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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

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

IRS Issues Guidance on Employer COVID-19 Leave-Based Charitable Donation Payments

In Notice 2020-46, the IRS provided guidance allowing employers to make cash payments to certain charitable organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo without otherwise including such amounts in the employees?ÇÖ gross income. In order to qualify for this relief, the payments must be made to a qualifying charitable organization no later than December 31, 2020?áfor the relief of victims of the COVID-19 pandemic as set forth in President Trump?ÇÖs March 13, 2020 declaration of a nationwide emergency (a copy of which is available here). The employees will not be treated as constructively receiving any of the amounts they elect to forgo under the program, and the employees cannot claim a charitable contribution deduction with respect to the value of the forgone paid leave. Employers should (i) make sure that any election made by their employees is in writing and the recipient… 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

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

IRS Issues Paid Family and Medical Leave Tax Credit FAQs

Under the American Tax Cut and Jobs Act (the ?Ç£Act?Ç¥), employers may claim a tax credit for providing paid family and medical leave to certain qualifying employees during 2018 and 2019. This paid leave program must permit qualifying employees to take leave for the reasons permitted under the federal Family and Medical Leave Act (?Ç£FMLA?Ç¥), but employers do not have to be subject to FMLA in order to qualify for the tax credit. We previously provided details about this tax credit as part of our discussion of employee compensation and benefits changes under the Act. The IRS recently issued a series of frequently asked questions (?Ç£FAQs?Ç¥) regarding this tax credit, including FAQs addressing requirements for an employer?ÇÖs program to qualify for the tax credit, qualifying employee eligibility, and how the tax credit is calculated. The FAQs also indicate that an employer cannot claim this tax credit for providing paid leave… Continue Reading

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