Wolters Kluwer Tax & Accounting looks at payroll tax relief available to businesses in response to the COVID-19 pandemic.
One of the favorite methods used by Congress to assist businesses during the COVID-19 pandemic has been payroll tax credits and related payroll tax relief. Even those businesses that may not owe income taxes as a result of government-ordered shutdowns or downturns in business still have payroll tax obligations. By providing credits for the employer portion of payroll taxes, Congress has enabled businesses to reduce their current payroll tax obligations. Through provisions in both the Families First Coronavirus Relief Act and the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) the savings to business can be substantial.
Payroll tax provisions should help many businesses reduce their tax obligations and help them lower the cost of retaining employees during the COVID-19 pandemic. With so many payroll tax breaks having many different requirements, taxpayers should seek the help of their tax advisors to sort through the options and determine which provisions can provide the greatest benefits.
Families First Coronavirus Relief Act
- Paid sick leave credit for employees impacted by COVID-19
- Paid sick leave credit for employees to care for individuals impacted by COVID-19
- Paid family leave credit for employees to care for a child whose school or daycare is closed
- Employee Retention Credit - not available for loans obtained under PPP (Paycheck Protection Program)
- Delay of payment of payroll taxes - not available if PPP loan is forgiven
- Cannot use more than one credit for the same payroll taxes
Paycheck Protection Program Flexibility Act
- Reverses CARES Act to permit delay of payment of payroll taxes even if PPP loan is forgiven
- Notice 2020-22: waiver of penalty for failure to pay payroll taxes where an offsetting credit is available
- Form 7200: employer may apply for an advance of payroll tax credits
Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting
, can help explain the payroll tax relief available for businesses dealing with the COVID-19 pandemic.