With the recent changes to the work environment, there are numerous questions for employers regarding payroll obligations and leave available to employees. Additionally, what resources and relief are available to employers?
The following identifies three key resources available to help employers navigate through these challenging times.
1) Payroll Protection Loan
Employers may be eligible for new loans authorized by the Small Business Administration to address payroll costs.
Why should employers consider these loans? Up to 8 weeks of average payroll and other costs are eligible for forgiveness if the business retains (or rehires) its employees and maintains their pay levels.
See the Allen & Gooch article that provides the details of this new program:
2) Payroll Tax Delay
Employers may defer deposits of the employer share of social security taxes (notably this does not apply to Medicare taxes or employee share of social security taxes). Normal deposits are not required from the date of enactment until December 31, 2020. The taxes will have to be repaid. Half of such taxes would be required to be deposited by December 31, 2021. The remaining deferred social security taxes would be required to be deposited by December 31, 2022. Additional guidance will be forthcoming from the IRS on how to properly report the deferred taxes. It is anticipated that a revised Form 941 is forthcoming.
3) Tax Credits for Paid Leave by the FFCRA
Tax credits for qualified sick leave wages and qualified family leave wages required to be paid by the Families First Coronavirus Response Act (FFCRA) will apply to wages paid for the period beginning on April 1, 2020, and ending on December 31, 2020. Employers receive 100% reimbursement for paid leave pursuant to the FFCRA.
The IRS has provided the following two examples:
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
The IRS has explained that if an employer pays out more in COVID-19-required leave than its payroll tax liability, the employer can immediately file for a refund on forms that the IRS expects to issue.
Resources are quickly becoming available for employers. We are here to help you navigate through these new resources.
Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.