The top payroll related searches for 2021
Payroll practitioners and employers alike continue to be challenged by the unique issues that COVID-19 has imposed on payroll administration. Payroll on Checkpoint has analyzed the searches of our subscribers to create this Top 20 list of topics in the forefront in 2021.
Employee retention credit
It’s no surprise that the Employee Retention Credit (ERC) was the most searched term of 2021. Payroll practitioners searched the topics of eligibility and how to claim the credit. The ERC evolved under numerous legislation, amending the eligibility requirements as well as increasing the amount of the credit.
Established under the CARES Act (P.L. 116-136, Sec. 2301), for 2020, the ERC allows eligible employers to claim a refundable tax credit of up to a maximum credit $5,000 of qualified wages per employee paid after March 12, 2020, and before January 1, 2021, if the employer experienced a full or partial suspension of their operations or a significant decline in gross receipts (“eligible employers”).
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (PL 116-260, Sec. 207) amended the ERC, allowing it to be claimed from January 1, 2021 through June 30, 2021 and increased the refundable payroll tax credit $7,000 per employee for each quarter of 2021.
Section 9651 of the American Rescue Plan Act (P.L. 117-2, Sec. 9651) further extended the ERC through December 31, 2021 and added a “recovery startup business” as a type of employer that may qualify for the ERC, limiting the credit for such employers to $50,000 per calendar quarter. Also, the Act permitted “severely financially distressed” employers (those that suffered a 90% or more decline in gross receipts to treat all wages (up to the $10,000 limit) as qualified wages.
Finally, the Infrastructure Investment and Jobs Act (IIJA; P.L. 117-58, Sec. 80604) terminated the ERC for most employers or wages paid after September 30, 2021. Recovery startup businesses remained eligible for the ERC through December 31, 2021.
The constant changes to the ERC left the IRS scrambling to release guidance.
COVID tax credits and paid leave
COVID dominated the payroll landscape in 2021. The second most searched topic included COVID paid leave credits, COVID paid leave requirements, payroll tax deferral, and the COBRA premium subsidy.
The Families First Coronavirus Response Act (FFCRA, P.L. 116-127) required certain employers to provide paid leave to workers who are unable to work or telework due to circumstances related to COVID-19 (Qualified Paid Leave). FFCRA offsets the costs of providing Qualified Paid Leave, up to certain amounts, with refundable tax credits against employment taxes for qualified leave wages taken beginning April 1, 2020, and ending December 31, 2020. While subsequent legislation extended the tax credit through September 30, 2021, the requirement to provide paid leave ended December 31, 2020.
Section 9501 of the American Rescue Plan Act of 2021 (ARPA, PL 117-2, Sec. 9501) provides a temporary 100% reduction in the premium that individuals have to pay when they elect COBRA continuation health coverage following a reduction in hours or an involuntary termination of employment. The law provides a corresponding tax credit for the entities that maintain group health plans, such as employers, multiemployer plans, and insurers. The 100% COBRA premium assistance, along with additional COBRA enrollment rights, are available to certain assistance eligible individuals during the period beginning on April 1, 2021, and ending on September 30, 2021.
Federal tax forms and reporting
With the various credits, federal reporting also was on practitioners’ minds. The IRS updated forms throughout 2021 to keep with legislative changes. Keeping up with the changes was challenging as the new credits created new lines on familiar tax forms as well as required qualified leave wages to be reported on Forms W-2 or a separate statement. These changes presented not only challenges to payroll professionals, but also required either payroll systems to be updated timely or practitioners had to find creative ways to delineate required data for reporting purposes.
Remote workers, nexus, and income sourcing
As the pandemic continued, employers increasingly embraced the concept of remote work. However, telecommuting presented challenges in terms of withholding tax, unemployment tax, and even wage and hour issues.
State withholding has always been a big search topic for Checkpoint. During the pandemic, that trend continued. Employers were seeking information on how to register in new states, learning the ropes of reporting in these new states, and complying with state requirements.
Checkpoint has extensive state withholding coverage including Quick Reference Charts as well as over 75 Create-a-Charts on withholding topics.
While not all states have local withholding, payroll professionals made this the sixth most searched topic for 2021. Employers engaged in states with local withholding have additional compliance requirements. In states such as Ohio and Pennsylvania, an employer may need to contend with multiple local jurisdictions including school districts, as well as multiple tax collection agencies.
Checkpoint provides local coverage on tax withholding as well as local coverage on assorted issues such local paid leave, predictive scheduling, and other local requirements.
Not all states have withholding tax, however, all states have unemployment tax. COVID again created stumbling blocks for employers who found themselves with employees in new states.
From 401(k)s to SIMPLE plans to Roth IRAs to nonqualified deferred compensation plans, deferred comp was on your minds.
Searches on the topic of health insurance ranged from the taxation of employer-paid premiums to flexible spending accounts, health savings accounts, and medical savings accounts.
This search term encompassed all questions regarding the tax treatment of stock options, restricted stock units (RSU), stock bonuses, stock buy-back, stock compensation, and stock vesting.
Questions regarding various visa workers came up throughout the year. From student visa workers and FICA exemptions to the H-1B and H-2B visa programs, employers sought clarity on visa issues.
When an employment relationship ends, there are many wage payment considerations. When final wages are due and what must be included in final wages will vary from state to state.
While no employer or practitioner wishes to miss or underpay a tax payment or miss a reporting deadline, searches looked to the consequences. Searches also included questions regarding appeals, audits, and who is a “responsible person.”
Searches ranged from adoption assistance, club membership, educational assistance, and gifts. A common search was what constitutes a de minimis fringe benefit.
A de minimis fringe benefit is one that an employee may exclude the fair market value (FMV) of the property or service where the value is so small as to make accounting for it unreasonable or administratively impracticable. The frequency with which similar fringes are provided by the employer must be taken into account in determining excludability. Examples of common de minimis fringe benefits may include occasional group meals, occasional sporting event tickets, or flowers under special circumstances.
Overtime searches included how to calculate overtime under special circumstances and when overtime pay is required. The Fair Labor Standards Act (FLSA) requires employers to pay nonexempt employees time and a half for any hours worked that exceed 40 hours per week under 29 USC 207.
Many issues must be addressed when an employer is informed of a death of an employee. A possible sad consequence of the COVID-19 pandemic may be responsible for an uptick on this search topic.
Paycheck Protection Program
The Paycheck Protection Program (PPP) was previously a hotly searched item, however, when the PPP closed the program as of June 1, 2021, the topic lost its urgency. Businesses still need to handle the PPP loan forgiveness process as questions shifted from eligibility and the loan application to the forgiveness application and process.
Practitioners had questions regarding short-term disability, third-party sick pay, as well as disability rates in state-run disability programs.
Meals and lodging
Practitioners and employers had questions regarding the taxability of employer-provided housing and meals as well as housing allowances. In general, meals are not taxable if furnished for the employer’s convenience and on the employer’s premises. Lodging is not taxable if furnished for the employer’s convenience, on the employer’s premises, and as a condition of employment. It should be noted that there state wage and hour considerations as well when it comes to employer-provided meals and lodging.
While searches on tuition assistance were common, COVID-19 brought out the generosity of employers. A number of searches were conducted regarding the tax treatment of student loan debts paid by the employer.
The CARES Act (PL 116-13, Sec. 2206) allowed employers that provide student loan repayment benefits to employees to do so on a tax-free basis and will be excluded from the employee’s income through Dec. 31, 2020. The Consolidated Appropriations Act (CAA, PL 116-260, Sec. 120) extended this benefit through Dec. 31, 2025. The annual $5,250 benefit cap includes educational assistance such as tuition, fees and books.
What’s hot for 2022?
Practitioners no doubt will continue to review the COVID tax credits and Employee Retention Credit as returns may require amendments. Remote work may be here to stay for some employers making this a perennial topic.
Payroll on Checkpoint is your go-to resource with quick reference charts, federal, state, and local guidance on withholding, unemployment, wage and hour, wage payment, and more. Let Checkpoint Edge cut the complexity out of payroll administration.