IRS Issues Instructions on Reporting Emergency Paid Leave Wages

On July 8, 2020, the Internal Revenue Service (IRS) released guidance for employers on reporting qualifying wages paid to employees under the Emergency Paid Sick Leave Act (EPSLA) and Emergency Family and Medical Leave Expansion Act (EFMLEA). Both laws are part of the “phase one” coronavirus legislation, the Families First Coronavirus Response Act (FFCRA), passed on March 18, 2020.

IRS Updates Payroll Tax Deferral FAQs Following Enactment of the Paycheck Protection Program Flexibility Act of 2020

Following the enactment of the Paycheck Protection Program Flexibility Act of 2020, the Internal Revenue Service (IRS) updated its frequently asked questions (FAQs) to state that employers whose Paycheck Protection Program (PPP) loan has been fully or partially forgiven are now eligible to defer the deposit of the employer portion of Social Security tax.

IRS Continues to Provide Relief for Nonresident Aliens in the Wake of COVID-19

The Internal Revenue Service (IRS) recently posted a set of frequently asked questions (FAQs) on its website to provide additional information on Revenue Procedure 2020-20. The IRS published this revenue procedure on May 11, 2020, to provide relief for certain nonresident aliens stranded in the United States due to COVID-19-related travel restrictions. The new FAQs provide relief for certain nonresident aliens who may be forced to remain in the United States longer than anticipated because of a medical condition. As indicated in our prior article on Revenue Procedure 2020-20, an extended stay could adversely affect a nonresident alien’s classification for federal income tax purposes.

IRS Provides Relief for Nonresident Aliens Affected by COVID-19 Travel Disruptions

Because of travel restrictions, such as canceled flights and stay-at-home orders, the COVID-19 pandemic may have significantly limited a nonresident alien’s ability to leave the United States, regardless of whether the individual contracted the COVID-19 virus. An unexpected extended stay in the United States, however, could affect an individual’s tax residency classification or eligibility for certain tax treaty benefits. The Internal Revenue Service (IRS) recently released Revenue Procedure 2020-20 to address the potential tax consequences for eligible individuals impacted by the COVID-19 travel restrictions.

EEOC Greenlights Employer Requests of Information from Job Candidates for Federal Work Opportunity Tax Credit

On April 29, 2020, the Equal Employment Opportunity Commission (EEOC) issued an opinion letter reiterating its position that proper use of Internal Revenue Service Form 8850 for the Federal Work Opportunity Tax Credit (WOTC) does not violate federal equal employment opportunity laws.

IRS Updates FAQs to Expand Eligibility for Employee Retention Credits Under the CARES Act

On May 7, 2020, the Internal Revenue Service (IRS) and the Department of the Treasury revised their frequently asked questions (FAQs) guidance on the Employee Retention Credit to allow employers that do not pay wages, but continue to cover the health plan expenses for laid-off or furloughed employees, to qualify for retention credits.

IRS Issues Update to Form 941 for COVID-19 Related Employment Tax Credits and Other Tax Relief

On April 30, 2020, the Internal Revenue Service (IRS) released a draft of Form 941, Employer’s QUARTERLY Federal Tax Return, and accompanying instructions. The revised Form 941 includes various additional entries to report and reconcile payroll tax credits and deferral opportunities available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Families First Coronavirus Response Act (FFCRA).

Multi-State Payroll Withholding Issues and Potential Relief for Telecommuting Employees

The “shelter in place” or “stay-at-home” orders that numerous states have issued in response to the COVID-19 pandemic have prompted some employers to require that their employees work remotely from their homes. As states roll back these orders, some employers will continue to have employees telecommute as they prepare their return-to-work strategies. Working from home or telecommuting may create a business presence in a state that establishes nexus, obligating nonresident employers to withhold state and local payroll taxes.

The Advantages and Challenges of Supplemental Unemployment Benefit Plans

The economic and financial consequences of the ongoing COVID-19 crisis have forced some employers to furlough and lay off workers, resulting in record numbers of individuals claiming state unemployment benefits across the country. As a result, an increasing number of employers are considering implementing supplemental unemployment benefits plans (SUB-Pay Plans) in order to provide additional benefits to discharged employees. Unlike severance plans, SUB-Pay Plans can be structured to maximize employer savings while providing greater benefit to the employees. This is not always a quick fix, however, as there are numerous legal and administrative issues to consider when implementing a SUB-Pay Plan.

CARES Act: Foreign National and Immigrant Eligibility for Paid Leave, Unemployment Benefits, and Stimulus Rebates

On March 27, 2020, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, intended to stimulate the national economy in the wake of the COVID-19 pandemic. The Act provides $2 trillion in direct financial assistance, including paid leave, unemployment insurance (UI) benefits, and rebates to eligible individuals. Immigrants and foreign nationals in the United States may be eligible for some or all of the listed benefits, depending on the circumstances.

Payroll Relief Under the CARES Act Softens the Financial Impact of COVID-19 for Employers

On March 25, 2020, the U.S. Senate voted unanimously (96-0) to pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act as an attempt to stabilize the U.S. economy disruptions in the wake of the COVID-19 pandemic. The CARES Act aims to boost the economy with over $2 trillion in tax and non-tax emergency aid provided to individuals and businesses. The U.S. House of Representatives approved the bill on March 27, 2020, which is now pending presidential signature.

Massachusetts Paid Family Medical Leave Quarterly Returns Due by January 31, 2020

Recently, the Massachusetts Department of Revenue (DOR) released guidance on how to report wages paid under the state Paid Family and Medical Leave Law (PFML) for employers’ fourth quarter 2019 PFML return. This guidance was released to ensure covered employers can properly and timely file and remit contributions in advance of the quarterly deadline of January 31, 2020.

Determining the Taxability of Employer-Provided Executive Health Examination Programs

Employers historically have maintained executive health examination programs to provide a convenient and efficient means for executives to visit several doctors in one visit, including for vision and annual health checkups. Generally, these programs are covered under employers’ self-insured health policies. This article discusses the taxability of employer-provided executive health examination programs and the associated employment tax withholding and reporting requirements.

Substance, Not Form, Determines Whether Employee Meals Have Noncompensatory Business Reason, IRS Warns

In a technical advice memorandum (TAM 201903017) released on January 18, 2019, the Internal Revenue Service (IRS) provided guidance on whether employer-provided meals and snacks are includable in employee income and subject to employment tax. The memorandum, which cites a number of IRS rulings on this topic, serves as a forewarning to employers of the limitations of providing free meals to employees.

IRS Clarifies Business Meal and Entertainment Deductions Following TCJA

The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the deduction for entertainment purchased as a business expense but left intact the deduction for business meals. Because entertainment and meals are often closely intertwined when purchased in a business context, taxpayers may have difficulty distinguishing deductible meal expenses from nondeductible entertainment expenses.

IRS Offers Guidance on Applying Test for Deductibility of Parking Expenses

The Tax Cuts and Jobs Act of 2017 (TCJA) generally eliminated employer deductions for expenses incurred to provide employee parking benefits but left intact deductions for expenses associated with parking provided for customers and the general public. Because nondeductible employee parking expenses are often closely intertwined with deductible general public or customer parking expenses, employers may have difficulty distinguishing between the two under the TCJA.

Tax Treatment of Employer-Provided Fringe Benefits for International Assignees

The Internal Revenue Service (IRS) recently clarified its position on two fringe benefits provided to employees on global assignments: tax equalization services and tax return preparation services. Memorandum Number 201810007 from the IRS’s Office of Chief Counsel (OCC), released on March 9, 2018, concerned a large American company employing thousands of employees globally.

Keystone State Targets the Gig Economy: Pennsylvania’s New Nonemployee Withholding and Reporting Requirements

On October 30, 2017, Governor Tom Wolf of Pennsylvania signed into law Act 43 of 2017. This new law provides that beginning July 1, 2018, Pennsylvania businesses that pay at least $5,000 in Pennsylvania-source nonemployee compensation or business income to a nonresident individual (or disregarded entity that has a nonresident member) are required to withhold from such payments the current applicable income tax rate (currently 3.07 percent).

Fringe Benefits Affected by the Tax Cuts and Jobs Act

The enactment of the Tax Cuts and Jobs Act (TCJA) on December 22, 2017, brought about the most sweeping overhaul of the Internal Revenue Code (IRC) since 1986. Most of the changes took effect on January 1, 2018. This article covers the TCJA’s impact on employer-provided fringe benefits and offers insights, based on conversations with employers across the country, on how the changes may influence employers’ fringe benefit offerings in the years to come.