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Issue Number:  2020-08

Inside This Issue

1. Who qualifies for which new employer tax credit and deferral of employment tax deposits and payments?
2. Flowchart helps employers understand new tax credits
3. IRS provides guidance on income tax withholding on certain periodic retirement and annuity payments
4. Reminder: Business payment P.O. Boxes in Cincinnati and Hartford close July 1
5. Technical guidance
6. New and draft forms, instructions and publications on IRS.gov

Some employers may be confused about the qualifications for different tax credits and the deferral of employment tax deposits and payments provided in the CARES Act. IRS COVID Tax Tip 2020-67, Who qualifies for which new employer tax credit? provides a brief explanation about these topics with links to more information.

Credits for paid sick and family leave
Businesses and tax-exempt organizations that have less than 500 employees and provide one or both types of leave can claim the refundable credits. Self-employed people can also claim similar credits. Some public employers must provide paid sick and family leave but aren’t eligible for the credits.
 
Employee Retention Credit
The Employee Retention Credit is available to employers of any size, including tax-exempt organizations. It also may be available to tribes, if they operate a trade or business. Self-employed people can’t receive the credit for their own earnings but may be able to claim the credit for wages paid to their employees. Federal agencies, state and local governments and businesses that receive Paycheck Protection Program loans don’t qualify.

Eligible employers are defined as those who operate a trade or business and experienced one of these:

• Fully or partially suspended operations because of a government order due to COVID-19
• A significant decline in gross receipts in a calendar quarter when compared to 2019

Deferral of employment tax deposits and payments
Employers may defer the deposit and payment of their share of Social Security tax and certain Railroad Retirement taxes. However, employers who receive a Paycheck Protection Program loan can’t defer their share of Social Security tax due after the lender forgives their loan.

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The IRS recently issued Publication 5419, New Employer Tax Credits to help employers understand the tax credits available to them due to the coronavirus pandemic.

The handy, two-page document breaks down the details of the Employer Retention Credit and the credits for paid sick and family leave in easy-to-follow charts. Using the document, employers can quickly determine whether they’re eligible for the credits, the amount of the credits and which wages apply to the credits.

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The U.S. Department of the Treasury and the Internal Revenue Service issued a news release about a proposed regulation updating the federal income tax withholding rules for periodic retirement and annuity payments made after December 31, 2020.

Prior to the Tax Cuts and Jobs Act (TCJA), if no withholding certificate was in effect for a taxpayer's periodic payments, the amount to be withheld from the payments was determined by treating the taxpayer as a married individual claiming three withholding exemptions.

Under the proposed regulation for 2021 and future calendar years, the Treasury Department and the IRS will provide the rules and procedures for determining the default rate of withholding on periodic payments when a taxpayer has no withholding certificate in effect in applicable forms, instructions, publications and other guidance.

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July 1 marks the closing of several business payment P.O. Boxes (also known as Lockbox addresses), in the Cincinnati and Hartford areas. Payments will be returned to sender. There will be no forwarding service. Where to File on IRS.gov has current payment addresses. Publication 3891, Lockbox Addresses for 2020, has more information.

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• Notice 2020-35, Additional Administrative Relief with Respect to Deadlines Applicable to Employment Taxes, Employee Benefits and Exempt Organizations Affected by the Ongoing Coronavirus Disease 2019 Pandemic

This notice postpones deadlines for certain specified time-sensitive actions with respect to certain employment taxes, employee benefit plans, exempt organizations and Coverdell education savings accounts in response to the ongoing COVID-19 pandemic. The notice also provides a temporary waiver of the requirement for a Certified Professional Employer Organization to file certain employment tax returns and their accompanying schedules electronically.

• Notice 2020-46, Treatment of Amounts Paid to Section 170(c) Organizations under Employer Leave-Based Donation Programs to Aid Victims of the Coronavirus Disease (COVID-19) Pandemic

This notice provides guidance under the Internal Revenue Code on the federal income and employment tax treatment of cash payments made by employers under leave-based donation programs to aid victims of the ongoing COVID-19 pandemic. The notice provides that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave which their employees forgo will not be treated as wages (or compensation, as applicable).

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New forms

• Form 4419, Application for Filing Information Returns Electronically (FIRE)
• Form 2159, Payroll Deduction Agreement
• Form 2159 (SP), Payroll Deduction Agreement (Spanish version)

New instructions

• Inst 7200 (SP), Instructions for Form 7200, Advance Payment of Employer Credits Due to COVID-19 (Spanish Version)

New publications

• Pub 2108, Federal Agency TIN Matching Program
• Pub 2108-A, On-Line Taxpayer Identification Number (TIN) Matching Program
• Pub 5279, Your Pathway to Becoming an Enrolled Agent Starts Here
• Pub 5419, New Employer Tax Credits: The Employee Retention Credit

Draft forms

• Form 941 (PR), Employer's Quarterly Federal Tax Return (Puerto Rico Version)
• Form 941 (Schedule R), Allocation Schedule for Aggregate Form 941 Filers
• Form 941-SS, Employer's Quarterly Federal Tax Return - American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands

Draft instructions

• Inst 941, Instructions for Form 941, Employer's Quarterly Federal Tax Return
• Inst 941 (Schedule B), Instructions for Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors
• Inst 941 (Schedule R), Instructions for Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers

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