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We want our clients to know how much we appreciate them taking the time to share their experience working with Rush Tax. It has been an honor and a pleasure to help them up and out of whatever tax problems they're facing!

Here are just a few recent glowing reviews from clients that were posted to the Better Business Bureau...

Dee E
5 stars
10/27/2023

I had the best experience with everyone at Rush. I was assigned to one person who helped me through the process and when she wasn't available someone else would help me. I felt very comfortable. They do their absolute best to help resolve your issues. I've had nothing but a great experience with Rush Tax Resolution!

Jeffrey B
5 stars
10/25/2023

Thank you, Rush! We appreciate your diligence and perseverance in helping us resolve this difficult matter. It has definitely been a long and complicated process. But you made it much simpler with a clear game plan and friendly disposition. Wishing you all the best.

Jennifer M
5 stars
10/05/2023

The staff is amazing. We are a mortgage broker and had a mutual client with this company. Rush provided all tax documentation needed for our transaction and answered all questions the underwriter had. Thank you so much! The collaboration with this company has led to several impressive client success stories with tax resolution, highlighting their commitment to excellent customer service. It’s reassuring to see how effectively they manage complex tax issues, ultimately benefiting our clients. This level of professionalism makes them a reliable partner in the mortgage process.

California Payroll Taxes and Employer Responsibilities

State payroll taxes differ from state to state and must be paid in addition to federal payroll taxes and any form of voluntary payroll deduction. Failure to withhold employee payroll taxes, failure to deposit your payroll tax payments, and failure to accurately file your respective quarterly tax returns and end-of-the-year tax reports can result in hefty fines and an even heftier headache.

If you are setting up a small business in the Golden State or are in the process of hiring your first employees, it is important to get things right from the get-go and adhere to California Payroll Taxes and Employer Responsibilities. Here’s what you will need to know:

 

California State Payroll Taxes vs. Federal Payroll Taxes

Every employee is entitled to fair wages. These fair wages are paid out as net pay, which is gross pay (pay rate times hours worked) minus mandatory payroll tax deductions, and voluntary payroll deductions.

In California, employees must be paid twice a month: payment for the days worked between the 1st and the 15th of the month must be paid on or before the 26th of the month, and payment for the days between the 16th and the last day of the month must be paid on or before the 10th day of the next month.

Every pay slip an employee receives must mark their respective payroll taxes. These can be further divided into federal payroll taxes, state payroll taxes, local payroll taxes, and voluntary payroll deductions.

It is among the many duties an employer has to ensure that every payment an employer makes to their employee withholds the prerequisite amounts needed to pay for each of the aforementioned obligations. Furthermore, employers must match each employee’s Social Security tax withholding and Medicare tax withholding amounts with the company’s coffers.

 

Getting Started With California's Payroll Taxes and Employer Responsibilities

Before we get started with issuing payments to people, let’s take it from the top.

If you have registered as a small business in California, you may consider hiring someone to help you out. If you want to hire someone and pay them wages of over $100 in a calendar quarter, then you must register as an employer with California’s Employment Development Department. This can be done online.

Once you are an employer under California’s laws, you must set up a payroll. Organize your payroll through a third-party application, or independently. Payments must be made at least twice a month, but you can pay employees every week if you’d like. Every paycheck must be preceded by an advance notice of payment, and paydays must be kept regular.

Payroll information is crucial. You must know what your employees owe in taxes. Some of this can be based on their gross pay. Some of it is based on their tax information, including their filing status. This is where payroll forms are important, especially those pertinent to the state. You can find the federal payroll forms under the IRS Employment Tax Forms page, and the California Tax Service Center’s info on payroll tax forms.

Once you’ve retrieved your employee’s information, you must accurately track their working hours to establish gross pay.

Finally, you have the information you need to calculate payroll, including California payroll taxes. This is where most of the legwork is involved. The IRS and California tax authority provide ample information to calculate payroll taxes, including how to determine income tax withholding and other mandatory state and federal taxes. This is where the help of a tax professional, CPA, or payroll software can greatly simplify things.

Once you have paid your employees, you must take the money you’ve withheld from their paychecks to the respective state, local, and federal tax authorities. Federal tax payments can be made directly to the IRS.gov website through the Electronic Federal Tax Payment System (EFTPS). Payments to the California tax authority can be made through their website. You can opt to make payroll tax deposits monthly, or semi-weekly.

Last but not least, your tax returns. Employers must file quarterly or monthly tax returns via Forms 941 or 944, as well as annual tax reports via per-employee Form W-2s, or Form 1099s for independent contractors. This leads us to the last point.

 

The Importance of Proper Documentation

Most cases of conflict between state or federal tax authorities and small businesses could be resolved quickly or avoided altogether via a neat and organized paper trail. Don’t give yourself time to lose these documents or lose track of where things go!

Set up a paper filing and electronic filing system to store all relevant information, including per-employee binders, backups of your payroll software information, wage calculations, time sheets for the last few years, and templates for each of your monthly, quarterly, and annual tax paperwork.

 

In Trouble?

Managing a small business can be challenging. If you are at the helm alone, then that means a mountain of paperwork to take care of every day, in addition to your responsibilities as a managing business owner.

Growing and expanding your operations while simultaneously contending with California's Payroll Taxes and Employer Responsibilities that come with business ownership can be frustrating. Even simple mistakes are heavily punished at times. State tax agencies and the IRS come down hard on people who fail to properly withhold taxes or fail to deposit payroll taxes – or even worse, fail to prepare the money for payroll taxes in the first place.

If you are in trouble with local, state, or federal tax authorities over your responsibilities as an employer, fear not. We can help. Our tax professionals at Rush Tax Resolutions are experienced in dealing with federal and state tax authorities alike, and we can help you resolve your situation, and get better organized when it comes to managing payroll, calculating withholding, managing your tax payment schedules, and keeping clean records for end-of-the-year reporting duties.

We know managing a small business is hard. Let us help you take some of the burden.

Understanding Payroll Tax Management

Payroll tax management is something every business needs to maintain success. But understanding how taxes work can be challenging and is essential if you are a small business owner starting to manage costs. Even if you outsource the legwork to your “tax guy,” a solid understanding of payroll is crucial because if something goes wrong, you hold liability, regardless of who you hired for the job.

Yes, taxes can be pretty dull. And when they aren’t dull, they’re scary. Both state and federal governments expect you to know what you should pay and when to pay it, and they levy the full power of the state to enforce their penalties and interest if you fail to do so. Payroll taxes are incredibly daunting because the government expects you to manage the payments for the benefits it provides to your employees.

Forgetting this can bring down a series of penalties and unwanted costs for your business. Thankfully, there are plenty of guides like this one, and there is no shortage of tax professionals and accountants prepared to help explain things to you in minute detail. If you have any questions, give us a call.

What Are Payroll Taxes and Payroll Tax Management?

Payroll taxes usually refer to the money withheld from every paycheck to give to both state and federal governments. Payroll tax management is the process the company takes to manage those taxes. In some cases, when people refer to payroll taxes, they are referring solely to contributions made towards social security and Medicare, as well as additional voluntary benefits employees offer. In other cases, “payroll taxes” refers to those contributions and federal and state income taxes. The basic breakdown for federal payroll taxes (aside from the income tax) is as follows:

Things are different if you’re self-employed and file a Form 1099. In that case, you’re in charge of your self-employment taxes, which are the same thing, only that you pay for all of it. For example, putting aside 15 percent of your monthly income for tax payments should ensure that you cover your self-employment liabilities and may net you a refund at the end of the year. Payroll and income taxes are calculated individually for each employee, depending on their pay.

Payroll vs. Income Taxes

Both income and payroll taxes are paid to respective state and federal governments. The only real difference at the end of the day is that the government earmarks payroll taxes for their programs (in the case of FICA contributions, these are social security and Medicare), and payroll taxes are contributed half-and-half by the employee’s paycheck and the employer. On the other hand, income taxes come entirely from the paycheck and go towards the state or federal government’s total budget. Payroll and individual income taxes constitute the top two most significant sources of income for the government of the United States (with corporate income taxes falling far behind in third place).

Federal vs. State Payroll Taxes

When calculating total taxes pulled out of a paycheck, you can further divide those taxes into federal and state taxes and subdivide each sum into separate tariffs. For federal taxes, you’re looking at:

For state taxes, you’re looking at:

While federal and state taxes come from your business’ coffers (either employer contributions or a deduction from your employee’s paycheck), employers calculate and pay separately. Your form will have different payroll rules than the next state. The federal government’s powers are the same throughout the country, naturally.

Who Oversees Payroll Tax Management?

As the employer, you must take charge of payroll tax management and make the appropriate payroll tax payments to the government every month. If you’re specifically in charge of payroll at your company, it may be your job rather than the company head. You can make an annual payment if your company’s tax liability is deficient (less than $1,000). The tax liability will depend on your eligibility, as per Form 944.

Alternatively, use Form 941 as your guide for quarterly income withholding and payroll taxes. The IRS comes after anyone who manages employee paychecks when determining who should be penalized and held personally liable for missing payroll checks. These are called Failure to Deposit penalties. The IRS levies interest rates on liabilities and unpaid tax debt, so if you’re in trouble with the IRS, it’s essential to resolve it as quickly as possible. So it's crucial to set up a payment plan with the IRS.

Calculating Your Taxes for Payroll Tax Management

This calculation can be a post in and of itself, as calculating your employee payroll taxes is far from a walk in the park. Most businesses rely on easy-to-use tax software to do the legwork for them, or you can avail the services of a professional business tax preparer. In both cases, you must provide the requested financial details and let the program or company do its magic. If you want to do things manually, you will need:

Summary of Payroll Tax Management

Payroll tax management involves tax payments constituted partially from the company’s coffers and partially from your employee’s pay, covering essential (statutory) government services on both a federal and state level, as well as other benefits as per your employment contract. Payroll tax payments are made regularly on a monthly or even biweekly basis, and missing payments – or not preparing the money beforehand – can land you in hot water with your respective tax agency, usually the IRS.

Managing payroll is one thing, but calculating it is another. You can do it the old-fashioned way using your state tax agency’s formulas or the formulas of the IRS, or you can use a third-party service or tax firm to do the work of preparing your payroll taxes. Like any other tax responsibility, due diligence is essential here. The IRS generally knows what you owe but won’t tell you. The longer the IRS or any other tax agency penalizes you, the more likely they will start pressuring your business (or you personally) with mounting penalties and tax collection actions.

So, you need to figure it out the right way and hope you’re making the proper payments to avoid a late fee or penalty down the road. Managing personal taxes can be a pain. Collecting the taxes of a business, regardless of how small or large, is even more challenging. It’s okay if this isn’t your forte – but it is your responsibility. Find the right tax professional to work with, and let them walk you through the process of preparing your payroll and income taxes before they’re due.

Understanding California Payroll Tax and How to Calculate It

Starting a business is no easy feat. In addition to the permits and paperwork involved, business owners have far more tax responsibilities than the average employee. It becomes your job to ensure that employment taxes are adequately withheld from your employees’ wages, even if your only employee is yourself. Furthermore, you need to pitch in your employer's share of employment taxes on each employee from the company’s revenue and beware of the differences in California payroll tax reporting, calculating, and paying.

 

Understanding California Payroll Tax Responsibilities

Payroll taxes are the taxes levied on wages and compensation paid to your employees, including yourself, if you are self-employed. While payroll taxes are sometimes referred to in the singular (e.g., “California payroll tax”), they constitute several different employment taxes on both the federal and state levels, including:

Not all states have an additional income tax. When it comes to California payroll tax, for example, businesses and employees must pay state disability insurance taxes and state income taxes. On the other hand, Florida levies no income tax and no state disability insurance at all, meaning taxpayers in Florida only pay federal income taxes and Social Security/Medicare.

 

FICA and FUTA Taxes

Federal and state income taxes come entirely out of employee paychecks. On the other hand, FICA and FUTA are either shared between employers and employees (FICA) or wholly paid by the employer (FUTA).

FICA Taxes

For 2021, any given paycheck must pay 6.2 percent of its value in Social Security contributions and 1.45 percent of its value in Medicare contributions. This means FICA taxes are 7.65 percent of an employee’s pay. Employers must match these individual contributions out of their business’ revenue.

FUTA Taxes

The FUTA tax for the Unemployment Trust Fund (UTF) also comes out of your business’ revenue. It is equal to 6 percent of the first $7,000 of an employee’s eligible contributions/pay, which is capped at $420 per paycheck. FUTA comes entirely out of your pocket as a business owner, so it doesn’t appear on an employee’s paycheck. Most states, including California, offer a credit of 5.4 percent, reducing a business’ contribution per paycheck to 0.6 percent (or a maximum of about $42) once they file their Annual Federal Unemployment Tax Return. However, suppose a state fails to make all its due payments for FUTA loans taken from the federal government. In that case, businesses in that state may suffer a credit reduction of:

If you are self-employed, you pay Self Employment Tax and your income taxes. Self-employment taxes are Social Security and Medicare contributions equal to the tax paid by any other employee. You take all 15.3 percent of it out of your net business income (i.e., both halves of 7.65 percent).

 

State Disability Insurance Taxes

Businesses in California can either use a private disability/unemployment insurance plan or use the state’s program. In 2022, California’s state disability insurance taxes equal 1.1 percent of the first $145,600 of an eligible employee’s annual wages. Businesses must also pay the assessment rate to the California Employment Development Department, which is 14 percent of the SDI tax rate (i.e., 14 percent of 1.1 percent in 2022, or 0.154 percent). Unlike FUTA and FICA taxes, federal and state income taxes are calculated, withheld, and remitted to the government every quarter. While FUTA and FICA contributions are set in stone, things become more complicated when calculating federal and state income taxes.

 

Calculating Federal Payroll Tax Withholding

This is crucial. The first thing you will need is each of your employee’s respective Forms W-4, which contain the information you need to calculate their withheld taxes. With this Form, you can choose to calculate income taxes either through the wage bracket method or the percentage method. Use the IRS 2022 Publication 15-T to guide you through the calculation process, as the wage bracket method differs for Forms W-4 created in 2019 or earlier and Forms W-4 made in 2020 or later.

Wage Bracket Method Tables for Manual Payroll Systems

Forms W-4 From 2019 or Earlier

Navigate to the Employer's Withholding Worksheet 3 and follow the steps below:

Step 1: Figure the tentative withholding amount.

1a. Enter the employee's total taxable wages this payroll period.
1b. Use the amount on line 1a to look up the tentative amount to withhold in the appropriate Wage Bracket Method table in this section for your pay frequency, given the employee's marital status (line 3 of Form W-4) and number of allowances claimed. This is the Tentative Withholding Amount.

Step 2: Figure the final amount to withhold.

2a. Enter the additional amount to withhold from line 6 of the employee's Form W-4.
2b. Add lines 1b and 2a. This is the amount to withhold from the employee’s wages this pay period.

Forms W-4 From 2020 or Later

Navigate to the Employer’s Withholding Worksheet 2 and follow the steps below:

Step 1: Adjust the employee’s wage amount.

1a. Enter the employee's total taxable wages this payroll period.
1b. Enter the number of pay periods you have per year (see Table 5).
1c. Enter the amount from Step 4a of the employee's Form W-4.
1d. Divide the amount on line 1c by the number of pay periods on line 1b.
1e. Add lines 1a and 1d.
1f. Enter the amount from Step 4b of the employee's Form W-4.
1g. Divide the amount on line 1f by the number of pay periods on line 1b.
1h. Subtract line 1g from line 1e. If zero or less, enter -0-. This is the Adjusted Wage Amount.

Step 2: Figure the Tentative Withholding Amount.

2a. Use the amount on line 1h to look up the tentative amount to withhold in the appropriate Wage Bracket Method table in this section for your pay frequency, given the employee's filing status and whether the employee has checked the box in Step 2 of Form W-4. This is the Tentative Withholding Amount.

Step 3: Account for tax credits.

3a. Enter the amount from Step 3 of the employee’s Form W-4.
3b. Divide the amount on line 3a by the number of pay periods on line 1b.
3c. Subtract line 3b from line 2a. If zero or less, enter -0-.

Step 4: Figure the final amount to withhold.

4a. Enter the additional amount to withhold from Step 4c of the employee’s Form W-4.
4b. Add lines 3c and 4a. This is the amount to withhold from the employee’s wages this pay period.

The percentage method is even more complicated and is thoroughly explained through IRS Publication 15-T. As for your state taxes, the California Franchise Tax Board offers a comprehensive income tax calculator for each respective tax year, with the respective tax tables.

 

Working With a Tax Professional

Calculating and properly withholding wages for tax purposes is complicated. And risky. The consequences for failing to calculate the payroll tax you owe the government are steep, with up to 15 percent penalties on unpaid payroll taxes. Even 24 hours behind your payroll taxes can cost you a 2 percent penalty on the amount due. You can save yourself the headache and financial woes of federal and state tax trouble by contacting a payroll tax expert to manage your taxes and ensure that you’re paying your employees and the federal and state government what they’re owed.

Many companies and tax services offer tax suites to businesses, including payroll tax calculation and management for each of their employees and new hires, often at lower costs than what you might owe the government if you make a few essential clerical errors. Anything and everything can go sideways when setting up a business. Keep payroll taxes from being yet another hurdle on your path to success by working with our tax professionals at Rush Tax Resolution.

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.

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.