Payroll: Relief from Penalty from Failure to Deposit Employment Taxes – Cristina Bucksbaum, Senior Tax Manager

Relief from Penalty from Failure to Deposit Employment Taxes

Notice 2020-22

The IRS provides employers relief from the “failure to deposit” penalty imposed by IRC § 6656 for an employer's failure to timely deposit employment taxes, to the extent that the amounts not deposited are equal to or less than the amount of refundable tax credits to which the employer is entitled under the Families First Act and the CARES Act. This allows employers to pay qualified leave wages required by the Families First Act or qualified retention wages under the CARES Act using employment taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.

This relief applies to deposits of employment taxes reduced in anticipation of the credits with respect to qualified leave wages paid for the period beginning April 1, 2020, and ending December 31, 2020, and in anticipation of the credits for qualified retention wages paid for the period beginning on March 13, 2020, and ending December 31, 2020.

State Unemployment Insurance Payroll

For states, such as Iowa, Minnesota, Missouri and Nebraska, state unemployment benefits related to the virus are not to be charged to employers and are not included in the computation of an employer’s future tax rate, preventing their unemployment tax rates from being subject to increases because of these benefits

In addition:

Iowa - Employers with up to 50 employees may request an extension to July 31 from April 30 to send unemployment tax payments. Employers are ineligible for this extension if they are delinquent in sending unemployment tax assessed for quarters before the first quarter of 2020. Employers must request the extension and electronically submit unemployment tax and wage reports by April 24 at 4:30 pm to avoid penalties.

Minnesota - The one-week waiting period for workers and five-week limit on unemployment benefits for business owners were temporarily suspended.

Missouri - The deadline for sending unemployment tax payments was moved to June 1 from April 30. Tax and wage reports still are due April 30.