Lee B

It's the employer's decision whether or not to opt in. The employer's participation is not driven by their employee's desire to have more take home pay.

Both of the payroll software programs that I use, have decided to to make no changes to their programs since so many unanswered questions remain!

"Late on Friday, the IRS issued much-anticipated guidance on the payroll tax deferral that was ordered by President Donald Trump in a presidential memorandum on Aug. 8 (Notice 2020-65). The notice allows employers to defer withholding on affected employees’ compensation during the last four months of 2020 and then withhold those deferred amounts during the first four months of 2021 Under the guidance, employers can defer the withholding, deposit, and payment of certain payroll taxes on wages paid from Sept. 1 through Dec. 31, 2020. The deferral applies to the employee portion of the old-age, survivors, and disability insurance (OASDI) tax under Sec. 3101(a) and Railroad Retirement Act Tier 1 tax under Sec. 3201. The due date for withholding and payment of these taxes is postponed until the period beginning Jan. 1, 2021, and ending April 30, 2021. The deferral applies to any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. The notice defines applicable wages, for these purposes, as: wages as defined in [Sec.] 3121(a) or compensation as defined in [Sec.] 3231(e) paid to an employee on a pay date during the period beginning on September 1, 2020, and ending on December 31, 2020, but only if the amount of such wages or compensation paid for a bi-weekly pay period is less than the threshold amount of $4,000, or the equivalent threshold amount with respect to other pay periods. Amounts excluded from wages or compensation under Secs. 3121(a) or 3231(e) are not included when determining applicable wages. Under the notice, the determination of applicable wages is to be made on a pay-period-by-pay-period basis — meaning that if the amount of compensation payable to an employee for a particular pay period is less than the threshold amount ($4,000 for biweekly pay periods), then the payroll tax deferral applies to that compensation, irrespective of the amount paid to that employee in other pay periods. The notice requires affected employers to withhold and pay the deferred taxes from wages and compensation paid during the period between Jan. 1, 2021, and April 30, 2021. Interest, penalties, and addition to tax will begin to accrue on unpaid taxes starting May 1, 2021. The notice says, that, if it is necessary, employers can “make arrangements to otherwise collect the total Applicable Taxes from the employee” but does not provide details on that requirement. The AICPA, in a letter to Treasury and the IRS on Aug. 12, asked for guidance on many open issues regarding the implementation of the presidential memorandum." In the second sentence the verb "allows" is used not "requires". In the third sentence the verb "can" is used not "must" so it appears that employers compliance is "optional". Then any tax deferred must be collected from the employee(s) from January 1, 2021 thru April 30, 2021. As of May 1, 2021 any uncollected tax starts accruing penalties and interest.. I am sure everyone's payroll software will be reprogrammed and ready to go on Tuesday morning. I will be I will strongly advising my clients not to participate.

Yeah, years ago I switched my mouse to my left hand so I could do my calculator and ten key entry with my right hand and my mouse with my left hand.

"WASHINGTON — A debate between the White House and the Treasury Department over President Donald Trump’s payroll tax suspension has delayed crucial information about how the executive order will be carried out, according to people familiar with the matter, leaving businesses across the country uncertain about how to proceed." . . . . . . . "The White House, which is eager to push through a tax cut before the November election, wants the Treasury guidance to ensure that companies, not workers, are held liable for paying the employee portion of the tax when the tax holiday ends." Even for a modest sized small business this could be tens of thousands of dollars of extra payroll tax! No wonder 30 business groups including the US Chamber of Commerce are strongly opposing the payroll tax deferral.

Copied from The Journal of Accountancy: "The U.S. Small Business Administration (SBA) and Treasury issued an interim final rule Monday addressing Paycheck Protection Program (PPP) forgiveness issues related to owner-employee compensation and the eligibility of nonpayroll costs. Specifically, the interim final rule establishes that owner-employees with less than a 5% stake in a C or S corporation are exempted from the PPP owner-employee compensation rule for determining the amount of their compensation for loan forgiveness. The exemption’s intent is to cover owner-employees who have no meaningful ability to influence decisions over how loan proceeds are allocated, according to the interim final rule. The guidance also details a couple of decisions that the SBA and Treasury said are designed to maintain equitable treatment between a business owner that holds property in a separate entity and one that holds the property in the same entity as its business operations. In the first decision, the SBA and Treasury declare that the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or subtenant of the PPP borrower. The guidance illustrates this with four examples. Example 1: A borrower rents an office building for $10,000 per month and subleases out a portion of the space to other businesses for $2,500 per month. Only $7,500 per month is eligible for loan forgiveness. Example 2: A borrower has a mortgage on an office building it operates out of, and it leases out a portion of the space to other businesses. The portion of mortgage interest that is eligible for loan forgiveness is limited to the percent share of the fair market value (FMV) of the space that is not leased out to other businesses. As an illustration, if the leased space represents 25% of the FMV of the office building, then the borrower may only claim forgiveness on 75% of the mortgage interest. Example 3: A borrower shares a rented space with another business. When determining the amount that is eligible for loan forgiveness, the borrower must prorate rent and utility payments in the same manner as on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings. Example 4: A borrower works out of his or her home. When determining the amount of nonpayroll costs that are eligible for loan forgiveness, the borrower may include only the share of covered expenses that were deductible on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings. In the second decision regarding certain nonpayroll costs, SBA and Treasury rule that rent or lease payments to a related party are eligible for loan forgiveness provided that (1) the amount of loan forgiveness requested for those payments is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the business, and (2) the lease and the mortgage were entered into prior to Feb. 15, 2020. However, mortgage interest payments to a related party are not eligible for forgiveness. Per the ruling, PPP loans are intended to help businesses cover nonpayroll costs owed to third parties, not payments to a business’s owner that occur because of how the business is structure."

What I have found out: 1. My clients tax return has been held in"processing" status since April 11th. 2. My client received their state refund via direct deposit on April 17th. 2. No help available over the phone, your only option is to use the "idverify" page at irs.gov. Took an IRS Webinar today on third party authorizations, currently it's taking on average at least 15 business days in order to get a 2848 processed.

In my client's situation there is no change of address or anything else?

Has anyone had one of your clients receive IRS Letter 5071C to asking them to verify their identity before their return is processed. I efiled my client's 1040 on April 11th and it was accepted on the same day. Thanks, in advance,

Copied from Accounting Today: "The U.S. Treasury Department still has yet to tell companies how to handle President Donald Trump’s order delaying the due date for employee payroll taxes, leaving major employers like Walmart Inc. in the lurch. It’s been two weeks since Trump issued his directive deferring the deadline to pay worker’s portions of Social Security taxes from Sept. 1 through the end of the year. But employers, who are responsible for submitting those payments to the Internal Revenue Service, are waiting to hear from the agency on how any tax bill would be handled when it comes due later. “I don’t think there is a bloody chance that, at this point, anybody is implementing anything before Labor Day,” said Adam Markowitz, an enrolled agent and vice president at Howard L Markowitz PA CPA. The Treasury and IRS didn’t respond to requests for comment on when the guidance would be published. Some companies have already shied away from the payroll tax deferral, which Trump touted as a boost for workers as the economy reels from the coronavirus pandemic, because the taxes would ultimately have to be paid unless Congress acts to forgive the liability. Large employers including Walmart, Macy’s Inc. and Procter & Gamble Co. have said they need more details from the IRS. They didn’t immediately respond to a request to comment on whether they would implement the deferral if the IRS didn’t issue any rules by the Sept. 1 start date. The U.S. Office of Personnel Management didn’t respond to a question about whether it plans to defer taxes for federal employees. “Companies cannot do anything until there is guidance,” Veena Murthy, a principal at accounting firm Crowe LLP, said. The order “requires Treasury and IRS to provide some way it can be done. In this case particularly, there really are no answers.” Payroll software providers need time to update their systems, and they can’t do that without guidance from the IRS and Treasury, Markowitz said. And companies have learned the hard way about claiming benefits before having sufficient guidance, he said. Following enactment of the last coronavirus stimulus legislation in March, some businesses quickly took advantage of loans under the Paycheck Protection Program but later found, after guidance was issued, that it might have been in their best interest to ditch the loans in favor of other tax credits or grants, he said. The U.S. Chamber of Commerce has said that many companies are unlikely to implement the deferral, even with the IRS guidance, because it forces a large tax bill on employees in the future and would be very difficult for employers to administer. “Further, the lack of concrete guidance on the most basic of implementation issues presents an untenable situation, making it basically impossible for employers to implement this EO and leaving little choice but for those employers to continue remitting payroll taxes to the Treasury,” Caroline Harris, the Chamber’s chief tax policy counsel, said in a statement. Treasury Secretary Steven Mnuchin has said he can’t force companies to implement the deferral, but said he hopes many companies will participate. Trump has said he would forgive the tax bills if he’s elected to a second term, but that would require participation from a Congress that has been hesitant to cut the funding source for Social Security. The onus is now on employers to provide explanations to their workers about why the company isn’t implementing the deferral and they should prepare to face a potential backlash from employees, Markowitz said. The average employee isn’t going to understand, nor care, that there isn’t any IRS or Treasury guidance, he said. “They’re just going to say, ‘Hey, Trump said I should have 6.2 percent more in my paycheck every week and I don’t." I haven't had any payroll clients ask about this yet

Clients disappointed with tax refunds, expect more from accountants By Michael Cohn August 21, 2020, "Over half of tax clients (53 percent) aren’t positive that their accountant fully minimizes their tax payment, and 46 percent were disappointed by the size of their tax refund last year, according to a new survey. The survey, by practice management software provider Canopy, nevertheless found that 85 percent of those surveyed would recommend their accountant. The top reasons cited by the individual and business taxpayers polled for what they value most about the relationship they have with their tax accountant are in-person communications, the ability to send and receive documents online, and guidance and knowledge about taxes. The top three things they said they would change about working with their accountant are more in-person meetings, more timely response, and better technology to streamline interactions. Taxpayers are increasingly relying on technology for doing their taxes and communicating with their tax preparers, especially during the novel coronavirus pandemic. While offering the ability to exchange documents online with their accountants is extremely important for taxpayers, only 2 percent of the respondents said that their accountant offers an online portal. Currently, the most common ways clients exchange documents with their accountant are during in-person meetings, through hard printouts and via email. “The accounting industry is rapidly changing, but above all, client expectations are centered around technology-enabled support and services as millennials and generation Z start engaging accounting and tax services,” said Canopy chief product officer Larry Furr in a statement Thursday. “While in-person meetings remain indispensable for most clients, we are in a position where this isn’t very likely and being able to access their accountant and documents online is clearly a critical prerequisite right now.” Seventy-eight percent of the taxpayers surveyed said the technology their accountant uses to make tax preparation easy is important. The top technologies they cited for improving the way they work with their accountants were an online way to send and receive documents, text chat for questions and answers, and the ability to set and change appointments online. Business owners are twice as likely as individual taxpayers to say they like being able to send and receive documents online, according to the survey, while women are nearly twice as likely as men to want online chat as a feature. Many tax clients are unaware of the post-filing services offered by their accountants. One out of three clients didn’t know if their tax accountant provides audit protection services. Business owners are two times less likely than non-business owners to know if their accountant provides audit protection services. Thirty-seven percent of the tax clients polled said they don’t know if their tax accountant provides legal tax service."

1. The IRS publishes guidance specifying the authorized formats for the 1099NEC 2. Software providers submit form format designs to the IRS for review and approval. 3. Following IRS approval, then software providers can move ahead Last month the IRS released a draft of Form 1099 NEC which was 2 forms per page On August 18th, the IRS released a new draft of Form 1099 NEC which was 3 forms per page There is no way to know if and when a 4 up format will be released. The software provider form design teams work closely with the IRS on this stuff so they probably know what's going on, however these details usually aren't known by support staff.

Just had my fourth online CPE class about PPP Forgiveness on Tuesday, since the Treasury and the SBA keep moving the goalposts. Many banks have yet to start accepting applications. The probable reason that banks are dragging their feet, is that most banks don't have the staff and expertise to process these applications, so they are subcontracting out the processing of these applications to large CPA Firms. If the "automatic forgiveness"for loans less than $ 150k ever goes thru it would save the banks a lot of money, which would go straight to their bottom line.

Interesting, I paper filed an amended 2018 1040 for a client in late March. She received her federal refund check plus interest a month ago. However she is still waiting for her Oregon refund. Even in years past I remember amended returns taking over 4 months

I didn't look this up but if it's non degree program, can you claim AOC?

Yeah, now that it's become known that this wasn't even an Executive Order, it was an Executive Memorandum which has the force of a f**t in the wind.

Apparently the Treasury Secretary has been receiving heavy pressure from businesses to resolve this SNAFU, because he was quoted today as saying, that business participation in the payroll tax deferral would be optional! I don't even know what to say ?

Copied from Accounting Today: "Employers wait for guidance on payroll tax deferral By Roger Russell August 18, 2020 In what amounted to an end run around Congress, President Trump signed a series of executive memorandums and an executive order on Aug. 8, 2020, to address issues left unresolved by the congressional failure to agree on additional bipartisan stimulus legislation. “It’s actually a memorandum rather than an executive order,” observed Mark Luscombe, CPA and principal federal tax analyst for Wolters Kluwer Tax & Accounting. “The difference is not legally significant. An executive order gets published in the Congressional Record.” While three of the executive actions are not tax-related — addressing enhanced unemployment payment, eviction moratoriums, and student loan relief — the fourth defers payroll taxes from Sept. 1, 2020, to Dec. 31, 2020. “There were three presidential memoranda and one executive order,” said Luscombe. “The order was the one relating to evictions.” The performance platform for the modern firm Firms are facing a new reality in how business is done. Right Networks and Rootworks have aligned front and back-office functions in a powerful... SPONSOR CONTENT FROM “The president has been pushing for forgiveness of payroll tax for some time, but neither Republicans nor Democrats were in favor of it because it doesn’t provide much immediate help, just a gradual benefit over time," Luscombe continued. "They would prefer a stimulus with more of an immediate benefit, but Trump went with a payroll tax deferral because that’s all he felt he could do with executive action without congressional involvement.” “The administration felt it only had the power to issue a deferral, not a forgiveness,” Luscombe said. “The memorandum only applies to the 6.2 percent employee’s share of Social Security taxes. It does not apply to the 1.45 percent employee’s share of Medicare taxes.” In addition, the memorandum only applies to biweekly income under $4,000 or less, which translates to annual income of $104,000, he said: “Some commentators have pointed out that if your salary is variable, you could end up being eligible even if your income for the year ends up being higher than $104,000.” Since the memorandum constitutes just a deferral, will someone have to pay the piper come January? “It’s likely that this would have to start to be repaid in January,” Luscome said. “The Treasury is expected to issue guidance on how the deferral will work and address several uncertainties. A lot of employers are waiting for the guidance to be issued.” “Many employers are concerned about implementation because it’s just a deferral,” he said. “There could be a double withdrawal from employees’ paychecks in 2021. That would be a burden on employees if Congress doesn’t get around to enacting forgiveness.” It’s not currently clear if employers will start deferral immediately, according to Luscombe. “Most employers think the executive memorandum is optional, not mandatory,” he said. “Some employers are worried that employees are not prepared for a future reduction in their paychecks,” he said. “They’re also concerned about getting their systems revised to take care of withholding. And if employees leave between now and the end of the year, will the employer be required to recoup the money out of their own pockets if they can’t get it from the employees starting in January?” The “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster” directs the secretary of the Treasury to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” “Most people think the direction on forgiveness can only be accomplished by congressional action,” said Luscombe. “It’s likely we will get guidance from the Treasury pretty quickly because of the Sept. 1 start date." What a mess!

You need at least some basic paperwork. Have A sell the business to B for $ 1 plus the assumption of the loan, otherwise the interest expense is still deductible on A's Schedule C.

There are many, many different factors that go into determining whether someone is an employee or an independent contractor, as last count I read that 39 separate factors have been identified. The socalled gig employees fall somewhere in the middle. IMHO they are closer to being employees than they are to be independent contractors. And Tom you are totally right the state decides. In Oregon residential contractors for years tried this structure; a general contractor with zero employees, all the work being done by various subcontractors who also had zero employees. Until state law made it mandatory that someone on the job site had to have a workers compensation policy that covered everyone working on the job site, including the independent contractors.

That may be, but I remember about 10 or 12 years ago a discussion where the IRS said that they paid attention to how many days on average it took 1st class mail to travel from the sender's mailing location to their P O Box and that unless it was Certified Mail the postmark was not considered to be the determining factor. As I recall this came up because so many people had access to programs like Stamps.com or there own small postage meter which could allow you to imprint postage on a letter and then mail the letter some days later.

Copied from IRS eNews: "3. Pending check payments and payment notices If your client mailed a check with or without a tax return, it may still be unopened in the backlog of mail the IRS is processing due to COVID-19. Any payments will be posted as the date IRS received them rather than the date the agency processed them. To avoid penalties and interest, taxpayers should not cancel their checks and should ensure funds continue to be available so the IRS can process them. To provide fair and equitable treatment, the IRS is providing relief from bad check penalties for dishonored checks the agency received between March 1 and July 15 due to delays in IRS processing. However, interest and penalties may still apply. Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending. See www.irs.gov/payments for options to make payments other than by mail." I find this a bit confusing, so if my client mails a payment which is due on July 15th on the 15th of July and the IRS records the date of payment on the date they received my client's letter say July 19th, is my clients payment considered to be late subject to a late payment penalty?

AICPA requests guidance on payroll tax deferral By Alistair M. Nevius, J.D. 3 hours ago "The AICPA on Wednesday sent a letter to Treasury and the IRS requesting guidance on the recent presidential memorandum deferring some employee payroll taxes until next year. The memorandum, issued by President Donald Trump on Saturday, defers the withholding, deposit, and payment of the employee portion of the old-age, survivors, and disability insurance (OASDI) tax under Sec. 3101(a) and Railroad Retirement Act Tier 1 tax under Sec. 3201 for any employee whose pretax wages or compensation during any biweekly pay period generally is less than $4,000. It applies to payroll taxes on wages paid from Sept. 1 through Dec. 31, 2020. The AICPA’s letter, addressed to David Kautter, Treasury’s assistant secretary for tax policy, and Charles Rettig, IRS commissioner, requests guidance on several issues related to how the deferral will be implemented. Specifically, the AICPA asks for guidance: Stating that an eligible employee is responsible for making an affirmative election to defer the payroll taxes; Stating that an eligible employee can make an affirmative election at any time from Sept. 1, 2020, to Dec. 31, 2020, and if an employee does not elect to defer Social Security taxes, taxes will continue to be withheld, deposited, and paid; Stating that an “eligible employee” is an employee whose wages are less than $4,000 (or equivalent amount depending on the employer’s pay period) per biweekly period." Providing a model notice for employers to furnish to eligible employees to inform them that the election to defer Social Security taxes is available for the Sept. 1, 2020, to Dec. 31, 2020, period; Stating that the payroll amount used to determine eligibility is a cliff; if the wage amount for a specified pay period is above $4,000 or the equivalent amount based on the employer’s regular payroll periods, no deferral is permitted; Stating that the $4,000 limit should apply separately to each employer of an employee; Stating that it is the responsibility of the employee and not the employer to pay the deferred payroll taxes; Stating which penalties are waived as a result of this deferral, including the penalty applicable to responsible parties; Addressing whether the increase in take-home pay attributable to the deferred taxes can be used to satisfy other employee obligations such as Sec. 401(k) loan repayments, garnishments, and child support payments; and Stating a payment due date(s) for the deferred taxes and a mechanism for employees to pay the deferred taxes." At first it was thought that employers would have recapture the deferred tax from employees beginning with paydates after 12/31/20, which raises a lot of questions about employees leaving, new employees arriving etc, etc, etc! Now after a whirlwind of discussions between Payroll Companies, Employers, the Treasury Dept and the IRS, it is now likely that employees would be required to pay back the tax deferred when they file their Form 1040 on April 15th. Are we having fun yet I am really glad I don't do a lot of 1040s!

The Taxpayer Advocate's Blog details what to do: https://taxpayeradvocate.irs.gov/news/nta-blog-need-help-with-economic-impact-payment-issues-how-tas-can-assist-those-that-qualify?category=Tax News

The House passed a bill in the middle of May which made these expenses deductible. The Senate Banking Cmte introduced a bill to make these expenses deductible two months ago, but it has never been brought up for the full Senate to vote on it.