IRS’ tips from the top at 2020 APA Virtual Congress

APA Congress

The American Payroll Association’s annual Congress, held during the week of June 2, was anything but typical.

At Tuesday’s first workshop, Payroll Changes for 2020 and Beyond, Andrew Garboden, CPP, Director of Payroll Training at the American Payroll Association and Curtis Tatum, Esq., Director of Federal Payroll Compliance at the APA, reviewed the most significant changes at APA’s virtual Congress.

Covid-19

The impact covid-19 has had on businesses in general, and payroll in particular, is inescapable.

Tatum reminded the audience of something that seems to have gotten lost in the weeds—the ability to defer the deposit of your 6.2% share of Social Security taxes doesn’t affect your Social Security tax liability.

Although the federal response to the covid-19 crisis has been overwhelming, Garboden concentrated on states’ responses. Specifically, he commented that many states’ paid sick leave laws were enacted long before covid-19 became a household word and those laws still apply.

Some of those laws, according to Garboden, already cover such covid-19 items as business and school closures, stay-at-home orders and exposure to communicable diseases. Upshot: Even if you’re off the hook to provide paid leave under federal law, you may still be required to provide it under state law.

He also noted Maine (beginning next January) and Nevada have paid sick leave laws that are the equivalent to PTO—employees don’t need much of a reason to call in sick.

Predictive scheduling laws and local ordinances, which require you to give employees a certain amount of notice before you change their shifts, weren’t suspended during the pandemic, Garboden added.

Social Security number truncation

In non-covid-19 news, Tatum reminded attendees of the final regulations allowing employees’ Social Security numbers to be truncated on their 2020 W-2s. But, he pointed out, most states are still on the fence about whether they will accept truncated SSNs on Copy 1.

According to Tatum, in response to an IRS survey of members of the Federation of Tax Administrators, only seven states—Idaho, Indiana, Iowa, New Jersey, New Mexico, Ohio and Virginia—will allow SSN truncation on Copy 2. Three states—Montana, Utah and West Virginia—will not allow SSN truncation at all.

What a long, strange trip it’s been

Despite the switch to a virtual format, Sunita Lough, Esq., deputy IRS commissioner for services and enforcement and Janine Cook, Esq., deputy chief counsel for exempt organizations and employment tax, were able to reach out to Congress attendees with critical payroll information.

Lough caught attendees up on the IRS’ efforts during the pandemic. Most IRS offices began shutting down in mid-March, she said. Staff that could work from home did, she continued, but not everyone could work from home.

Offices are reopening in three, four or five states per week, depending on governors’ orders.

Lough said the IRS now faces 10 million pieces of unopened mail, including your first-quarter Forms 941.

Pandemic-related guidance

According to Cook, the IRS has published 170 pandemic-related FAQs. Ever wonder where they come from? She spilled the beans—they come from you, the APA and law firms. And the IRS is working on even more FAQs, she added, so stay tuned.

Cook reviewed the pandemic-related tax credits, pointing out a key distinction: While the paid leave provisions and tax credits are mandatory, the employee retention credit is discretionary.

She also noted a split in federal agency authority: The Department of Labor takes care of the leave and the IRS takes care of the tax credits. This is important to keep in mind, as enforcement efforts go forward.

Cook promoted a new two-page IRS publication on the pandemic—Pub. 5419. It’s easy to read and in a flowchart form.

Deferral of Social Security deposits

The CARES Act allows any employer to defer its 6.2% share of Social Security taxes through the end of the year. Deferrals could begin on March 27—right at the end of the first quarter. Deferrals must be reconciled on Form 941, Cook said, but not the second quarter form. The IRS is working the issue, she added.

Advances on credits

You must fax (no paper or e-filing) Form 7200 if you want an advance on your tax credits, Lough said. The IRS is processing about 200 Forms 7200 day. Here’s the rundown, according to Lough:

  • 10% of the forms are incomplete or inaccurate, preventing the IRS from processing them in a timely manner.
  • The forms are matched to prevent fraud; the IRS has active fraud investigations pending.
  • Mistakes will be corrected by making interest-free adjustments on Form 941-X. Changes to the form are in the works.