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Last Week in Payroll: Repaying Deferred Social Security Taxes

Christopher Wood, CPP  

Christopher Wood, CPP  

A blog of some of the prior week’s more important federal, state and local payroll stories. This week’s focus is on the repayment of the deferral of the employer and employee’s share of Social Security taxes.

Repaying Deferred Social Security Taxes 

In an attempt to provide relief to struggling employers during the coronavirus (COVID-19) pandemic, the Coronavirus Aid, Relief and Economic Security (CARES) Act included a provision that allowed employers to defer the payment of the employer’s share of Social Security tax from March 27, 2020 through December 31, 2020. In addition, a Presidential Memorandum signed on August 8, 2020, allowed employers to defer the employee’s share of Social Security tax from September 1, 2020 through the end of tax year 2020. 

The deferral of the employer’s portion of Social Security taxes from 2020 must be deposited as follows: (1) 50% of the deferred amount by December 31, 2021 and (2) the remaining amount by December 31, 2022.  The deferral of the employee’s portion of Social Security taxes from 2020 must be deposited by December 31, 2021. This deadline was extended by the Consolidated Appropriations Act (CAA) of 2021. It should also be mentioned that the December 31, 2021 due date falls on a weekend and January 1, 2022 falls on that Monday.  As such, the IRS is allowing the due date to be January 3, 2022.  

If employers do not pay these deferred Social Security taxes by these deadlines, penalties and interest will apply to any unpaid balance.  Employers can make deferral payments through the Electronic Federal Tax Payment System (EFTPS) or by credit or debit card, money order or with a check. Employers that deferred the employer and/or employee portion of Social Security tax should make careful note of the deferred tax deadlines and have a plan in place to pay these taxes.  

Federal News 

Biden Administration asks Supreme Court not to hear non-resident state taxation case. 

The Acting U.S. Solicitor General, Elizabeth Prelogar, has filed an amicus curiae brief on behalf of the United States in the case of State of New Hampshire v. Commonwealth of Massachusetts. The case challenges a temporary Massachusetts rule requiring specified nonresident employees of Massachusetts employers to treat income earned for services performed in another state because of the coronavirus (COVID-19) pandemic as if the income had been earned in Massachusetts.  

IRS issued American Rescue Plan Act sick and family leave credit FAQs. 

The IRS has released a series of frequently asked questions (FAQs) about the sick and family leave credits in the American Rescue Plan Act that include examples of how to calculate the amount of the credits. Federal legislation in 2020 required certain employers provide paid leave to employees affected by the coronavirus (COVID-19) pandemic. The legislation also allowed employers to claim credits for the paid sick and family medical leave. Other federal legislation expanded and amended the leave and credits. ARPA further expanded and amended through the end of the third quarter of 2021. The paid leave is no longer required but employers that provide qualified leave can claim the credits.  

Labor Department’s spring regulatory agenda. 

The Office of Information and Regulatory Affairs, Office of Management and Budget (OMB) has released the 2021 Spring Regulatory Agenda that includes several Department of Labor (DOL) proposed regulatory changes that relate to payroll, such as: (1) tip regulations, (2) joint employer status, (3) Davis-Bacon and related Acts, (4) minimum wage for federal contractors, and (5) worker visas. 

IRS disagrees with court regarding PEOs and wages. 

The IRS has announced its non-acquiescence to the holding by the U.S. Court of Appeals for the 11th Circuit in TriNet Group, Inc. v. U.S. that a professional employer organization, rather than its clients, had “control over the payment of wages” and thus was entitled to the IRC Sec. 45B credit for employer FICA tax paid with respect to employee cash tips. The IRS non-acquiescence does not mean it will not automatically refuse to follow the ruling of the court on this particular case, but it does mean that the IRS will not apply the ruling to other cases. 

IRS disaster-related postponement regulations. 

The IRS has finalized regulations that clarify when the disaster-related mandatory deadline postponements in IRC Sec. 7508A(d) apply and that provide a definition of a federally declared disaster. The final regulations amend IRC Sec. 7508A to clarify the term “federally declared disaster” [TD 9950].  

State and Local News 

College-athlete endorsement pay

Connecticut legislation would allow student athletes to earn compensation through an endorsement contract or employment in an activity unrelated to any intercollegiate athletic program. Also, the bill would allow student athletes to obtain the legal or professional representation of an attorney or sports agent through a written agreement, provided he or she complies with their higher education institution’s policy on student athlete endorsement contracts and employment activities. The bill would take effect on September 1, 2021, if signed into law.  

Agricultural worker wage protection. 

Colorado legislation will remove the exemption from agricultural workers from the state and local minimum wage and overtime pay requirements and would require that wages be adjusted annually for cost of living. It will take effect on January 1, 2022 and will require such workers to be paid at least $515 per week. Beginning January 1, 2021, the bill would require annual adjustments for this minimum wage rate.  

Juneteenth premium pay begins on June 19, 2021. 

In July 2020, Massachusetts Governor Baker signed legislation designating June 19th (Juneteenth) as a state holiday in Massachusetts. As a result, premium pay requirements for retail businesses subject to the Blue Law exemption are in place, beginning with the holiday that took place on Saturday, June 19, 2021. This premium pay requirement will be phased out in accordance with the other designated holidays by 2023. 

Regulation addresses withholding for work performed at a temporary location.

The Missouri Department of Revenue (DOR) has adopted a regulation, effective July 15, 2021, that addresses withholding for employees at a temporary work location. It provides that each employer may withhold taxes earned by an employee in a temporary work location as if they were working from their primary location if the employer did not maintain a time and attendance system for all employees, and only if the employer is: (1) an employer having a primary work location in Missouri with employees working from temporary work locations in states other than Missouri; or (2) an employer having a primary work location in a state other than Missouri with employees working from temporary work locations in Missouri. Employers who elect to withhold based solely on the employee’s primary work location must submit an affidavit to the DOR with specific information. 

Paid sick leave to receive COVID-19 vaccine. 

Nevada legislation provides paid leave for employees seeking to receive their coronavirus (COVID-19) vaccine. The law requires that employers give employees two consecutive hours of paid leave (4 hours for vaccines requiring two doses). The requirements are applicable to private employers that have at least 50 employees and have been in business for at least two years. Additionally, employees are required to provide employers with at least 12 hours of notice before taking the leave, and employers must maintain paid leave accrual and use records for one year. The paid leave time is not to be taken into consideration in calculating the number of hours for which the employee must be paid overtime. 

Extension of non-charging of unemployment benefits. 

The Tennessee Department of Labor and Workforce Development (DLWD) has announced that the Employment Security Division will suspend provisions related to base period contributory employers. COVID-19 related claims filed between March 14, 2021, through July 3, 2021, will not be charged against employer accounts. 

Unemployment tax rates set at pre-COVID-19 levels. 

The Texas Workforce Commission (TWC) has announced that it has set unemployment insurance (UI) tax rates for 2021 consistent with 2020 rates rather than increase rates due to the coronavirus (COVID-19) pandemic. Rates for experienced employers in 2020 ranged from 0.31% to 6.31%. These rates include a 0.10% employment and training assessment. The new employer rate is 2.7%. The taxable wage base is $9,000. The announcement notes that TWC has set the state’s UI replenishment tax rate to 0.18%, and the Obligation Assessment was set to 0.03% to cover any federal interest due on Title XII loans due on September 30, 2021. There was no Obligation Assessment in 2020. The combination of the replenishment tax and obligation assessment equals the 2020 replenishment tax rate of 0.21%. 

Unemployment accounts not chargeable for unemployment benefits. 

Vermont legislation renders benefits paid due to the coronavirus (COVID-19) pandemic non-chargeable to employer unemployment tax accounts for benefits claimed in tax year 2020. For benefits claimed in 2021, the claims must be directly related to a business closure by a public health mandate, a temporary layoff of quarantined employees, or voluntary workplace closure due to exposure to COVID-19 in order to be considered non-chargeable. Under the legislation, any benefits paid in 2020 are not to be used when the Vermont Department of Labor (DOL) computes the unemployment tax rate schedule set to take effect on July 1, 2021 or those of future years. 

Unemployment taxable wage base to increase in 2022. 

The Washington Employment Security Department (ESD) has announced that the taxable wage base for unemployment tax purposes will increase from $56,500 to $62,500 in 2022 due to a 10.1% increase in the average annual wage in 2020. Additionally, the minimum weekly unemployment benefit will increase to $295 and the maximum weekly benefit will increase to $929 for new claims opened on or after July 4, 2021. 

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