New Presidential Memorandum Issued: Relief with Respect to Employment Tax Deadlines Applicable to Employers Affected by the Ongoing Coronavirus (COVID-19) Disease 2019 Pandemic 

Summary: On August 8, 2020, the President of the United States issued a Presidential Memorandum directing the Secretary of the Treasury to use his authority pursuant to section 7509A of the Internal Revenue Code (Code) to defer the withholding, deposit and payment of certain payroll tax obligations. Click here to read the IRS Notice 2020-65 in full

Accordingly, the Secretary has determined that employers that are required to withhold and pay the employee share of social security tax under section 3102(a) or the railroad retirement tax equivalent under section 3202(a) are affected the COVID-19 emergency for purposes of the relief described in the Presidential Memorandum and this notice. For Affected Taxpayers, the due date for the withholding and payment of the tax imposed by section 3101(a), and so much of the tax imposed by section 3201 as is attributable to the rate in effect under section 3101(a), on Applicable Wages, is postponed until the period beginning on January 1, 2021, and ending on April 30, 2021. 

A few notes (provided by The Franklin Partnership): 

  • Eligible employees include those earning pre-tax wages or compensation paid for a bi-weekly pay period less than $4,000. The determination of Applicable Wages is made on a pay period-by-pay period basis and keep in mind that the deferral is not for all employees up to $4,000 per bi-weekly pay period but only for employees earning under $4,000 during a two-week pay period. Also, the way it is written appears to apply per bi-weekly pay period so if someone earns $4,500 in one two week span they cannot have the tax deferred but if they earn $3,500 the following bi-weekly pay period they are eligible for the deferral.
  • If an employee has their Social Security payroll tax of 6.2% withheld between Sept. 1 and December 31, 2020, then it must be paid by April 30 starting as soon as January 1, 2021, with no interest or penalties accruing prior to May 1. After April 30, 2021, penalties, interest and “additions to tax” will begin to accrue, however, the Notice states, the “Affected Taxpayer may make arrangements to otherwise collect the total Applicable Taxes from the employee.” To that point of “make arrangements” with the employee, the Notice does not appear to address what happens if an employee cannot repay or leaves the employer prior to the employer collecting the deferred tax. Again, placing a significant burden on the employer to work with individual employees on paying the withheld amount in addition to the normal employee payroll tax payments due for regular January 1 – April 30 pay period.

For more information on the tax implications for specific situations/companies, business owners should consult directly with their own tax advisor prior to taking action. Please note that participation in this program begins September 1, 2020, so if choosing to participate, The Franklin Partnership recommends contacting your CPA and payroll provider quickly.

COVID-19 Accounting and Disclosure Implications

The economic impact of the COVID-19 pandemic will likely continue for some time causing uncertainty and volatility in financial marks, disruptions to supplies and distribution chains as well as directly affecting cash flows for many businesses. The pervasive impact of this pandemic also creates accounting and disclosure implications in financial statements for the year ended December 31, 2019 and beyond as we continue to battle the spread of the virus and its aftermath.

To learn more, visit Mueller Prost's resource page here.

Tax Payment Deadlines Extended Until July 15, 2020

The IRS has issued Notice 2020-17 in response to Treasury Secretary Steven Mnuchin's announcement that affected taxpayers owing an aggregate amount up to one million dollars in taxes would be able to defer tax payments, free of interest and penalty, until July 15th. In the case of an individual taxpayer, the same deferral amount applies regardless of filing status. The amount that can be deferred is increased up to $10 million for corporate taxpayers. 

Update 3/22/20: 

The IRS has issued Notice 2020-18 clarifying the announcement from Treasury Secretary Steven Mnuchin earlier Friday that the deadline for filing tax returns would be extended until July 15, 2020. This notice supersedes Notice 2020-17 issued March 19, 2020, which capped the amount of tax due that could be postponed until July 15, 2020.

Update 4/10/20:

On April 9, 2020, the IRS issued Notice 2020-23 expanding Federal tax filing and payment relief in response to the COVID-19 pandemic. Read more here.

Update 2/12/21:

The Employee Retention Tax Credit has been expanded and extended. Find out if your business qualifies for the ERTC here.

Additional Forms/Tax Credits