Larry Elder Recommends Rush Tax Resolution

Another Great Endorsement of Rush Tax Resolution. Listen to Larry Elder on the Air – Recommending Rush Tax Resolution!

 

 

Larry Elder
Larry Elder Recommends Rush Tax Resolution!

Best-selling author and radio talk-show host Larry Elder is only recommending our firm, Rush Tax Resolution. Larry has been at our firm, has met with our staff, and has investigated actual results and testimonials from our clients.  Elder was extremely impressed with our ZERO complaint history, and with our incredible results.

Larry is the recipient of a star on the Hollywood Walk of Fame.  He has hosted the longest-running afternoon drive time radio show in Los Angeles, beginning in March, 1994 called “The Larry Elder Show.”

Known to his listeners as the “Sage From South Central,” Larry sizzles on the airwaves with his thoughtful insight on the day’s most provocative issues.

The “Sage” engages a blend of fiscal conservative and social liberal-with attitude-Elder’s limited government/personal responsibility views have fueled controversy and made him one of the most in-demand radio personalities cable news pundits in the country.

 

About Larry Elder

Larry created, directed and produced his first film, “Michael & Me,” a documentary that examines the history and use of guns in America. It was released in August, 2005.  He has also written several best selling books, such as:

Larry was host of the television show, “Moral Court.”  In the fall of 2004, Elder returned to television with “The Larry Elder Show,” an hour-long, multi-topic show.  Elder was the subject of profiles by both “60 Minutes” and “20/20.”  In 1999 he received an Emmy for “Best News Special.”  He was the reporter for several episodes of the groundbreaking PBS “National Desk” series, including “Redefining Racism: Fresh Voices From Black America.” His PBS work earned him a 1998 AEGIS Award of Excellence, a 1998 Telly award, and a 1999 Emerald City Gold Award of Excellence.

Larry has established the Larry Elder Charities, a non-profit organization that will contribute to groups and individuals offering non-government, self-help solutions to problems of poverty, crime, poor parenting, dependency, and education.

 

We are very proud of the fact that Larry Elder has chosen Rush Tax Resolution as his top choice for a tax relief firm that you can trust, and that delivers verifiable results.

 

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Choosing a Reputable Tax Preparer: 10 Things to Look For

Why is it important to find a reputable tax preparer? Preparing tax returns after a stressful year, especially after COVID, is the last thing you want to do

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The IRS routinely requests taxpayers to keep up to date on constantly evolving rules surrounding potential tax refunds and deductions. These include required forms and considerations, but also understands that these requests might be a little out of scope for many who struggle to keep up amid dozens of other responsibilities and changes. This is why it’s legal to have someone else prepare a tax return for you – provided you do it right.

The most important piece of information to understand is that professional and reputable tax preparers are equipped with the means and permission to create an accurate tax return based on the information you provide, and as such, the actual accuracy of the return will remain your responsibility.

This means the IRS will come to you with questions about the return, even when it’s been prepared by someone else. As such, when choosing to work with a tax preparer, making sure you find a reputable tax preparer with experience is key. This is more important now than ever, in the face of many changes made to both individual and corporate taxes as a result of the coronavirus. Here is what you need to know.

Beware of Unrealistic Claims

The job of a reputable tax preparer is to take the information you provide them with and create an accurate and comprehensive individual or corporate tax return, while advising you on applicable refunds and deductions. They can’t work special magic or persuade the IRS to somehow charge you less than what you owe the government.

They may help you understand what refunds you are and are not eligible for based on the information given, but they will not find exclusive refunds for you, nor find refunds other tax preparers wouldn’t think of. When looking for a reputable tax preparer, look for consistency and accuracy, rather than exaggerated claims. 

 

Ask for Their PTIN!

All professional tax preparers must have a preparer tax identification number (PTIN). This number is provided on your tax return, alongside the preparer’s signature, when you file your tax return. This lets the IRS know that a professional prepared your return, and acts as an additional measure of verification, security, and recourse for taxpayers who have been scammed by abusive return preparers.

Note that a PTIN is also critical if you choose to allow your tax preparer to receive any and all correspondence from the IRS regarding your return, via the third-party authorization checkbox on IRS forms.

 

What Are Their Professional Qualifications and Credentials?

There are steps and requirements to becoming a professional reputable tax preparer, and the IRS takes fiduciary duty and taxpayer representation very seriously. Only attorneys, certified public accountants (CPAs), and enrolled agents can represent taxpayers before the IRS on matters such as tax returns, audits, collections, and so on.

This is important because should your tax preparer be asked to represent you in the case of an audit, they will need the proper credentials. Only preparers who are seasonally enrolled in the IRS Annual Filing Season Program have the limited right to represent taxpayers whose returns they prepared and signed, should they be audited.

If you want to make sure that your tax preparer can help advise and represent you should the IRS challenge or question your return, you will want a reputable tax preparer with years of experience in accounting, tax advice, and/or tax law.

 

How Are They Adjusting Returns for COVID?

Individual and employer tax returns will have to be adjusted for the coronavirus measures the Treasury and the IRS has put through, including PPP loan tax considerations (whether they’re tax-exempt, whether they can be used to pay business taxes, etc.), payroll taxes and applicable tax refunds and credits (such as the sick and family leave credit and the employee retention credit, and more.

Deadlines have also been pushed forward to buy taxpayers more time to understand their situation and figure out what does and doesn’t apply to them and their returns.

 

Who Will Be Preparing Your Tax Return?

When working with a company that offers tax preparation services as part of a larger suite of tax services, it pays to make sure that you know who will be responsible for your specific case – and whether they are qualified, as well.

You should be working closely with your preparer to ensure that the information you provide them is not only accurately used to prepare your tax return, but also safely transmitted and promptly deleted. Don’t work through a middleman! Reassure yourself that all sensitive information is transmitted safely either physically or via encryption, and not needlessly stored.

 

Never Sign a Blank Tax Form!

Be careful what documents you sign. The IRS warns of abusive practices in tax preparation services not just out of an overeager sense of caution, but because it is a real danger. Tax preparation fraudsters can cost you hundreds of thousands of dollars.

 

Check Their Reputation and Years of Experience

One of the great benefits of the internet is that it’s an unparalleled archiving tool. If you know where and how to look, you can dig deep on someone’s professional history and competence across years of service. Figure out through in-depth reviews, local testimonials, and real-life stories whether the tax preparation service you are considering is the right pick for you.

 

Make Sure You Know the Timeline

Tax preparation is not necessarily a simple process, but an experienced tax preparer should be able to tell you what they need, when they need it, how and where your information will be stored and for how long, and roughly when your return will be completed and back in your own hands.

 

Be Sure You Can Contact Them Thereafter

A reputable tax preparer will only create a return on the basis of multiple forms, total income, your previous deductions, tax credits you know you are eligible for, and other important information. But even then, the IRS may want to know more about your return and may ask you some questions thereafter. Understanding the itemized deduction advantages for taxpayers can significantly impact your tax situation. By maximizing these deductions, you can potentially lower your taxable income and save money. It's essential to discuss all relevant deductions with your tax preparer to ensure you take full advantage of available benefits. When considering the standard deduction advantages and disadvantages, it's important to weigh the potential tax savings against the opportunities lost by not itemizing. Many taxpayers may find that the simplicity of the standard deduction is appealing, especially if their eligible deductions are low. However, others with significant deductions may benefit more from itemizing, so it's crucial to evaluate your unique financial situation.

It’s a good idea to know what your tax preparer’s policy is on follow-up questions. What channels should you go through to best get a message to them should the IRS contact you about your prepared return.

 

Why Having a Reputable Tax Preparer is More Important Than Ever

We each have our own worries and responsibilities. Finding ways to simplify that list can help us focus on other tasks and reinvest precious time into the things that matter most to us. Preparing tax returns after a stressful and exceptional year, especially when given the changes and considerations to make due to COVID, is probably one of the last things on anyone’s mind. For those managing their finances, there are essential tax preparation tips for homeowners that can help streamline the process. Understanding the deductions available for mortgage interest and property taxes can significantly reduce the tax burden. Additionally, taking advantage of energy-efficient home improvements may provide further benefits when filing your return.

Yet that will not stop the IRS from imposing its deadlines on 2020 tax returns. Come tax season, the IRS will start penalizing taxpayers who haven’t prepared a return and haven’t filed for an extension either.

By working with Rush, you can assure yourself that you’re in good hands. Our credentialed preparers have decades of experience in helping taxpayers make sense of their taxes.

I Owe Money to the IRS, What Do I Do?

If you owe money to the IRS, you may feel helpless and unsure of what to do, but you have options. Our tax professionals can help you find a solution that works for you.

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You might feel like IRS debt puts you in a hopeless or even shameful situation but let us assure you that it doesn’t. Over 11 million Americans owe back taxes to the IRS, and sometimes, something as simple as missing a single tax return or being late with your payment can trigger a minor debt that builds up into something greater over time. Thankfully, there are ways to resolve a debt to the IRS, even after years of penalties and interest.

If you owe money to the IRS, the first thing to know is that there are very few ways to fully cancel your debt. The IRS will expect payment in some shape or form – but given the right circumstances, you can greatly delay when you must pay, or reduce your debt significantly. Let’s explore each of your options.

 

What Are My Options If I Owe Money to the IRS?

There are three general forms of recourse available to taxpayers who owe money to the IRS. These are: Taxpayers experiencing financial difficulties may find solace in exploring options such as installment agreements or offers in compromise. Additionally, those uncertain about their current financial standing can benefit from checking your irs refund status, which helps clarify any pending refunds that could alleviate their tax burdens. Understanding these options is crucial for effective financial planning and navigating potential resolutions with the IRS.

Depending on how large your debt is, and how long you’ve gone without paying the IRS, you may be subjected to different collection actions, which include liens and levies. There are different ways of dealing with these collection actions, too.

If you owe money to the IRS, the first thing to do is to get up to date on your tax returns. If you haven’t filed in a while, you will need to make sure you’re back up to speed, or you won’t be able to seek certain forms of debt reduction, nor complete a payment plan with the IRS. Keep in mind, if you are self-employed or must otherwise make estimated tax payments, then making sure you continue to make your payments is also important, even if you can’t pay off your debt yet.

 

Seeking a Reduced Debt 

If you cannot afford to pay off your debt within 120 days, nor afford to make monthly payments for six years or until your debt expires, then the IRS may be persuaded to an offer in compromise.

This is an offer the taxpayer must prepare and send alongside an initial payment. The IRS can either accept the offer or reject it. Interest continues to accrue while the IRS deliberates the offer in compromise, so making an offer the IRS is likely to accept is important.

Many factors go into the IRS’s deliberation of an offer in compromise. The most significant factor is your reasonable collection potential (RCP) based on your expendable income over a certain period, and the total value of any non-exempt assets you own at their quick sale value (QSV) or liquidation value. The IRS offers an online pre-qualifier tool to help taxpayers weigh their options but note that it is no guarantee that the IRS will accept your offer.

Penalty Abatement

Under certain circumstances, first-time taxpayers may be able to request penalty abatement from the IRS when seeking to pay their back taxes. This would remove additions from your owed tax such as penalties, fees, interest, and even certain taxes. The circumstances for a penalty abatement are quite strict, and the requirements for filing the right form can be confusing. A tax debt professional can help you navigate your options for abatement.

Tax debt professionals are your best option for formulating an effective and reasonable offer in compromise. They know what to look for in a person’s financial past and circumstances, and how low the IRS will be willing to bring the debt. Offers in compromise are never a guaranteed option but may be the best one available to taxpayers with no hope of consistently making monthly installments to eliminate their debt in a few years’ time.

 

Arguing Against Your Liability

While rarely an option, some taxpayers receive a tax liability they did not deserve due to an error on the IRS’s part. A tax professional can help these taxpayers bring their evidence to the IRS’s Independent Office of Appeals or the US tax court and argue doubt as to liability.

For example, the IRS might have sent you a revised tax bill after deciding you did not qualify for a certain deduction. You can appeal this decision and provide the necessary evidence to prove that you are qualified for the deduction.

 

What Happens If You Don’t Pay?

If you owe money to the IRS and ignore your tax debt for long enough, the IRS will begin to pursue specific collection actions against you. The government is within its right to use these actions to leverage taxpayers to pay, and its ability to seek payment outstrips that of any other creditor. The two most significant tools at the IRS’s disposal are liens and levies. In some extreme cases, failure to respond to tax obligations could even lead to jail time for unpaid taxes. This course of action is typically reserved for those who have willfully evaded their tax responsibilities, highlighting the seriousness of the situation. Taxpayers should be aware that the consequences of ignoring tax debts can be severe and long-lasting.

Liens can be leveraged almost immediately after you’ve missed your deadline for paying your back taxes, depending on the size and nature of your tax debt. A tax lien is a legal claim on all your property, effectively allowing the government to call dibs on everything you own until you pay your debt.

This isn’t a physical claim of any assets or accounts but does interfere with your ability to secure a loan using your property as collateral or liquidate assets without first paying your tax debt.

Levies are a physical claim of an asset, property, or a portion of your monthly wages. The IRS can make your employer withhold a portion of your wages every month if you are eligible, empty out a bank account, or claim an asset such as a secondary vehicle or non-primary residence, until your debt is paid. Collection actions such as levies can be avoided or worked around in certain ways, such as declaring yourself currently not collectible.

 

How Rush Tax Resolution Can Help 

Qualified tax professionals can get you out of trouble with the IRS, not just by helping you navigate around the IRS’s rules and collection actions, but by advising you on the best possible path towards debt resolution.

Experienced tax attorneys know how the IRS works, and how the government leverages collection actions against indebted taxpayers. If you owe money to the IRS, Rush Tax Resolution will work with you every step of the way to get back into a good standing with the IRS, and even reduce the amount you owe.

5 Tips for Filing Your Employment Tax Returns

Learn how to avail specific tax credits and get the relief your business needs. Read tips on how to properly file your employment tax returns with Rush Tax Resolution.

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Businesses must file quarterly or annual tax returns detailing what and how their employees were paid, and report wages withheld for payroll tax purposes (for Social Security and Medicare). This means both the employee portion (withheld from wages) and employer portion.

There are several forms to consider when filing employment tax returns. Business owners must make sure to file the right one. The IRS issues harsh payroll tax consequences for failing to file, and audits returns that don’t match the information they received from employee tax returns and third parties.

 

Use the Right Form When Filing Returns

Some small businesses pay employment tax once a year. Others must pay on a quarterly basis. Businesses file either Form 941 or Form 944 based on how they file employment taxes. These should not be used interchangeably. There are designated filing requirements for both forms.

Form 941

This is the Employer’s Quarterly Federal Tax Return. It is used to report:

The IRS may specifically advise an employer to file quarterly.

Form 944

This is the Employer’s Annual Federal Tax Return. It is used to report the same taxes as Form 941, if the total amount of calculated tax owed is $1,000 or less.

This form cannot be used unless the IRS provides an official notification to a business that they are eligible to use it. When a business’s tax liabilities expand, said business can switch to Form 941 if the IRS sends a notification that they are eligible for that form now, instead.

Again, it’s important that you continue to file the form the IRS notifies you about, until you receive a newer notification stating otherwise, regardless of the tax you owe. The IRS may notify you about filing the other form next year/quarter if your current tax liabilities do not match the form you have filed.

It should be noted that both Form 941 and Form 944 were changed in 2020 to integrate coronavirus-related tax relief, specifically payroll tax deferral options. Be sure to contact your tax professional about COVID-19 related tax relief if your business and/or employees chose to defer taxes last year. These forms are also used to report and qualify for other employer tax relief options, including the Sick and Family Leave Tax Credit, and the Employee Retention Tax Credit.

 

If You Fail to File the Right Return, the IRS Can File One for You

As with individual returns, the IRS can make employment tax returns (and other business returns) for you, utilizing information provided through your previous tax returns, employee taxes, and third-party information returns. This is called a Substitute for Return.

These estimated returns will be less kind to your bottom line than any return you might draft yourself, so it should be mentioned that there is a significant downside in letting the IRS file for you. Additionally, there are steep penalties and consequences for failing to file.

 

There Are Penalties for Failing to File Employment Tax Returns

Your business will incur a penalty of 5 percent of the due tax on the first late month, and an additional 5 percent each month, up to 5 months (25 percent). These are separate from penalties incurred for being late on estimated payments or having a tax debt (due to the results of an examination/audit).

Late business and employment tax returns are given additional scrutiny, so you should take additional care when preparing them. Consider seeking help from a tax professional to make sure you are as meticulous with your paperwork as possible and aren’t giving the IRS any reasons to further audit your business.

Once you do file a return (or after the fifth month), the IRS will inform you of the balance due on your business’s account via a CP161 notice. Your debt to the IRS will be assessed, and you will be given a deadline to pay.

There are further penalties (failure to pay penalties) for failing to meet that deadline, as well as interest on any due balance. The penalties for failing to pay are 0.5 percent of the unpaid amount per month. Penalties may increase or decrease based on whether the IRS has issued a tax lien against your business (which it can), or whether you have entered into a payment plan with the IRS.

 

The IRS Can (and Does) Audit Employment Tax Returns

Just like individual tax returns, the IRS can audit business tax returns, including employment tax returns, if they have information that leads them to believe the returns and associated payments are incorrect. The IRS determines if an examination (an audit) is needed based on two major factors:

Once the IRS completes its examination, it either decides that you owe additional taxes, it owes your business a refund, or that no change will occur on your business’s tax account.

 

Tax Professionals Can Help You Navigate Employment Taxes

With the option to defer both your portion and employee portions of the social security (payroll) tax available in 2020, and recent changes in how and when those deferred taxes are due, navigating employment taxes in 2021 can be a little complicated.

Experienced tax professionals can help answer all your questions about business taxes in the new year and keep you up to speed on deferred tax deadlines, employment tax returns, filing requirements, and much more. Tax professionals can also help you accurately file your business back taxes and compile all the information needed for a late return. Learn how to avail specific tax credits and get the relief your business needs through a tax professional at Rush Tax Resolution.

How to Stop Wage Garnishment: 6 Tips for Individuals

Negotiating with the IRS can be difficult, especially when you don’t know how to navigate the IRS’s ruleset. Explore these tips on how to stop wage garnishment.

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Certain debts and obligations can warrant serious collection actions from creditors, particularly for tax debts, late child support payments, and late loan payments. When you owe federal taxes, for example, the IRS goes through a step-by-step collection process to coerce payment. Wage garnishment is one of the last steps for employed taxpayers and involves ordering their employer to withhold a portion of their wages every month until the full debt – including penalties and interest – is paid off.

 

What is Wage Garnishment?

When the IRS garnishes your wages, it’s because you owe a significant tax debt and haven’t properly addressed the IRS’s collection actions against you. The IRS’s collection process officially begins as soon as ten days after you have been notified of your tax balance and due taxes.

Late payment penalties (and late filing penalties, should you fail to file or claim an extension) begin thereafter and continue to accumulate on a monthly basis, alongside an annual adjusted interest rate (based on the federal short-term rate, plus three percentage points for Q1 2021).

If your tax debt is high enough, then the IRS can immediately file a federal tax lien against all of your property and assets. Ignoring the lien may lead to levies, including wage levies (also known as wage garnishment).

If you act soon enough, you can stop wage garnishment and halt levy actions. The IRS will usually give you multiple warnings in the form of various notices, followed finally by a Notice of Intent to Levy. This is often your last chance to contact the IRS and negotiate a way to avoid a levy and stop wage garnishment.

Aside from levying wages, the IRS can also levy assets, properties, and bank accounts. Self-employed taxpayers, for example, might see the IRS claim and empty a bank account to satisfy the debt.

Unlike wage garnishment which occurs whenever a wage is paid, levies on assets, accounts, and properties are individual events. If the sale of a property or claiming of an account more than satisfied your tax debt, the remained is returned to you. If it was not enough, then the IRS may issue another levy on a different asset or property.

 

How to Stop Wage Garnishment

There are multiple ways to stop the IRS from levying or garnishing wages, but they all boil down to the same thing: tackling the debt itself. This means either

      1. Paying it off
      2. Coming to an agreement with the IRS, or
      3. Seeking for some form of debt forgiveness

Under specific circumstances, you can also argue that the IRS must pause all collection efforts. Let’s look at each option.

 

Paying Off Your Debt Entirely 

The most straightforward and least attractive option is to pay off your debt any way you can. This might involve selling property or negotiating with the IRS to discharge or subordinate their tax lien in order to let you seek financing.

Both of these options effectively create an exception for one property or creditor in the case of a federal tax lien, which usually prevents you from seeking credit, as the IRS’s claim supersedes that of any creditor under a tax lien.

 

Creating an IRS Tax Payment Plan

You don’t have to pay off your tax debt immediately. The IRS also offers multiple payment plans to let you pay off your debt in chunks. Interest will continue to accumulate during the payment period, but at a halved rate.

If you plan to pay off the entire debt within 120 days, you can qualify for a short-term payment plan. If you need more than 120 days, then the IRS will charge you in monthly installments through a long-term payment plan. Depending on your debt, these may be easier to manage financially than your ongoing or potential wage garnishment.

The setup fees for payment plans depend on whether you opt for short- or long-term, and whether you set the plan up via the Internet, or via phone/mail/appointment. Setting up online is often the cheapest and most convenient option.

Long-term payment plans are more expensive to set up, particularly if you opt out of the IRS’s automatic payment system (the Direct Debit Installment Agreement). Taxpayers who qualify as “low-income” (less than 250 percent of the federal poverty level) may also be eligible to have their setup fees waived or reimbursed.

Initiating a payment plan with the IRS can stop wage garnishment, as well as other levies. Sticking to the payment plan for at least four consecutive payments can make you eligible for a released lien as well, provided your total remaining tax debt is below $25,000, and you haven’t missed a payment in the past.

 

Negotiating an Offer in Compromise

Many taxpayers have fallen on hard times this year. Some aren’t able to meet the financial requirements for a long-term payment plan, let alone pay off the entire debt within a few lump sum deposits. That’s where an offer in compromise comes into play.

An offer in compromise is a payment plan wherein you tell the IRS what you are prepared to pay, and over what period. While it sounds too good to be true, it’s important to understand that the IRS typically rejects offers in compromise, unless they meet their standards and qualifications. This is where a tax professional can become critically important – they can help you negotiate with the IRS and draft an offer in compromise that is more likely to be accepted.

To understand how the IRS evaluates offers in compromise, it’s important to understand your own reasonable collection potential. This is calculated by estimating your own expendable income (what is left after taxes and basic cost of living) over a specific period, as well as net realizable equity. The IRS will comb your financial history to determine what you can afford to pay every month, and check if it matches up with your offer.

 

Arguing Financial Hardship

Wage levies are designed to leave you with an acceptable minimum monthly wage, and exemptions are raised for every dependent in your household. But if the IRS’s wage garnishment is affecting you heavily, to the point that you can argue financial hardship, you can talk to a tax professional about filing for Currently Not Collectible status.

This will halt all collection efforts until your financial situation changes. Eligibility for this status is determined periodically. It does not lift tax liens and does not halt interest.

 

Declaring Chapter 7 Bankruptcy

Most debts can be cleared by going through the bankruptcy process – but tax debts are special. Clearing a tax debt through bankruptcy is a lengthy process, and there are eligibility requirements before the IRS will drop your debt.

However, going through bankruptcy does pause most collection actions, including stopping wage garnishment. This doesn’t mean your tax debt is gone, but it does stop the IRS from claiming a portion of your wages, or anything else.

 

Always Seek Professional Tax Help 

Negotiating with the IRS can be difficult, especially when you don’t know how to navigate the IRS’s ruleset for tax debts and collection actions. Experienced tax professionals can help you cut the chaff and figure out your best path towards living debt free. Contact our team of professionals today to stop your wage garnishment. One crucial aspect to consider is the availability of tax debt relief options in California, which can significantly ease your financial burden. These programs may provide you with flexible payment plans or even reduce the total amount you owe. By exploring these options, you can regain control over your finances and move forward with confidence.

Deferred Payroll Taxes and COVID-19 Relief

Learn the ins and outs of the recent COVID-19 tax relief measures and how it may impact you and your company's deferred payroll taxes. 

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In 2020, the government rolled out several COVID-19 relief measures, including Economic Impact Payments and several forms of tax relief. One particular option that has received little love from businesses, tax advisors, and political commentators alike has been the option to defer employee payroll taxes until 2021, with the caveat that all employee-deferred taxes are to be paid back early this year.

Just a few weeks into 2021, the IRS has issued a statement pursuant to the COVID Tax Relief Act of 2020 stating that the deadline on these deferred payroll taxes has been extended. Several other forms of tax relief have also been extended into the new year.

Many government employees and workers who have opted to defer their portion of payroll taxes last year would otherwise have had to have a larger portion of their wages withheld in the first few months of the year to pay back what they deferred. With this newest statement, that deadline has been extended until the end of the year. 

Navigating the changes made to tax and economic relief options last year can be challenging, so let’s walk through them step-by-step.

 

When Were Payroll Taxes Deferred? 

Payroll taxes were nominally deferred in two separate occasions – first, earlier in 2020, the CARES Act allowed employers to defer their portion of the payroll tax (half of the 6.2 percent per employee wage used to pay for Social Security and certain railroad retirement taxes) for the rest of the calendar year (from March through December 2020), with two separate deadlines for paying back deferred taxes. These are:

Then, later in August 2020, a Presidential Memorandum issued by President Trump to the Secretary of the Treasury urged him to provide a similar option to employees to defer their half of the payroll tax for the remaining months of 2020 (September through December), with the caveat that these taxes would be additionally withheld from wages in the first quarter of 2021. Failure to completely pay back all deferred taxes by April 30, 2021 would lead to the accruement of penalties and interest starting May 1, 2021.

This option was seen as less favorable, as the individual financial impact made by deferring these taxes would be generally minimal, whereas the additional strain on the employee’s wages in 2021 would be a larger issue for most. Other questions surrounding the deferral of employee taxes included liability (if the employee were to quit/leave before the new year). It was also only available to workers who earned less than $4000 on a biweekly basis.

However, recent changes made through the Consolidated Appropriations Act at the end of 2020 have extended that original deadline to give employers charged with withholding their employees taxes more time to accumulate the deferred amount.

 

When Are Deferred Payroll Taxes Now Due? 

Instead of being due from the period of January 2021 to April 2021, all deferred payroll taxes are now due December 31, 2021. All associated penalties, interest, and additional payments on unpaid amounts would begin to accrue on January 1, 2022. 

This means that instead of being made to pay back all deferred payroll taxes in the first quarter of the year, employees whose portion of the payroll tax was deferred by their employers now have until the end of the year to accumulate the deferred amount through additional withholding.

Employees are required to accrue the total applicable taxes ratably through “wages and compensation” between January 1, 2021, and December 31, 2021. They can alternatively “make arrangements to otherwise collect the applicable taxes” from their employers.

 

What If Deferred Payroll Taxes Aren’t Paid?

If the deferred payroll taxes aren’t paid, then the IRS can charge the affected taxpayer additional penalties and interest. Failure-to-pay penalties for taxes owed to the government start at 0.5 percent of the total debt per month, up to 25 percent.

Additional interest is based on the federal short-term rate, plus three percentage points. Should your debt continue to grow, the IRS can pursue collection actions against you.

 

What About Other COVID Tax Relief? 

Employers were granted other forms of payroll tax relief throughout the year to help reduce the financial and personal impact of the coronavirus, as well as combat the rising unemployment numbers throughout the country.

The New Employer Tax Credits included two different credits for eligible employers looking for relief – the Credit for Sick and Family Leave, as well as the Employee Retention Credit. Both have been extended to a degree in the new year.

 

Credit for Sick and Family Leave

The Credit for Sick and Family Leave was provided to small and mid-sized businesses under the Family First Coronavirus Response Act, and helps employers finance a mandatory sick leave period provided to affected employees who have had to call in sick due to COVID, had to care for someone who was sick, or had to care for their children due to school and daycare closures in 2020.

This paid sick period was mandated to be a minimum of ten days at the employee’s regular rate of pay, up to $511 per day (maximum of $200 a day if the employee was caring for someone else, or their children)

An update late in 2020 extended the tax credit until March 2021, but did not extend the mandatory sick leave period, meaning only employers who do decide to continue to provide sick leave can avail of an additional tax credit in 2021 under the FFCRA. The qualifications and caps haven’t been altered either.

 

Employee Retention Credit

The Employee Retention Credit was a refundable tax credit of up to 50 percent of at most $10,000 in qualifying annual wages per employee (maximum of $5,000 per employee) paid between March 13, 2020 and December 31, 2020. This tax credit is only available to businesses that have been partially or fully affected by government-mandated lockdowns caused by COVID-19 or have quarterly gross receipts that are less than 50 percent of what they were for the same quarter in 2019.

The Taxpayer Certainty and Disaster Relief Act of 2020 further extended the eligibility period through to June 30, 2021 and amended the tax credit to apply to up to 70 percent of at most $10,000 per employee per calendar year. Additionally, businesses with a decline in gross receipts in the first quarter of 2021, wherein their gross receipts are less than 80 percent of what they were in the first quarter of 2019, are also eligible.

If you have been personally affected by the COVID tax relief efforts and have further questions about how your requirements and/or deadlines have changed, consider getting in touch with our tax professionals at Rush Tax for an in-depth and individualized look at your coronavirus tax relief. Rush can also work with you on cases of tax debt and debt resolution, and help you negotiate with the IRS.