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  • Mar 30 / 2021
What's New

IRS Releases 2021 Form 941, Instructions for Form and Schedules B and R


On March 9, the IRS released the 2021 Form 941, Employer’s Quarterly Federal Tax Return, and its instructions. The IRS also revised the instructions for Form 941, Schedule B and the instructions for Form 941, Schedule R. When the IRS released the instructions, Congress was considering changes to COVID-19 tax relief. When the new legislation changes these instructions, the IRS will post updates here.

Updates to Form 941

The Form 941 instructions have been updated to include extensions of the COVID-19-related tax credits under the Consolidated Appropriations Act, 2021:

  • The Families First Coronavirus Response Act (FFCRA) tax credit for emergency paid sick leave wages and expanded family and medical leave wages was extended to qualified leave wages paid for leave taken before April 1, 2021.
  • The employee retention credit, established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was extended to qualified wages paid through June 30, 2021.
  •  The instructions also provide guidance on claiming advance tax credits using Form 7200, paying the employer and employee social security tax deferred in 2020, and a new payroll tax credit for tax-exempt organizations affected by qualified disasters.

Paying Deferred Amount of Social Security Tax

The IRS said it will update its Electronic Federal Tax Payment System (EFTPS) to allow employers to pay the deferred amounts of the employer and employee share of social security tax by March 19. Filers will be able to select the new option to make these payments.

Courtesy of the APA

 

  • Mar 30 / 2021
What's New

California Pay Data Reporting Required by March 31


By March 31, 2021, California private employers with 100 or more employees that are required to file the annual federal Employer Information Report (EEO-1) are required to submit a pay data report to the state. The California Pay Data Reporting Portal is open.

Due to the COVID-19 pandemic, the California Department of Fair Employment and Housing will consider an employer’s request that the agency defer seeking an order for compliance (to submit the required report by the due date). An employer must submit the request before March 31. Requests must be submitted using the online form.

Legislation requiring California pay data reporting in 2021 was passed last year. Guidance is available for employers, including a User Guide, FAQs, and a template that employers may use to submit their data.

Courtesy of the APA Lia Coniglio, Esq

  • Mar 09 / 2021
What's New

Biden Administration Extends Relief for Federal Student Loan Borrowers


On January 20, President Biden requested that the Secretary of Education extend COVID-19-related relief for federal student loan borrowers. The U.S. Department of Education has indicated on its Coronavirus and Forbearance Info for Students, Borrowers, and Parents website that the relief will be extended at least through September 30, 2021. Without the extension, the relief measures would have expired on January 31.

During this extension of the payment suspension, collections on defaulted, federally held loans are still halted, and any borrower with defaulted federally held loans whose employer continues to garnish their wages will receive a refund of those garnishments.

New Administration May Have Big Impact on Payroll

The Biden administration has many priorities that, if implemented, will have a big impact on payroll professionals. Some of these policy initiatives include: adjusting the income tax benefits for participation in retirement plans such as 401(k) plan, raising the federal minimum wage to $15 an hour, and reforming labor provisions relating to joint employer status.

Courtesy of Curtis E. Tatum, Esq., Director of Federal Payroll Compliance for the APA.

  • Mar 09 / 2021
What's New

IRS Releases 2021 Forms W-2, W-3, Instructions


The IRS released the 2021 Form W-2, Wage and Tax Statement, Form W-3, Transmittal of Wage and Tax Statements, and the General Instructions for Forms W-2 and W-3. The instructions have been updated to address how employers should handle COVID-19-related employment tax credits.

Items of interest to payroll professionals:

  • Potential discrepancies when reconciling Forms W-2 and W-3 with Forms 941 and 944 due to COVID-19-related employment tax credits.Employers may have a discrepancy when reconciling Forms W-2 and W-3 with Forms 941 and 944 if COVID-19 tax relief was taken in 2020. Paid qualified sick leave and family leave wages are not subject to the employer share of social security tax. Also, the deferred amount of the employee share of social security tax is reported on Forms 941 and 944, but it is not reported on Forms W-2 and W-3.
  • Reporting deferred employee share of social security tax from 2020. Employee social security tax deferred in 2020 under Notice 2020-65 that is withheld in 2021 and not reported on the 2020 Form W-2 should be reported in Box 4 on Form W-2c. Enter tax year “2020” in Box c and adjust the amount previously reported in Box 4 of the Form W-2 to include the deferred amounts withheld in 2021. All Forms W-2c should be filed with the Social Security Administration, along with Form W-3c, as soon as possible after withholding the deferred amounts. For more information, see the IRS webpage on Form W-2 reporting of employee social security tax deferred under Notice 2020-65.
  • Mar 09 / 2021
What's New

IRS Releases 2021 Publications 15 (Circular E) and 15-B

Circular E summarizes the COVID-19-related tax credits and other tax relief on page 2.

COVID-19 Items 

Due to the COVID-19 pandemic, employers with participants in health and dependent care flexible spending arrangements (FSAs) can amend their plans to allow:

  • Participants in health and dependent care FSAs to carry over any unused benefits or contributions remaining in the account from the plan year ending in 2020 to 2021 and also from the plan year ending in 2021 to 2022.
  • A 12-month grace period for unused benefits or contributions in health and dependent care FSAs for plan years ending in 2020 or 2021.
  • Post-termination reimbursements from health FSAs from unused benefits or contributions for 2020 or 2021 through the end of the plan year in which an employee ceases participation in the plan.
  • A midyear change in the election amounts up to the maximum allowable amount for the year for health and dependent care FSAs for plan years ending in 2021.

Reminder on Withholding Tables

The percentage method and wage bracket method withholding tables, as well as the amount to add to a nonresident alien employee’s wages for figuring income tax withholding, are now in Publication 15-T,  Federal Income Tax Withholding Methods.

  • Mar 09 / 2021
What's New

IRS Releases 2021 Publication 15-A


The IRS released the 2021 Employer’s Supplemental Tax Guide (Publication 15-A). The 2021 Circular E, Employer’s Tax Guide (Publication 15), and the Employer’s Tax Guide to Fringe Benefits (Publication 15-B).

Breakdown of Publications 15

  • Publication 15 (Circular E) contains the bulk of the information employers need for tax information. For 2021, Circular E summarizes much of the COVID-19-related tax credits and other tax relief on page 2.
  • Publication 15-A contains specialized and detailed employment tax information supplementing the basic information provided in Circular E.
  • Publication 15-B contains information about the employment tax treatment of various types of noncash compensation.
  • Publication 15-T, Federal Income Tax Withholding Methods, contains the percentage method and wage bracket method withholding tables, as well as the amount to add to a nonresident alien employee’s wages for figuring income tax withholding.
  • Jan 07 / 2021
What's New

Business Standard Mileage Rate Decreases to 56 Cents in 2021


The IRS announced that the business standard mileage rate for transportation expenses paid or incurred beginning January 1, 2021, will be 56 cents per mile, down 1.5 cents from 2020 [Notice 2021-02, 12-22-20].

The mileage rate may be used to compute the amount to reimburse employees who are using their own cars for business purposes. It may also be used by employers that elect to use the “cents-per-mile” valuation method for purposes of determining the amount that needs to be imputed to an employee’s income for personal use of certain company-owned or leased nonluxury vehicles (see The Payroll Source®, §3.2-2). However, it may not be used by employees in claiming a tax deduction for unreimbursed employee business expenses, since such deductions are suspended by the Tax Cuts and Jobs Act.

In addition, the 2021 standard rate for miles driven for medical or moving purposes will decrease to 16 cents per mile, down from the 17 cents-per-mile rate in effect during 2020. The deduction for moving expenses only applies to members of the Armed Forces on active duty who move under a military order and due to a permanent change of station. The standard mileage rate for operating a passenger car for charitable purposes, which is set by law, will stay at 14 cents per mile in 2021.

For vehicles put into service in 2021, the cents-per-mile valuation method can be used only if the vehicle does not have a fair market value of more than $51,100 ($50,400 in 2020). For employer-provided vehicles under the fleet-average valuation rule, applicable to an employer with a fleet of 20 or more automobiles, the 2021 maximum value is $51,100 for an automobile ($50,400 in 2020). Note:The fleet-average valuation rule may not be used if any of the automobiles in the employer’s fleet exceeds its maximum allowable value.

REMINDER– Because of the 1.5 cent decrease in the business standard mileage rate, employers reimbursing employees at the 2020 rate need to be mindful of the rate change. To avoid having to include the extra 1.5 cent in the employee’s income and the accompanying withholding and reporting responsibilities, employers should make sure to change to the 2021 rate for all affected travel on or after January 1, 2021. And remember that business miles driven in December 2020 that show up on an employee’s expense report in 2021 are governed by the rules applicable to the corresponding 2020 mileage rate.

  • Jan 07 / 2021
What's New

States Extend Nexus Guidance for Employees Working Remotely


As the COVID-19 pandemic continues to affect people across the country, states have extended their guidance regarding nexus and withholding requirements. Here are some recent state developments.

Massachusetts

The Massachusetts Department of Revenue has extended pandemic-related state income taxation, withholding, and nexus rules that have been in effect on an emergency basis since April and apply from March 10, 2020.The requirements are now scheduled to expire 90 days after the COVID-19 state of emergency is lifted [TIR 20-15, 12-8-20]. New Hampshire has filed a lawsuit over these rules, which may be decided by the U.S. Supreme Court.

Rhode Island

Under emergency regulations that were extended again to January 18, 2021, income of employees who are nonresidents working outside of the state solely due to the pandemic will continue to be treated as Rhode Island-source income for withholding tax purposes [Department of Revenue, Division of Taxation News, 11-23-20].

South Carolina

The South Carolina Department of Revenue has issued additional guidance, effective from March 13, 2020, through June 30, 2021, stating that it will not use the temporary change of an employee’s work location during the COVID-19 relief period to impose withholding tax requirements [Information Letter #20-29, 11-30-20].

Courtesy of: Lia Coniglio, Esq, APA.

  • Jan 07 / 2021
What's New

IRS Releases 2021 Publication 15-T, Form W-4


The IRS has released the 2021 Publication 15-T, Federal Income Tax Withholding Methods, and the 2021 Form W-4, Employee’s Withholding Certificate. The 2021 Form W-4 has few changes and is very similar to the 2020 Form W-4.

2021 Publication 15-T

Publication 15-T describes how to figure federal income tax withholding using the percentage method and the wage bracket method and describes alternative methods for figuring withholding. The publication explains how to withhold income tax based on pre-2020 Forms W-4 and 2020 or later Forms W-4. 

New optional computational bridge

Adjustments for an employer to figure withholding based on pre-2020 Forms W-4 and 2020 or later Forms W-4 are described in more detail in the various worksheets. In addition, a new optional computational bridge is available. The computational bridge allows employers to treat 2019 or earlier Forms W-4 as if they were 2020 or later Forms W-4. Employers use computational procedures and data fields for a 2020 and later Form W-4 to arrive at the equivalent withholding for an employee that would have applied using the computational procedures and data fields on a 2019 or earlier Form W-4. Note:The new computational bridge only applies to pre-2020 Forms W-4 that were provided to employers before 2020. No employee may now complete a pre-2020 Form W-4.

The computational bridge may also be used for lock-in letters based on pre-2020 Forms W-4, and to convert a nonresident alien employee’s pre-2020 Form W-4 to a 2020 or later Form W-4.

Withholding on periodic payments of pensions and annuities

Employers should use Worksheet 5 and the percentage method tables in that section to figure withholding on periodic payments of pensions or annuities. If the recipient does not submit Form W-4P, Withholding Certificate for Pension or Annuity Payments, withholding on periodic payments is calculated as if the recipient were married claiming three allowances.

Withholding adjustment for nonresident aliens

Publication 15-T provides the amounts that employers should add to the wages paid to nonresident alien employees working in the United States when figuring their income tax withholding.

Help for smaller employers

The IRS Income Tax Withholding Assistant, which is an Excel spreadsheet that is designed to help small employers calculate the amount of federal income tax to withhold, has been updated for 2021. Employers that use an automated payroll system do not need to use the assistant.

  • Jan 07 / 2021
What's New

Preliminary list of state unemployment insurance wage bases for 2021

Courtesy of EY Payroll News Flash

State unemployment insurance (SUI) trust funds are largely financed by employer contributions (except in Alaska, New Jersey and Pennsylvania, where employees also make contributions). States are required to maintain an SUI wage base of no less than the limit set under the Federal Unemployment Tax Act (FUTA). The 2021 FUTA wage limit of $7,000 has remained unchanged since 1983, despite increases in the federal minimum wage and annual cost-of-living adjustments over the last 36 years.

Some states are conservative in their approach to maintaining adequate SUI trust fund reserves. Consequently, the SUI wage base is flexible in those states, meaning it is indexed to the average wage or varies based on the trust fund balance. According to the U.S. Department of Labor, 24 states and the Virgin Islands had a flexible wage base in 2020. (U.S. Department of Labor, Comparison of State Unemployment Laws, 2020.)

As a result of the COVID-19 pandemic, several states are considering or have passed legislation or have issued executive orders to change their UI laws, bolster UI trust funds and/or provide relief to their employers. For example, several states have transferred federal stimulus under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to their UI trust fund balances to avoid significant increases in employers’ 2021 SUI tax rates. In addition, most states, at least for a period of time, chose not to charge employer reserve accounts with COVID-19 UI benefits.

A preliminary look at the 2021 state unemployment taxable wage bases

Following is a preliminary list of the 2021 SUI taxable wage bases (as compared to 2020) and employee SUI withholding rates, if applicable.

SUI taxable wage bases, 2021 vs. 2020

State

2021

2020

% increase or decrease

2021 employee contribution rates

Alabama

8,000*

8,000*

Alaska

43,600

41,500

5.06%

Employee SUI withholding rate is 0.5% on wages up to $43,600

Arizona

7,000*

7,000*

Arkansas**

10,000

7,000

42.9%

California

7,000*

7,000*

Colorado**

13,600

13,600

Connecticut

15,000*

15,000*

Delaware**

16,500

16,500

District of Columbia

9,000*

9,000*

Florida

7,000*

7,000*

Georgia

9,500*

9,500*

Hawaii

47,400

48,100

(1.48%)

Idaho

43,000

41,600

3.37%

Illinois

12,960

12,740

1.73%

Indiana

 9,500*

 9,500*

Iowa

32,400

31,600

2.53%

Kansas

14,000*

14,000*

Kentucky**

11,100

10,800

2.78%

Louisiana**

7,700

7,700

Maine

12,000*

12,000*

Maryland

8,500*

8,500*

Massachusetts

15,000*

15,000*

Michigan**

9,500 (EST)

9,000

5.56%

Minnesota

36,000 EST)

35,000

2.86%

Mississippi

14,000*

14,000*

Missouri

11,000

11,500

(4.55%)

Montana

35,300

34,100

3.52%

Nebraska**

9,000/24,000*

 9,000/24,000*

Nevada

33,400

32,500

2.77%

New Hampshire

14,000*

14,000*

New Jersey**

36,200

35,300

2.55%

Employee SUI withholding rate is 0.425% on wages up to $36,200

New Mexico

27,000

25,800

4.65%

New York**

11,800

11,600

1.72%

North Carolina

26,000 (EST)

25,200

3.17%

North Dakota

38,500

37,900

1.58%

Ohio**

 9,000*

9,000*

Oklahoma

24,000

18,700

28.3%

Oregon

43,800

42,100

4.04%

Pennsylvania

10,000*

10,000*

Employee SUI withholding 0.06% on total wages

Puerto Rico**

TBD

7,000

Rhode Island**

TBD

24,000/

25,500

South Carolina

14,000

14,000

South Dakota

15,000

15,000

Tennessee**

TBD

7,000

Texas

9,000*

9,000*

Utah

38,900

36,600

6.28%

Vermont

14,100

16,100

(14.18%)

Virginia

8,000*

8,000*

Virgin Islands

TBD

28,900

Washington

56,500

52,700

7.21%

West Virginia

12,000*

12,000*

Wisconsin

14,000*

14,000*

Wyoming

27,300

26,400

3.41%

FUTA

7,000*

7,000*

* Law sets the taxable wage base; legislation would be necessary to change.

** See footnote below.

*** Due to the high volume of COVID-19 UI benefit claims, the state is delayed in issuing 2021 SUI tax rate

information and notices.

EST: Estimated 2021 wage base

TBD: 2021 wage base was not available as of the time of this printing

Arkansas

2019 legislation (SB 298/Act 512) changes the way that Arkansas determines the SUI wage base starting with tax years after 2019. The SUI wage base, set by law at $10,000 for 2018 and 2019, is now determined each year by the average seasonally unadjusted UI benefit rate for the preceding fiscal year (July 1 through June 30). Depending on the UI benefit rate, the SUI wage base could range from $7,000 to $10,000. In addition, during times when the UI trust fund balance falls below a specified level, the SUI wage base could increase to $11,000 or $12,000. According to a Department representative, the taxable wage base will increase to $10,000 for 2021.

Colorado

2020 legislation (SB 20-207) sets the SUI taxable wage base at $13,600 for calendar year 2021 and provides that the SUI taxable wage base will increase incrementally to $30,600 by calendar year 2026.

Delaware

2013 legislation (HB 168) increased the SUI taxable wage base to a minimum of $10,500 and a maximum of $18,500 by linking the wage limit to the balance of the state’s unemployment trust fund. The higher the trust fund balance, the lower the taxable wage base. 2019 legislation (HB 198) froze the taxable wage base at $16,500 for 2020 (under the bill language from July 1, 2019 to October 29, 2020) so that the Division of Unemployment Insurance and the Unemployment Compensation Advisory Council could determine whether the formula used to calculate the annual figure should be revised. According to a Division representative, the taxable wage base will remain at $16,500 for 2021.

Kentucky

The taxable wage base is expected to continue to increase by $300 each calendar year until it reaches $12,000.

Louisiana

2020 legislation (SB 55/Act 40) provides that the SUI taxable wage base will remain at $7,700 for 2021.

Michigan

The SUI taxable wage base is expected to increase for 2021 from the $9,000 that has been in effect for the past several years to the $9,500 that is currently only assigned to delinquent employers. Michigan’s UI trust fund balance fell below $2.5 billion on June 30, 2020, the balance required for the $9,000 wage base to be in effect. Legislation introduced in September 2020 (HB 6136) would, if enacted, freeze the SUI taxable wage base at $9,000 for calendar year 2021.

Nebraska

2019 legislation (LB 428) increases the SUI taxable wage base to $24,000 for employers assigned the maximum rate. This change was effective for calendar year 2020. The taxable wage base remains $9,000 for all other employers.

New Jersey

Employee contribution rate includes the Workforce Development/Supplemental Workforce Funds surcharge.

New York

The taxable wage base will continue to increase as follows: 2022 — $12,000; 2023 — $12,300; 2024 — $12,500; 2025 — $12,800; 2026 — $13,000; for each year thereafter, computed as 16% of the state’s average annual wage.

Ohio

2016 legislation (SB 235) increased the SUI taxable wage base to $9,500 for calendar years 2018 and 2019. The taxable wage base reverted to $9,000 effective January 1, 2020 and will remain at that amount unless changed by future legislation.

Puerto Rico

2017 legislation grants the territory’s Secretary of Labor the discretion to increase the taxable wage base to as much as $10,500 if deemed necessary.

Rhode Island

Negative-balanced employers assigned the maximum tax rate will have a taxable wage base that is $1,500 higher than other employers (e.g., because the 2020 taxable wage base is $24,000, these negative-balanced employers pay taxes on the first $25,500 in wages).

Tennessee

Under Tennessee UI law, if the UI trust fund balance on December 31 of any year is less than $900 million, the taxable wage base is $9,000. If the trust fund balance is above $900 million, but less than $1 billion on December 31, the taxable wage base is $8,000. If the trust fund balance is over $1 billion on December 31, the taxable wage base is $7,000. The Tennessee UI trust fund balance as of November 30, 2020, was $1,165,876,123. If the balance remains above $1 billion as of December 31, 2020, the 2021 taxable wage base will remain $7,000.

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