With December comes the reality that many 2020-specific rules, relief and deferrals expire at the end of the month. This means vigilance is required of payroll professionals in reviewing and re-reviewing checklists and preparing for changes that literally happen overnight on December 31st. Ana Woods-Hill, CPP, Manager of Managed Payroll with Wise Consulting, prepared a list of must-review items for payroll professionals.
(*all expiration dates are accurate at the publishing of this article but could be subject to change)
- Student loan relief is set to expire on 12/31/2020. The expectation is that garnishments will resume with the first payroll in January 2021. However, the DOE has advised that companies not resume garnishments until they receive word from the agency in writing. Have you verified your settings in the HCM system to prepare for the change? Have you validated that someone can be actively retrieving mail during this critical time of year?
- 401(k) loan suspension will expire on 12/31/2020. Employers have been able to opt-in to allow employees to suspend loans. If you opted into this program and you haven’t heard from your retirement vendor, reach out to them. Partner with your retirement vendor to ensure a compliant first payroll in January 2021.
- Employer Social Security tax deferral – Under the CARES Act, employers had the option to defer the deposit and payment of their portion of Social Security tax on payroll periods from 3/27/2020- 12/31/2020. CARES Act employer tax deferrals cannot be taken for payrolls dated after 12/31/2020. Wise can continue to help clients with employer Social Security deferral reconciliations to ensure alignment with IRS invoices set to be sent to employers in 2021. https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020
- Employee Social Security tax deferral (‘payroll tax holiday’) – Employers could allow employees to elect to defer withholding the employee portion of Social Security taxes from paychecks issued between 9/1/2020-12/31/2020. Employers who offered this to eligible workers must collect or repay the taxes during the first quarter. https://templatelab.com/payroll-tax-memorandum/
Credit-Related Federal Legislation:
- CARES Act payroll tax relief credits – For employers who kept employees on their payroll when financially impacted by COVID-19, a refundable credit of 50% of up to $10,000 in wages per affected employee paid between 3/12/2020 and 12/31/2020 can be claimed. *There is currently no discernable process by which to handle credit-eligible wages that are accrued in 2020 but not paid until 2021. Contact Wise Consulting for more information. https://www.irs.gov/coronavirus/employee-retention-credit
- FFCRA payment compliance and credit eligibility for paid leave between 4/1/2020-12/31/2020 should be checked and limits obeyed. *There is currently no discernable process by which to handle credit-eligible wages that are accrued in 2020 but not paid until 2021. Contact Wise Consulting for more information. https://www.dol.gov/agencies/whd/pandemic
- California COVID-19 Supplemental Paid Sick Leave is valid for food sector workers from 4/16/2020 and for non-food sector workers from 9/19/2020. Both are set to expire on 12/31/2020. https://www.dir.ca.gov/dlse/FAQ-for-PSL.html
- Colorado’s COVID-19 Emergency Paid Sick Leave (‘CO-EPSL’), effective 7/15/2020-12/31/2020, extends some of the FFCRA’s paid sick provisions for employers with over 500 employees, but does not offer tax credits. https://leg.colorado.gov/sites/default/files/documents/2020A/bills/2020a_205_enr.pdf
- Teleworker taxation: As workforces shift to temporary and potentially permanent work-from-home scenarios, states are having varied responses which impact both withholding and unemployment tax. Some states are making rules specific to COVID, some want to stick to original nexus rules, and some have not made their stance clear. This is a complex and evolving issue that warrants monitoring and should be considered when making critical business decisions.
Remember: Be mindful if you have an extra pay period in December with checks dated 12/31/2020. The payroll date is the determining factor in whether COVID-19 relief (student loan and 401(k)) etc., would still be permissible on that check date.
Keep in Mind: Even though Form 7200 must be filed by the last day of the month following the end of the quarter, be aware that you may have more time to file for a refund claiming FFCRA/CARES credits via a Form 941-X. If you are interested in claiming retroactive credits, contact Wise Consulting to see how much you might be eligible to claim. HCMHelp@WiseConsulting.com or 800-654-4550
*This information is not intended as advice. Wise suggests that original sources be checked for information regarding all COVID-related legislation and regulations.