Medlin Software, Dennis

The employer seems to have already made their decision. It is well established the employer cannot provide money to the employee tax free, no matter what term they use, unless it is to reimburse a direct expense or something else accountable in nature. The likely push back (and mostly the direction I was commenting on) will be from the employees, if any or all of them realize the 20 is taxable remuneration. Dealing with getting monthly or other time frequency allowed accountable reports from 8 employees is not free. Likely the employees will do their part on company time, and the employee will have to beg for then review and store the records. Does not seem like the employer wants to provide the phones, which I think would invoke the non accountable aspect. The one caveat for the employer to consider is what the 20 really costs. Multiply by 7.65% (assuming none earn over the SS limit), and their WC rate. For most, would not be additional UI taxable wages, but possible for a lower wage worker in a high UI wage base state. The reality is, a large number of employers will "reimburse" incorrectly, calling it a stipend or some other term, and will not report it as remuneration. Unless someone inquires, it will never be noticed, or penalized, as a separate issue, since the amount is likely not going to cause a significant "profit" for an auditing agency. I still see employers who do things like pay "rent" for tool or vehicle use, and issue a 1099 to those employees. The employee's tax preparer will not likely notice, as the amount is not likely going to be on a W2, and (most) employees should not be getting a 1099.

Storage devices will fail shortly after start of service, or after many years of service, if they fail. I don't trust new ones until about 90 days of use, and replace every 3 or 4 years. Usual in service failures can be detected and managed by the drive's software, and you will not even notice. In the old days, one would run a scanning program from time to time, which would move data from suspect areas, then mark those areas as bad (not to be used). Likely still the case that all drives come with locked out bad areas, and those will gain over time, but not really affecting use or reliability. The failures I see are human (hiring someone to "move" to a new computer, and they fail), power outages, and allowing some sort of nefarious item to cause problems. Normal power on and off has some small amount of chance of causing issues.

For two lines, a dual sim phone is much easier. The problem is, in the US, these types of phones are hard to come by, and have some issues. For instance, google's cell service is one where you can get and easily use a dual sim phone, but your second line will not be "captive" so certain carriers will not allow certain things. If you use a phone captive to a major, to get all the services, then they likely prevent use of the second sim, even if the phone has it. In my case, the problem was the second line would not use wifi when cell service was not available. I need a major for best connectivity, and the other major for times when the other has no service (when traveling). Two phones (actually three) is what I end up with to accomplish what I want. One for each major, and a google cell as a normally "suspended" alternative. Creative call forwarding settings means whatever phone I have on with reception reaches me. (I also carry a SpotX satellite handheld, so I can text message out when there is no cell coverage.) On the OP, it always makes me smile when such a small change to taxable income causes so much kerfuffle. Most TP's who ask are not in a high enough bracket where the extra taxable covers the time spent researching. Employer can make it easy by a taxable addition, say for the desired amount plus 10%. As someone who has two family members who will eventually depend for a large part of their ongoing income based on my SS numbers, anything which can maximize taxable pay up to the SS limit is not a bad thing.

From the payroll side. Draw could have more than one meaning. Could be an advance against wages, would be withdrawal of (hopefully) profit by owner. Assuming the intent/requirement is to be paid as an employee, then if there are funds available, employee(s) (owner or not) need to be paid at least minimum wage for all time worked. Owner/employees need to meet the reasonable wage parameters. Pay frequency must meet state regulations (if any), so monthly may or may not be an option. If this is the first paycheck the business is to create, then there needs to be consideration to the other issues, such as making sure a UI account is in place, WC insurance, payroll posters in place, W4, I9, etc. Given the knowledge funds will be short, I would suggest not holding any withheld taxes, and depositing with every payroll. (Good advice for most businesses, since there is little to gain on the float, much to lose on not remitting on time, and reconciliation costs are less.) <soapbox>Big miss for many owner/employees is remembering to treat the employee part of the process as if it was a stranger and comply with all regulations for any employee. No "I want to withhold this", and instead, withhold based on the last valid W4 received. No "pay themselves whenever and whatever they want, but collect time card information, pay as often as required via the posted pay cycle the business has, and for at least minimum wage - more if possible to meed reasonableness "tests". None of the one big paycheck a quarter or year shenanigans - since there will likely be use of the money (withdrawals) during the entire year. Interestingly, the owner/employee who does not do the above is usually not caught by a tax agency (assuming reasonable taxes are paid in some form), but are "caught" when they want or need to sell, or if they want or need to borrow against business or against income and struggle to quickly fudge up the books to show the proper results.</soapbox> If the funds run out, then the business needs to obtain more funds, or lay off the employees. (Owner/employees can sometimes claim UI.)

I am sure many lessons We are fairly like minded, which made the working relationship both easy and hard. The big lesson he shared with me is there is no such thing as an "accounting emergency". I have tried to apply this to as many things as possible, the "not an emergency" principle.

Me too. I see footnotes most often in email, about privacy and such things. Funny thing is, unless sent via some sort of scrambled secure email, the email must be considered public, so such notice is moot. It is public knowledge email providers, such as gmail, scan the content (to serve ads / make money), and "security/spam" vendors who do the same. Sometimes I ask those who send messages with such footnotes if they are aware any message they want to cover by privacy regs (230?) must be send scrambled and secure... and more often than not, they had not considered sending email via normal channels is not secure or private.

Ant that, my friends, is how Medlin Software was born in the late 70's early 80's. Jerry had an accounting franchise, and wrote his own programs to save time (handle more clients). He shared his programs with others in the same line of work, and so on and so on...

The IRS will throw a wide net, and see who fail to wiggle out. I have been subpoenaed merely because I provide payroll software for others to use, and the case had nothing to do with payroll (it was tax prep fraud, where the preparer was faking returns after the fact, and collecting refunds in the names of their clients). The IRS found my software on one of the computers... There are those who are paid to really manage payroll, and thus, openly accept liability. They usually do nothing without first having the funds available, deposit every payroll, and properly limit exposure. There are those who only do calculations and provide unsigned reports, sort of a grey market. Then there are the rest, who likely do not realize their liability. Whether or not someone is eventually held liable, defense is not free!

What always strikes me is how the seemingly smallest thing can affect one's life. One of our kids had an inkling to go one way with his career, which said career is gone until at least the middle of 2021, and instead took a liking to an internship he was doing, and has become a medical researcher - at present working with COVID patients. He is considering the MD route if he can find someone or something which will pay his way (he refuses to be a freshly minted MD with 20 years of work to pay his med school debt). When I look back, I see a few key twists in my life choices as well. Hindsight and all that...

The SBA can release all the forms they wish. What matters to the recipients is what the lending institution uses... which like the application, may have more required items than an SBA designed form. The "experts" still say to wait, as they believe there will be more changes, possibly a plain no form required forgiveness below a certain threshold.

Received this today. My only practical reply was to suggest to contact their local Congress person and Senator (and if the businesses need the funds, they should be adjusting their deposits accordingly, instead of counting on a timely refund). "In the 2nd quarter many of them qualified for the retention credit on form 941. From the clients we have spoken to, none have received their refunds yet. I have been researching and it is only suppose to take 6 to 8 weeks. I am at a loss as to what to tell our clients. Do have have any idea why the refund is taking so long? Thanks for any information."

Yikes. Sounds like the new owner bought a job, and one that likely has not been paying well.

Interesting situation. Since most purchases are assets only, it may be the buyer's perspective the price was 185k, since they likely care not about the sales tax lien, and may only care a little about the creditor (if it is a key supplier they also want to use). May have some sort of off sale license to account for separately, depending on the situation.

The third version of the 941 was not a big programming change. The only issue was the late release of the final version means many, like me, already submitted Q3 before the new form was available (since so few "memo" deferred). The 944 and 943 will also be different, with an additional page for each...

I have a customer who sent in the Q1 layout for Q2, and it was rejected. If (now un)common sense were to be used, the Q2 form can still be used for Q3, but only time will tell what those folks in the forms design and processing locations have determined. The instructions for Q2 state not to use the Q1 form for Q2, but there is nothing that specific in the Q3 instructions (that I noticed).

After review and implementation (only one person's opinion!) it appears the second revision may still work, unless the employer elected to defer (the Presidential memo). Page 3 has a different "95" code, which should allow the scanning software to interpret each revision appropriately. Of course, that is using logic, which may not apply in this case, so use the old revision at your own risk. Personally, I mailed my form yesterday, before the new form dropped (I did not defer), so we will see if it bounces back.

The IRS dropped a third version of the 2020 941 yesterday. The new version is for Q3 and Q4, with some changes made for the Sept-Dec SS deferral option. While I have no inside information, I suspect any of the three revisions can be used, as long as the figures are correct, and the revision used will handle the employer's needs for the quarter being reported. It appears the IRS will differentiate the revisions via the "95" code at the top right of each page.

Federal reporting has wide leeway. They will happily take multiple 941 forms per EIN, as well as multiple sets of W2 forms per EIN. (They prefer one set per EIN, but there is no such requirement.) Other common reasons for multiple reporting: Internal accounting (one set of reports per location for instance). Multiple state reporting (one set of reports per state, which will become much more common in the new remote work scenario we live in). Multiple "other" jurisdiction reporting (such as having multiple local taxes, in an area without common reporting).

Nice of the spouse to help, likely because of (now un)common sense instead of worrying about "no good deed goes unpunished". Keep in mind it is clear the new client does not keep records well, so make sure you have built in a fee to act as their "file cabinet".

Missing, or left twisting in the wind: What figures to use on 941's and W2 forms for SS wages. How will reporting deal with SS wages and SS withheld not "matching"? How about in 2022 if the claw back is via a paycheck deduction (where allowed)? What about states where claw back via deduction is prohibited, or where an employee does not agree? (If someone really wants to defer, my suggestion is to not defer, but to create and execute a binding contract for a loan, with the loan being for the amount of SS withheld each paycheck, to be paid back before May 1, 2020, and with interest (waived if paid back before May 1, 2022). Such a contract likely solves any state claw back issues, and if unpaid, there are well known means of collection or handling the uncollected amount as additional wages.) What about those who apply for/receive aid, and have more disposable income for 2021, and less for 2022? How about garnishments? Same issue with disposable income. I am sure there are other issues yet to be discovered.

If withheld, it must be remitted. The employer cannot hold the withheld amount. The workaround that at least partially allows the deferral, without tweaking the IRS rules, is to not withhold at all, which makes the amount due zero. Another of several possible flaws is the lack (not that I looked hard) of any rule allowing anything other than legally required amounts to be withheld - in other words, will withholding more than the actual calculation, in early 2021, be permitted by an actual regulation? I think there was some mention to avoid causing issues with state laws (such as collecting a debt from a paycheck illegally.) There are localities which prohibit anything other than required withholding, not even allowing side agreements. There cannot be some sort of doubling or new calculation to recoup. Employer will have to track the deferred amount, and come up with a repayment method. If not repaid, then the amount itself becomes taxable wages, subject to taxation adjustments (amended forms likely). So much left unsaid, to chance, or to slip by via election not to enforce actual regulations... If I were forced to defer, the only way I could protect myself would be NOT to defer, but to enter into an actual loan agreement, contract, with each employee who wants to "defer". Then I would have something I could enforce with terms a judge could accept. Would need to have some sort of interest, if not repaid by end of April, so the loan would not be taxable wages too.

For clarity, many employees, and some employers, believe it is SS and Medi which could be deferred.

You probably will, once the first checks dated on or after Sep 1 are released, and the employees start asking their employers for the extra money, and the employers pass the buck to you. I have thousands of customers. Only one proactively asked, and it was from their personal paycheck perspective (owner/employer) as to how they should setup to get a larger paycheck. The others who have taken notice and contacted me have agreed, "much ado about nothing", until the employees start griping about their "missing" 7.45% "raise". While I have not completely formed a possible notice for employers to share, I expect to have to do so, to help employers not have to waste time answering the same questions over and over, and try to focus on staying viable. I have a slight hope employees, as a rarity, might just accept their employer is acting properly, given the situation, but I know better, and many employees will you know what and moan about their missing 7.45%.

When the treasury lead says it is optional, and with no apparent rush to put out directions for employers and employees, the only conclusion is it is much ado about nothing. Unless it is not optional;, I see no reason to modify my software. Those that want to take the risk and defer can already do so my manually changing the calculated value. I do not want to make it easy for an employer to get into a debt situation. The one piece which struck me is how employers are required to withhold (existing rules), and how the memo only offers deferral of payment.

Of my customers who have inquired, or responded to my email, only one was actually thinking they needed to do something. All others are planning on not deferring, unless there is absolutely no option. Their concern is the simple one, since it is a deferral, they should hold the money anyway (since it is not theirs to use!), so there is no point in deferring. Those who are still in business do not need to defer for three months, and they are worried about the cost of managing the deferral. If there comes a point where there is forgiveness, most figure they will be able to get a refund or credit on a future return. The rub for the employers is dealing with employee inquiries. So far, the employees, except for the obstinate ones, seem to be satisfied with the answer of "until more details are released", "unless the deferral is a requirement", etc.