Employee retention credit available for businesses affected by COVID-19

The employee retention credit is designed to encourage businesses to keep employees on their payroll. The amount of the credit is 50% of qualified wages paid up to an annual limit of $10,000, which equals a maximum credit amount of $5,000 for each employee for the year.

Eligible employers are employers who operate a trade or business and has 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

How is the credit figured?

• The amount of the credit is half of qualifying wage0s paid up to $10,000 for all calendar quarters. The maximum credit for any employee is $5,000 for the year.
• Wages paid between March 12, 2020, and January 1, 2021 are eligible.
• Wages are not limited to cash payments. They also include a portion of employer-provided health care costs.

Which wages qualify?

Qualified wages are based on the business’s average number of full-time employees in 2019.

• Small employers, those that had 100 or fewer employees, may receive the credit for wages paid to employees whether or not they are providing services to the employer.
• Large employers, those that had more than 100 employees, may only receive the credit for wages paid to employees for time the employees are not providing services to the employer.

If an employer is eligible due to a full or partial suspension of operations, only wages paid while operations are suspended count as qualified wages.

How do eligible employers get the credit?
Employers must report their qualified wages on their federal employment tax returns, usually Form 941, Employer’s Quarterly Federal Tax Return.

They can reduce their required deposits of payroll taxes withheld from employees’ wages by the amount of the credit. They can also request an advance of the employee retention credit by submitting Form 7200. Eligible employers may use the employee retention credit with other relief such as, payroll tax deferral which may affect deposits and advances.

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New credits fund employers for Coronavirus-related paid leave

The Families First Coronavirus Response Act provides tax credits to reimburse employers for the costs of providing paid sick leave and paid family and medical leave to employees unable to work because of the coronavirus (COVID-19). These credits are refundable. That means if the amount of the credit exceeds the amount of tax owed, the remainder is refunded to the business or organization.

The law is intended to allow employers to keep employees on their payrolls, while at the same time making sure employees aren’t forced to choose between their paychecks and public health measures needed to combat COVID-19.

These credits are available to eligible employers beginning April 1, 2020, for qualifying leave they provide between April 1, 2020, and Dec. 31, 2020.

Covered employers
Eligible employers are businesses and tax-exempt organizations with fewer than 500 full-time and part-time employees within the United States or any U.S. territory or possession and that have to meet employer paid leave requirements. The Questions and Answers and regulations issued by the U.S. Department of Labor have more information about the 500-employee threshold and the paid leave requirements.

The law allows equivalent credits for self-employed individuals in similar circumstances. For details, see specific provisions related to self-employed individuals in the COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs

Paid sick leave requirement and credit
Employees of eligible employers who are unable to work or telework because they’re quarantined or experiencing COVID-19 symptoms and seeking a medical diagnosis can receive up to 80 hours of paid sick leave. This pay is at their regular rate of pay or, if higher, the applicable minimum wage, up to $511 per day and $5,110 in total.

Employees can receive up to 80 hours of paid sick leave at 2/3 of their regular pay or, if higher, the applicable minimum wage, up to $200 per day and $2,000 in total. Employees can receive this benefit if they need to care for:

• an individual subject to quarantine,
• a child whose school or place of care is closed, or
• a child whose child-care provider is unavailable,

due to COVID-19 or because they’re experiencing similar conditions as specified by the U.S. Department of Health and Human Services.

An employee is eligible for paid sick leave, regardless of length of employment.

The eligible employer is entitled to a fully refundable tax credit equal to the required paid sick leave wages. Eligible employers can also get an additional credit for the employer’s share of Medicare tax imposed on the qualfied sick leave wages and the cost of maintaining health insurance coverage for the employee during the sick leave period. The employer is not subject to the employer portion of Social Security tax on those wages.

Paid family and medical leave requirement and credit
In addition to the paid sick leave credit, an employee who is unable to work or telework because of a need to care for a child whose school or place of care is closed or whose child-care provider is unavailable due to COVID-19, is entitled to paid family and medical leave equal to 2/3 of the employee’s regular pay, up to $200 per day and $10,000 in total. Up to 10 weeks of qualifying leave can be counted toward the paid family leave credit.

An employee qualifies for paid family and medical leave if they’ve been on an employer’s payroll for 30 calendar days or more.

The eligible employer is entitled to a fully refundable tax credit equal to the required paid family leave wages. Eligible employers can also get an additional credit for the employer’s share of Medicare tax imposed on those wages and its cost of maintaining health insurance coverage for the employee during the family leave period. The eligible employer isn’t subject to the employer portion of Social Security tax on those wages.

Example. An employee’s child-care provider is unavailable indefinitely due to the COVID-19 outbreak, leaving the employee unable to work or telework because of the need to care for their child. For up to the first 80 hours of any period of leave to care for their child, the employee is entitled to qualified sick leave wages, up to $200 per day and $2,000 in total. After that, the employee is entitled to qualified family leave wages for up to 10 weeks of additional leave needed, up to $200 per day and $10,000 in total.

How to claim the credits
Eligible employers report their total qualified leave wages and the related credits for each quarter on their federal employment tax return, usually Form 941, Employer’s QUARTERLY Federal Tax Return. They can receive the benefit of the credits by reducing their federal employment tax deposits for that quarter by the amount of the qualified leave wages, allocable qualified health plan expenses, and the employer’s share of Medicare tax on the wages. They’ll account for the reduction in deposits due to the leave credits on the Form 941 they file at the end of the quarter. The IRS recently posted Frequently Asked Questions about the ability both to reduce deposits for the credits and to defer the deposit of all of the employer’s portion of Social Security tax due before January 1, 2021 under a separate provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

If employers don’t have enough federal employment taxes to cover the amount of the credits, after they have deferred deposits of employer Social Security taxes under the CARES Act as discussed in the Frequently Asked Questions, they may request an advance payment of the credits from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19. They may fax their completed forms to 855-248-0552.

Examples: An eligible employer is entitled to a credit of $5,000 for paying qualified sick leave wages and qualified family leave wages (and allocable health plan expenses) and is otherwise required to deposit $8,000 in federal employment taxes withheld from all of its employees for wage payments made during the same quarter as the $5,000 in qualified leave wages. The employer may keep up to $5,000 of the $8,000 of taxes it was going to deposit, and it will not owe a penalty for keeping the $5,000. The eligible employer will claim the credit and reflect the reduced liability for the $5,000 when it files Form 941.

An eligible employer is entitled to a credit of $10,000 for paying qualified leave wages (and allocable qualified health plan expenses) and is otherwise required to deposit $8,000 in federal employment taxes withheld from all of its employees on wage payments made during the same quarter. The employer can keep the entire $8,000 of taxes that it was otherwise required to deposit without penalties as a portion of the credits it is otherwise entitled to claim on Form 941. The employer may file a request for an advance credit for the remaining $2,000 by completing Form 7200.

Keep records to substantiate claims
Eligible employers claiming the credits must keep records and documentation supporting each employee’s leave. The COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs has more information about the documents needed to support the employee’s leave and the employer’s credit.

An employer should keep all employment tax records for at least four years.

The Questions and Answers issued by the U.S. Department of Labor have more information about the leave requirements.

More information:
Coronavirus Tax Relief
IR-2020-57, Treasury, IRS and Labor announce plan to implement coronavirus-related paid leave for workers and tax credits for small and midsize businesses to swiftly recover the cost of providing coronavirus-related leave.

 

IRS People First Initiative provides relief to taxpayers

Due to COVID-19, the IRS is providing relief on a variety of issues as part of the People First Initiative. The IRS is modifying certain activities through the filing and payment deadline, Wednesday, July 15, 2020. Here’s what people need to know about relief related to IRS exams or audits

Field, office and correspondence audits – Generally, the IRS won’t start new field, office and correspondence audits. The agency will continue to work refund claims, where possible, without in-person contact.
However, the IRS may start new audits if needed to preserve the statute of limitations.

• In-person meetings – In-person meetings for current field and office audits are on hold. However, examiners will continue their work remotely, where possible. Taxpayers should respond to any requests for information during this period, if possible.

• Unique situations – Corporations and businesses may want to begin a previously scheduled audit while people and records are available. When it’s in the best interest of both parties and appropriate people are available, the IRS may move forward with an audit. COVID-19 developments could slow activities.

• General requests for information – Taxpayers should reply to all IRS correspondence, if requested.

Earned income tax credit and wage verification reviews – Taxpayers have until July 15, 2020, to respond to the IRS and verify that they qualify for the earned income tax credit or to verify their income. These taxpayers should submit all requested information. If they can’t contact the agency and explain why the information is not available, the IRS won’t deny these credits for a failure to provide information until July 15, 2020.

Independent Office of Appeals – Appeals employees will continue to work their cases. They aren’t currently holding in-person meetings, but conferences may be held by phone or video. Taxpayers should respond to any requests for information form the Independent Office of Appeals.

Statute of limitations – The IRS will continue to protect all statutes of limitations. If statute expirations might be jeopardized during this period, taxpayers are encouraged to cooperate in extending these statutes. Otherwise, the IRS will issue Statutory Notices of Deficiency and pursue similar actions to protect the interests of the government.

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First Step: Starting a Small Business- Webinar

Date: 5/15/20
Time: 9:00 AM – 12:00 PM (EDT)
Status: Open
Registration Deadline: 5/14/20 4:00 PM (EDT)
Fee: No Fee

Point of Contact: Shippensburg Univ. SBDC (717) 477-1935
Location: This course will be provided as a webinar.
Shippensburg PA 17257

Training Topics: Business Start-up/Preplanning
Description:
This workshop is intended to provide aspiring small business owners with an overview of many of the issues involved in planning and launching a new business venture. Topics include personal and lifestyle issues of the entrepreneur/business owner, the legal, financial and tax considerations of starting a small business, and the “how-to’s” of business registration, government regulations and compliance issues. Attendees will also be introduced to the steps of developing a sound business plan. Upon completion of the workshop, attendees will be invited to schedule a free, one-on-one consulting session with an SBDC Business Consultant.
Instructions: “The First Step: Starting a Small Business,” will be held as a webinar. The workshop is free to attend. Please give us a call at 717-477-1935, if you have any questions.

IRS People First Initiative provides relief to taxpayers facing COVID-19 issues

Due to COVID-19, the IRS’ People First Initiative provides relief to taxpayers on a variety of issues from easing payment guidelines to delaying compliance actions. This relief is effective through the filing and payment deadline, Wednesday, July 15, 2020.

• Existing Installment Agreements – Under an existing Installment Agreement, payments due between April 1 and July 15, 2020 are delayed. Those currently unable to meet the terms of an Installment Payment Agreement or Direct Deposit Installment Agreement may cancel payments during this period with no default. By law, interest will continue to accumulate on any unpaid balances.

• New Installment Agreements – People who can’t pay all their federal taxes can establish a monthly payment agreement.

• Pending Offer in Compromise applications – Taxpayers have until July 15, 2020, to provide additional information for a pending OIC. The agency generally won’t close any pending OIC request before July 15 without the taxpayer’s consent.

• OIC payments – Taxpayers can delay all payments on accepted OICs until July 15, 2020. Interest may accrue, and missed payments are due when the suspension period ends. Taxpayers can call the number on their acceptance letter to address their needs.

• Delinquent return filings – The IRS will not default an OIC for taxpayers who are delinquent in filing their tax return for 2018. However, they should file any delinquent 2018 return and their 2019 return by July 15, 2020.

• Non-filers – More than 1 million households who haven’t filed tax returns in the last three years are owed refunds. The deadline to get refunds on 2016 tax returns is July 15, 2020. Those who owe taxes on delinquent returns may visit IRS.gov for payment options. The longer the debt is owed, the more penalties and interest accrue.

• Field collection activities – IRS stopped field revenue officer enforcement actions, such as liens and levies. Revenue officers will continue to pursue high-income non-filers and perform other similar activities where necessary.

• Automated liens and levies – IRS delayed issuing new automated and systemic liens and levies. Taxpayers experiencing a hardship due to a levy should reach out to their assigned IRS contact or fax their information to (855) 796-4524.

• Certifications to the State Department – IRS has delayed new certifications of taxpayers who are considered seriously delinquent. This affects a person’s ability to receive a new or renewed passport. Existing certifications will remain in place unless their tax situation changes.

• Private debt collection – IRS will not forward new delinquent accounts to private collection agencies during this period.

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Local IRS Offices

York
2670 Industrial Hwy, York, PA 17402
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:30pm)
(717) 757-4977

Harrisburg
228 Walnut St, Harrisburg, PA 17101
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm) (717) 777-9650

Lancaster
1720 Hempstead Rd, Lancaster, PA 17601
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:00pm)
(717) 291-1994










NATP

National Association of Tax Professionals