Notably, the FAQs provide guidance on how to calculate such expenses when an employer sponsors more than one health plan (e.g.,… Continue Reading

UPDATE: Calculation of Payroll Costs for Purposes of the Paycheck Protection Program (?Ç£PPP?Ç¥)

The Small Business Administration (?Ç£SBA?Ç¥) continues to update its FAQs on PPP loans to provide additional guidance regarding what costs constitute payroll costs. Borrowers should use care in determining what amounts constitute payroll costs since borrowers are responsible for providing an accurate calculation of payroll costs and must attest to the accuracy of those calculations on their Borrower Application Form. Under the new guidance the SBA clarified: The $100,000 annualized per employee cap only applies to cash compensation and does not include any non-cash benefits, such as employer contributions to defined benefit or defined contribution retirement plans, payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and payment of state and local taxes assessed on employees?ÇÖ compensation. PPP loans can be used to cover costs for employee paid vacation, parental, family, medical and sick leave (other than qualified sick and family wages for… Continue Reading

Employee Benefits as Payroll Costs under the Paycheck Protection Program

Businesses that received a loan under the Paycheck Protection Program (?Ç£PPP?Ç¥) are eligible for forgiveness of that loan if, among other things, the loan proceeds are used to cover ?Ç£payroll costs?Ç¥ incurred over the eight-week period after the loan is made. Payroll costs, capped at $100,000 on an annualized basis for each employee (i.e., $15,384 over the eight-week period), are broadly defined to include, among other things: Salary, wages, commissions, or tips; Employee benefits costs, such as for vacation or paid family or medical leave (other than wages for which a credit is received under the Families First Coronavirus Response Act), group health care costs, retirement plan contributions, and severance benefits; and State and local taxes assessed on employee compensation. As of the date of this posting, no guidance has been issued by the IRS or the Department of Treasury to further clarify what specific items qualify as payroll costs.… Continue Reading

CARES Act Relief Checklist: Considerations in Deciding What Relief is Right for Your Business

The Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥) offers relief to businesses affected by COVID-19 through various programs, including forgivable loans and federal income tax credits. However, the CARES Act prevents businesses from claiming certain benefits that are considered duplicative.?á The following checklist outlines key considerations for businesses when selecting among the Paycheck Protection Program (the ?Ç£PPP?Ç¥), the Employee Retention Tax Credit, the Employer Social Security Tax Deferral, and Work Opportunity Tax Credit. Certain industries, such as aviation, have specialized relief, which is beyond the scope of this checklist. In deciding what relief is appropriate, businesses should consider, as discussed in detail below, employer size, what may be best for the business?ÇÖs employees, and the business?ÇÖs long-term prospects. While this checklist is designed as a tool to assist businesses in choosing the proper relief, the best way to determine which option is optimal for a particular business… Continue Reading

IRS Issues Additional Guidance on Coronavirus-Related Employment Tax Relief

In a series of news releases, notices, and FAQs, the IRS has begun to issue guidance on the various employer payroll tax credits and payment deferrals enacted by the Families First Coronavirus Response Act (the ?Ç£FFCRA?Ç¥) and the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). Links to the guidance are below, and more detailed information on the employee benefits, compensation, and employment tax provisions of the FFCRA and CARES Act can be found on our blog here. FFCRA Tax Credits: News Release: Implementation of Paid Leave and Tax Credits under the FFCRA. FAQs: COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses. Notice 2020-21: Effective Date for Employment Tax Credits under the FFCRA. CARES Act Tax Relief: News Release: Employee Retention Credit. FAQs: Employee Retention Tax Credit under the CARES Act. Notice 2020-22: Relief from Penalty for Failure to Deposit Employment Taxes. Forms… Continue Reading

EMPLOYEE BENEFIT/EXECUTIVE COMPENSATION CHANGES MADE BY THE CARES ACT

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the ?Ç£CARES Act?Ç¥). This historic $2 trillion relief package received bipartisan support and is part of the third wave of federal government support as the nation copes with the acute economic fallout from the coronavirus (COVID-19) pandemic.  Some of the key provisions of the CARES Act that apply to health and welfare plans, educational assistance programs, retirement plans, executive compensation programs, and employment and payroll taxes are outlined below. Health and Welfare Plans Q1.      What COVID-19 testing and treatment is our company?ÇÖs employer-sponsored group health plan required to cover? The Families First Coronavirus Response Act (?Ç£FFCRA?Ç¥) requires an employer-sponsored group health plan (including a grandfathered plan under the Affordable Care Act (?Ç£ACA?Ç¥)) (a ?Ç£Plan?Ç¥) to provide coverage for COVID-19 diagnostic testing and services related to the diagnostic testing without any cost sharing (including deductibles, copayments, and… Continue Reading

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