new challenges for the payroll professional (002) · 2020. 8. 13. · challenges for the payroll...

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.



2020 Challenges

for the Payroll

ProfessionalWest Michigan Chapter

American Payroll Association

Presenter:Ronii Rizzo, BDO

Agenda:

• 2020 Form W-4 Employee’s Withholding Certificate• Federal Payroll Response to COVID-19

• Families First Coronavirus Response Act• Coronavirus Aid, Relief, and Economic Security Act• August 9th Executive Order

• State Unemployment Insurance & Income Tax Withholding

• Relief for Nonresident & Expatriate Employees• Section 139 Disaster Relief Payments

2020 Form W-4 Employee’s Withholding Certificate

• Redesigned Form W-4• No longer tied to personal exemptions• 5 Steps• Step 1 and 5 mandatory

• Filing status• Standard deduction

• Step 2 – Increase to withholding• Step 3 - Decrease to withholding• Step 4 – Increase or decrease


• No requirement to submit new form if previously prepared form was on file prior to 2020.

• All new employees as of 2020 must complete new form

• All readjustments to withholding require the new Form W-4

• Absent a Form W-4, the employee will be withheld as if they are single with no withholding adjustments


Bloomberg Tax & Accounting

Federal Payroll Response to COVID-19

The Families First Coronavirus Response Act (FFCRA)Publication L No. 116-127

• Paid sick leave related to COVID-19;• Expansion to the Family and Medical Leave Act providing for paid public

health emergency leave; and• Payroll tax credits for providing the aforementioned forms of paid leave.

The requirement covers private-sector employers with fewer than 500 employees, and public-sector employers in general.Covered employers must provide employees with the leave regardless of how long they have worked.The leave is available to full-time employees for up to 80 hours and to part-time employees for the average number of hours they work, or are expected to work, over a two-week period.


The Families First Coronavirus Response Act (FFCRA)

Six scenarios where an employee will be eligible for this paid sick leave where the employee cannot be on worksite in person or telework

• Subject to a federal, state or local quarantine or isolation order related to COVID-19• Advised by a health care provider to self-quarantine related to COVID-19• Experiencing COVID-19 symptoms and is seeking a medical diagnosis• Caring for an individual subject to an order described in Scenario 1 or self-

quarantine as described in Scenario 2• Caring for a child whose school or place of care is closed (or child care provider is

unavailable) for reasons related to COVID-19, or• Experiencing any other substantially similar condition specified by the Secretary of

Health and Human Services, in consultation with the Secretaries of Labor and Treasury



PAYFor the first three situations, highest of:

• The employee’s regular hourly rate of pay • The highest hourly minimum wage (federal/state/local)• The amount of paid sick leave provided to an employee for the first

three situations cannot exceed $511 per day and a total of $5,110 For the fourth, fifth, and sixth situations, two-thirds of:

• The amount to which he or she would have been entitled had the other situations been applicable.

• The amount of paid sick leave provided to an employee for the fourth, fifth, or sixth situations cannot exceed $200 per day and a total of $2,000.



PAY

Daily compensable hours for part-time employees with fluctuating workweeks: • Employers can use the average daily number of hours that the employee

was scheduled to work, including hours for which the employee was on leave, during the six-month period ending on the start date of the period of COVID-19 sick leave.



Qualified sick leave wages are not themselves subject to the employer portion of Social Security tax.



Credits may be directly applied against employer and employee portions of Social Security and Medicare taxes and the amount of federal income tax withheldFor each quarter, the total credit for qualified sick leave wages applicable to that quarter is the sum of:• The amount of that type of qualified leave wages paid to employees;• The employer’s qualified health plan expenses that it incurred to provide

and maintain group health plan coverage for employee receiving that type of qualified leave wages in their periods of receipt of the leave; and

• The employer portion of Medicare tax imposed on payments of that type of qualified leave wages.


Bloomberg Tax & Accounting

Coronavirus Aid, Relief, and Economic Security Act (CARES)Publication L No. 116-136

• Employee Retention Credit• Forgivable loans to pay for payroll costs (Paycheck Protection Program• Employer portion of Social Security tax deferral for remainder of 2020


Coronavirus Aid, Relief, and Economic Security Act (CARES)

The CARES Act established a refundable payroll tax credit for retaining employees and continuing to pay compensation to them.

Employee Retention Credit

• Based on qualified wages paid from March 13 to Dec. 31, 2020• Credit may be directly applied against employer and employee portions of

Social Security and Medicare taxes and the amount of federal income tax withheld



An employer is eligible for the employee retention credit for a quarter if:• Carrying on a trade or business in 2020 and • Fully or partially suspend its business operations for the quarter because of

a governmental order issued in response to the coronavirus outbreak that limited commerce, travel, or the size of group meetings

(business suspension condition)• Employer experienced a significant decline in gross receipts

• Gross receipts were less than half of its gross receipts for the same calendar quarter in 2019

(gross receipts condition )



Tax credit available for a quarter • Half of the qualified wages that the employer paid to employees for that

quarter • only up to $10,000 in qualified wages paid per employee for 2020 can

be taken into account for determining the total amount of this tax credit that may be acquired across the four quarters of 2020

• Wages from March 13, 2020, to March 31, 2020, are to include 50% of those wages and 50% of any qualified wages paid during the second three-month quarter of 2020 on the second-quarter Form 941 to claim the credit



An employer cannot apply the employee retention credit against its payroll tax liability if the employer acquires a loan through the Paycheck Protection Program, even if the employer did not receive forgiveness of all or part of the loan.


Paycheck Protection Program

Forgivable loan to cover payroll costs• Generally for employers with up to 500 employees• 2 year loan maturity and interest of 1%• Includes salary, wages, commissions or similar compensation, payments of

tips, vacation, parental, family, medical or sick leave; allowances for dismissals, payments for insurance premiums and payments of state or local taxes assessed on compensation paid to employees

• Up to $100,000 per employee


Deferred Payment of Employer Portion of Social Security Tax

Employer portion of Social Security tax that normally would need to be paid to the government during the period from March 27 to Dec. 31, 2020, may be deferred under the CARES Act

• Deposit half of that deferred amount by Dec. 31, 2021, and the other half by Dec. 31, 2022

• An employer is ineligible to defer paying its portion of Social Security tax if it not only acquires a loan through the Paycheck Protection Program also established by the CARES Act, but acquires forgiveness of all or part of the loan

August 9th Executive Order – Deferral of Employee Social Security Tax

Deferral of Employee Social Security Tax(pending Secretary of Treasury implementing guidance)

On August 9, 2020, President Trump issued an executive order that allows for the deferral of the withholding and employer remittance of the employee share of Social Security tax (6.2% of wages up to $137,700) and the comparable portion of the Tier 1 Railroad Retirement Tax (RRTA) effective September 1, 2020, and through December 31, 2020. The deferral is available only to employees earning less than $4,000 each biweekly payroll period, or $104,000 per year.

State Unemployment Insurance and Income Tax Withholding


State Unemployment Insurance (SUI)

Four-part test to determine which state/jurisdiction has the authority to claim coverage over employees who perform work in more than one state.

Factors are to be considered in the following order:

1) Place where work is localized,2) Site of base of operations,3) Site from which operations are directed or controlled,4) Site of employee’s residence.


State Income Tax

General rule for state income tax withholding is to withhold tax in the state(s) where an employee is physically performing services

(some exceptions such as reciprocal agreements)Additional reporting and tax withholding obligations may exist in the employee’s resident state

Several states have issued guidance regarding updated withholding tax provisions due to employees working remotely on account of COVID19 Generally the guidance allows employers to continue withholding as they were prior to COVID19 (i.e., based on an employee’s primary work location), as opposed to enforcing withholding in the employee’s new, temporary work state

Each state combination should be reviewed.


Typical Considerations Work Anywhere State

Income Tax withholding

Follow rules of the work state and then home stateConsider localities

• Where currently performing services• Where generally performing services• Resident state on Form W-4• Telecommuting regulations• Employment Letter

State unemployment Insurance Tax

Follow four part test for designation

• Review based on potential new tax home

• Any other taxes such as family leave or disability

State Payroll/ Corporate Considerations

Follow rules of that business’ jurisdiction as it is the place of work

• Registration to do work• Income and unemployment tax

registrations• Specific requirements of the state


Remote and Mobile Worker Relief Act of 2020 – PENDING/NOT SIGNED

A bill to limit the authority of States or other taxing jurisdictions to tax certain income of employees for employment duties performed in other States or taxing jurisdictions.

In general, no part of the wages or other remunerations earned by an employee who performs employment duties in more than one taxing jurisdiction shall be subject to income tax in any taxing jurisdiction other than:• Taxing jurisdiction of employee’s residence• Taxing jurisdiction within which the employee is present and

performing employment duties for more than 30 days during the calendar year

Relief for Nonresident & Expatriate Employees


Individuals who are not residents of the U.S. and who had planned to leave the U.S. during the period from Feb. 1 to April 1, 2020, but who were prevented from doing so because of the coronavirus outbreak can exclude up to 60 days of their presence in the U.S. from the substantial presence test so that these days of presence do not cause them to be considered as U.S. residents for tax purposes.

Nonresidents generally would be considered as U.S. residents for a calendar year if they were present in the U.S. for at least 31 days of that year and there were at least 183 days among (1) the number of days when they were present in the U.S. during that year, (2) one-third of the number of days when they were present in the U.S.

during the preceding year, and (3) one-sixth of the number of days when they were present in the U.S. during the second preceding year.


An expatriate employee who in 2019 or 2020 returned to the U.S. instead of staying abroad because of the coronavirus outbreak would be able to count the days they would have been abroad had the coronavirus outbreak not occurred toward determining whether they fulfilled the bona fide residence test or the physical presence test if they reasonably expect that they would have fulfilled either test for the year when they returned had the coronavirus outbreak not occurred.

An expatriate employee who qualifies for the foreign earned income exclusion or the foreign housing exclusion because of this exception would be able to apply the exclusion only to amounts respectively coverable by the foreign earned income exclusion or the foreign housing exclusion during the period when the expatriate employee was abroad.

Section 139 Disaster Relief

Payments

Section 139 Disaster Relief Payments

Allows employers to assist employees during a federally declared disaster with “qualified disaster relief payments” that are tax free to the employee and fully deductible to the employer• Benefits in kind• Not covered by insurance• Reasonable and necessary

Examples• Shelter in place temporary living• Travel reimbursements• Expenses associated with working from home• Sanitizers, disinfectants, personal protective equipment

Section 139 Disaster Relief Payments

Record Keeping:

Although not technically required to have a written plan or policy, it is good practice

• Who is eligible• What expenses will be reimbursed• What documentation/support of payment/reimbursement is required

States:

Generally state treatment for federally declared qualified disaster relief payments will mirror federal treatment. However, it is important to check treatment for unemployment wages by state.

Thank you for your time!Ronii RizzoManaging Director, Expatriate Tax and Payroll Services704-887-4266 (Direct) 341-4266 (Internal)704-887-4290 (Fax)[email protected]

BDO615 South College St., Suite 1200Charlotte, NC 28202 UNITED STATES704-887-4236www.bdo.com

new challenges for the payroll professional (002) · 2020. 8. 13. · challenges for the payroll...

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