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Payroll Tax Holiday


Edsel

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Among the hundreds of posts, there may already be one that exists on this topic.  If so, please indulge.

What is this "payroll tax holiday" in 200 words or less.  Do the payroll taxes just go away, or does the company simply have longer to remit them?  If the latter, it would appear the employer could be painting themselves into a corner.

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See section 2302 of the CARE ACT,  on page 71 and 72.   https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

Basically it is a deferment, cannot be used by PPP recipients who receive loan forgiveness.

There is also a payroll tax credit available to certain employers under sec 2301 of the act, not sure exactly how that is going to tie in.

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7 hours ago, Edsel said:

Thanks for this Dan.  The aforementioned credit is 50% of wages for "qualified" employees.  That's where I'm stuck.

Tax jargon uses the word "qualified" to avoid having to tell you more.

Sounds like you are asking about the employee retention credit.  Look at the new IRS Form 7200 form and instructions.  This is arguably the easiest (no bank involvement!), but not always the most beneficial.

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8 hours ago, Lion EA said:

Do read the act

Hello my friend from CT -

It must be annoying to those of us who are well-versed to read questions from people like myself who ostensibly do not do the least bit of research on our own.  A probable misuse of what this forum is intended for.

I lean, perhaps unfairly, on other members to minimize problems in reading material.  There are a couple of factors which can send me to forum when dealing with reading.  Let's take this CARES Act that you wish for me to read:

  1.   Have you read the act?  It is several hundred pages long.  If I can ask a question on a forum such as this, I will do so.
  2.   Even if I had the act in front me for 24 hours, I could not understand the language written by legislative legal assistants who try to leave no stone uncovered in their verbose styles.  Even still, their writing will invite "technical corrections".

Lion, you are great and helpful member and I would not provoke you for any reason.  Sometimes "reading the act" will work for me, but often it will not.

 

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I don't know the act, and have been trying to deal with it as little as possible, only as it can help my clients or answer their questions. But, none of us are experts yet. We do have to read the parts we need for a specific client question. And, then yes, ask others what that means to them, until we get more analyses written in tax preparer terms instead of legal terms. I've been taking webinar after webinar on the parts my clients have asked about. And, not getting nearly enough returns prepared nearly fast enough. So, I'm getting cranky and probably should apologize for that short answer. However, we do have FAQs now as well as the act, so reading first would help you. And, Dan told us that section is only two pages long, so I think those two pages of the act and the FAQs or another analysis would bring you some understanding. "What is this..." is a pretty broad question.

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On 4/8/2020 at 1:14 PM, Medlin Software said:

 

Look at the new IRS Form 7200 form and instructions.

I'm back to the "qualified" wages.  Thanks, Medlin, for sending your suggestion my way.  Even after reading this, the language is so stilted and circular that I don't know what wages qualify for the credit.

Form 7200 is really for an "advance" credit and only exists when the credit is anticipated to be more than the taxes themselves.  Maybe the example in the instructions is clear enough.

A credit is available (on the 941) of 50% of "qualified wages"  Emphasize this is a credit and not a deduction. 

  1. Payroll taxes (and deposits) for the 2nd qtr are $8,000 and the credit is $5000.  This results in an overpayment and the future payroll tax deposits may be reduced by $5000 to take advantage of the credit.  Form 7200 is not appropriate.
  2. Payroll taxes (and deposits) for the 2nd qtr are $8,000 but this time the credit is $10,000.  Again, the overpayment of $8000 can be applied to future tax deposits, but this still leaves $2000 on the table for the employer.  Form 7200 is now filed to claim the extra $2000, and should result in a cash refund.

No problem with the Form 7200, but still stuck on what qualifies as "qualified wages."  Seems to be a double threshold - one for companies with up to 500 people, and another for companies with up to 100 people.

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I think it's the wages you report on Form 941 but NOT including wages you use for another benefit, such as PPP forgiveness. I don't think it kicks in until you're filing 2Q Forms 941, so we have lots of time to continue getting clarifications that are arriving almost daily. I'm sure you know as much as anyone else; but if you're unsure, you could find a good payroll company to work with your payroll clients. (I got rid of all my payroll clients to places like Paychex, so I don't have to learn the finer detail of this one!)

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