COVID-Related Payroll Tax Deferral Raises Questions

COVID-Related Payroll Tax Deferral Raises Questions

In an effort to reduce the burden on workers, President Trump signed a memorandum on August 8 providing for the deferral of payroll taxes from September 1 through December 31, 2020. The new rule defers the employee portion of the old-age, survivors and disability insurance (OASDI) tax and Railroad Retirement Act Tier 1 tax for those whose pretax biweekly wages are generally less than $4,000. Note: Currently this is considered a tax DEFERRAL — not forgiveness — so tax will be due at a later date.

However, because the lack of detail in the memorandum left open a lot of questions, the American Institute of CPAs (AICPA) has requested guidance from the Treasury Department on handling the tax deferral. As soon as these issues are ironed out, we’ll be able to help you implement the tax deferral in your payroll systems. Details to come!

Source: Journal of Accountancy

PPP: Don’t Rush to Apply for Forgiveness

Are you one of the more than 5 million businesses that received a Paycheck Protection Program (PPP) loan? If so, you may be ready to apply for forgiveness.

However, experts are advising most small businesses to wait a little while to apply, even though the SBA opened the forgiveness portal last week. That’s because the SBA continues to make adjustments and issue new guidance (in the form of frequently asked questions).

The delay is mostly because Congress has been unable to agree on a new COVID-19 relief bill, which would hopefully address some outstanding issues. One such issue is whether expenses covered by PPP loans will be deductible on your 2020 tax return or not.

For example, SBA guidance recently issued clarifications for:

  • Payments for vision and dental benefits, which are included in group health care and insurance premiums and are thus eligible to be paid with PPP funds.
  • Payments of transportation utility fees assessed by state and local governments, which are eligible for loan forgiveness.
  • Calculating reductions in loan forgiveness arising from reductions in employee salary or hourly wage.
  • Sole proprietors, independent contractors and self-employed individuals, who qualify to use the simplified PPP Loan Forgiveness Application Form 3508EZ.

While you wait for Congress to act, take the time to gather up your paperwork so that you’re ready to apply when the time is right. If you don’t have a separate business account for the loan proceeds, be sure to keep good books and records that show how you spent the loan funds.

If you have any questions, please don’t hesitate to contact us. We’re here to help!

Source: CNBC

MONEY BRIEF #1

You can use the IRS Tax Withholding Estimator to determine the right amount of tax to be withheld and avoid surprises on your tax bill next year. Income tax withholding is generally based on your expected filing status and standard deduction. Adjusting withholding on your paycheck or revising the amount of your estimated tax payments can help prevent penalties. This is especially important if you work in the “gig” economy, have more than one job or experienced major life changes recently. This also applies if you received unemployment due to COVID-19 layoffs.

MONEY BRIEF #2

During the 2019 fiscal year, the IRS:

  • Collected more than $3.5 trillion in taxes.
  • Processed more than 253 million tax returns and other forms.
  • Issued more than $452 billion in tax refunds.
  • Was called or visited by nearly 61 million taxpayers.
  • Received nearly 651 million visits to its website (irs.gov), where taxpayers downloaded almost 363 million files.
Know Your Payroll Tax Due Dates

Know Your Payroll Tax Due Dates

I your small business has employees, you need to withhold and pay Georgia AND Federal income tax on a regular basis. There are five possible payment schedules for withholding taxes in Georgia:

  • Next-business-day
  • Semi-weekly
  • Monthly
  • Quarterly
  • Annually

Your payment schedule depends on the average amount you withhold from employee wages over time. The more you withhold, the more frequently you need to make withholding tax payments. (Note: The IRS requires three deposit schedules: semi-weekly, monthly, or quarterly if your overall liability is $2,500 or less.)

Threshold dollar amounts for the different payment schedules may change over time, so check with us (or the Georgia Department of Revenue) at least once a year for the latest information. Due dates for payments are:

  • Semi-weekly: Payments are due by Wednesday for amounts withheld on the preceding Wednesday, Thursday or Friday — or by Friday for amounts withheld on the preceding Saturday, Sunday, Monday or Tuesday.
  • Monthly: Payments are due by the 15th day of the month following the month in which the tax was withheld.
  • Quarterly: Payments are due by the last day of the month following the end of the quarter.
  • Annually: Payment is due by January 31st.
Businesses making semi-weekly or monthly payments must also file quarterly withholding tax returns. (Quarterly and annual filers only need to file the correct version of Form G-7.) G-7 returns are due on or before the last day of the month following the end of the quarter:
  • April 30 for 1Q (Jan–Mar)
  • July 31 for 2Q (Apr–Jun)
  • October 31 for 3Q (July–Sep)
  • January 31 for 4Q (Oct–Dec)

For specific dates and forms, please refer to the Georgia Department of Revenue website.

We Can Handle Your Payroll

Speaking of payroll, did you know that Premier CPA Services can handle your payroll processing? We can also take some of the pain out of your business reporting chores by taking care of Quarterly Payroll Reporting (Federal and State), as well as state and/or local sales tax reports on a monthly, quarterly or annual basis. Give us a call today to find out more about our small business services.

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.