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Last Week in Payroll: Keeping Up with Taxes

Christopher Wood, CPP  

· 8 minute read

Christopher Wood, CPP  

· 8 minute read

A blog of some of the prior week’s more important payroll stories. This week’s focus is on: keeping up with taxes, IRS forms and publications, state and local news, and more.

Keeping Up with Taxes

On March 22, 1765, the British government passed the Stamp Act. The legislation levied a direct tax on the American Colonies in an effort to pay off debts and defend new American territories won from the French in the Seven Years’ War. The colonists were none too happy about this new tax since there were three other taxes recently put into play: Sugar Act (1764), Currency Act (1764) and Quartering Act (1765). Shortly thereafter, colonists raised the issue of taxation without representation in protest and within a year’s time the British government repealed the Stamp Act tax.

So, why the brief history lesson on American Colony taxes? To illustrate the point that there are a lot of taxes to keep up with, even back in Colonial times.  For payroll, in particular, there are a number of taxes. There’s federal income tax, Social Security and Medicare taxes, Federal Unemployment Taxes (FUTA), state withholding tax, state unemployment tax, and certain local taxes, for starters. Then, there’s how to pay and file these taxes.  What are the due dates?  Is electronic filing required? Can the employer file a waiver for these requirements?  What is the penalty if the filings or payments might be late? Can the employer submit an extension to pay or file these taxes?  Is there interest on the late taxes?

The questions can keep adding up and the confusion can keep growing.  The latest COVID-19 relief bill has 628 pages.  A number of those pages will directly affect payroll.  The U.S. House of Representatives first published the U.S. Tax Code (Title 26) in 1926. Some have reported that the code is currently around 70,000 pages long. Others say it is much shorter but still thousands of pages long.

Keeping up with the many changes that typically occur when the country is not in the midst of a pandemic can be a feat within itself.  Now there are many more changes that have been extended as the national health emergency continues.

What can help with this daunting task of keeping up with taxes? Hiring a team of speed readers with perfect recall? If you know of such a team, please hire them and also let me know if they are available for more work. A more realistic aid would be searchable online tax libraries that contain news and content related to the specific tax topics a business needs to follow. It is a resource that offers a sense of security even if the company has its own full payroll department or outsources payroll duties to a third-party provider.  Ultimately, a business is the responsible party so having all the relevant information in one place for reference to be sure is definitely a good idea.

Now, let’s take a look at this past week in payroll and go over a few of the more interesting stories buzzing about in the industry.

Federal News

IRS posts subsequent draft forms for periodic and nonperiodic payments. The IRS has posted another draft version of the 2022 versions of Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, and Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions.  The IRS is planning to split the current Form W-4P, which is used for both periodic and nonperiodic payments, in two forms, beginning in 2022.  The third early release draft of Form W-4P notes that its purpose is to provide instructions for an optional computational bridge between the 2021 or earlier Forms W-4P and 2022 and later Forms W-4P. The draft also explains that these computational steps should not change and the current draft forms may be relied upon for purposes of starting systems programming.

IRS updates more FAQs on COVID-19 paid sick/family leave. The IRS has updated a number of its Coronavirus Tax Relief frequently asked questions (FAQs) regarding paid sick and family leave tax credits. These updates are based on the Consolidated Appropriations Act (CAA), which was signed into law on December 27, 2020.  The IRS notes that it has not yet updated these FAQs for the American Rescue Plan Act (ARPA), which was signed into law on March 11, 2021. In response to the FFCRA paid sick and family leave tax provisions, the IRS has maintained an ongoing list of FAQs on its website offering guidance regarding these laws. On March 15, 2021, the IRS updated a number of other questions based on the CAA, 2021.

EEO-1 reporting update. The Equal Employment Opportunity Commission (EEOC) has announced that the EEO-1 Component 1 data collection for the 2019 and 2020 calendar years will open at the end of April 2021 and will close in July 2021. On March 12, 2021, the EEOC announced that EEO-1 Component 1 data collection will open at the end of April 2021 and close in July 2021. The EEOC said that the exact closing date will be posted when the data collection launches and added that employers will be notified of further details and how to access the online filing system in April 2021.

Bill extending PPP application deadline passes House. Legislation introduced in the House of Representatives on March 11, 2021 that would extend the application deadline for Paycheck Protection Program (PPP) loans from March 31, 2021 to June 1, 2021 passed with a 415 to 3 vote and is now set for a vote in the Senate “as quickly as possible,” according to Senate Majority Leader Chuck Schumer.

State and Local News

Noncharging of unemployment benefits related to COVID-19. Recent Arkansas legislation says that benefits will not be charged against the unemployment tax account of an employer starting with the week ending April 4, 2020 if the benefits paid are a direct result of the Arkansas Governor declaring a disaster emergency or a disaster resulting in a state or federal disaster declaration. This action may help an employer’s unemployment tax rate to not increase (or not further increase) if layoffs are related to COVID-19.

More localities enact hazard pay ordinances for certain workers. In California, the cities of Pomona, San Francisco, San Mateo and Santa Ana have all have hazard pay ordinances that call for additional wages per hour for certain workers (mainly grocery and/or drug store employees) employed by larger employers in the grocery or drug store business during the COVID-19 pandemic. The California Grocers Association has challenged some of these ordinances in court.

Using sales tax to fund unemployment trust fund. In Florida, there is a bill being considered that would require online sales tax collection and its revenue to be used for the state’s unemployment trust fund. The aim of this legislation would be to help avoid increases in unemployment tax rates for employers.

Winter storm disaster tax relief. In Louisiana, the IRS announced winter storm disaster tax relief for the storms that occurred from February 11, 2021 through February 19, 2021.  The extended due date is now June 15, 2021.  This applies to the quarterly payroll tax returns (Form 941) normally due on April 30, 2021.  This extension does not apply to employment tax deposits, however, penalties on deposits due on or after February 11, 2021 and before February 23, 2021 will be abated as long as the deposits were made by February 26, 2021.

Unclaimed property reports due in July. In Michigan, holders of unclaimed property that reach its dormancy period as of March 31, 2021 must be reported and remitted to the state Department of Treasury before July 1, 2021. The Holder Report should be filed through the state’s Unclaimed Property website. Unclaimed property includes unpaid wages, payroll or salary.

Paid leave ordinance ruled unconstitutional. The Texas Court of Appeals for the Fourth District has ruled that the San Antonio paid sick leave ordinance is preempted by the Texas Minimum Wage Act (TMWA) and therefore violates the Texas Constitution. The San Antonio City Council approved an ordinance that required employers to provide up to 56 hours of paid sick leave to their employees. In December 2019, the city announced the ordinance would not go into effect on its scheduled effective date of December 1, 2019, pending the outcome of the lawsuit [Washington, et al. v. Associated Builders & Contractors of South Texas, Inc., et al., Tex Ct. of App, 4th District, Dkt. No. No. 04-20-00004-CV, 3/10/2021].

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