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In the Payroll Mailbag: June ’20

Which employer-paid benefits are taxable? … Are covid-19 bonuses included in the regular rate?

Snack attack? Better be prepared to eat half the cost

Proposed regulations consider snacks in break rooms, such as free water and cookies, to be meal expenses, subject to the 50% limit on deductions on your Form 1120.

IRS consolidates two more payment field offices

As of July 1, the IRS is closing two business payment P.O. Boxes (i.e., lockbox addresses) in the Cincinnati and Hartford areas.

Ten-hut! Handle Guard, reservist pay the right way!

In many locales, members of the National Guard and military reserves were activated to help respond to the coronavirus pandemic. But they usually give their two weeks to Uncle Sam during the summer. Now is the time to review Payroll’s responsibility to these first responders.

It could happen: What you can do if state UC rates increase

States may raise their unemployment contribution rates next year. Strategy: If you’re willing to budget just a little bit more—by paying so-called voluntary contributions—you may come out ahead.

Payroll practice essentials: W-4s for 2nd half of 2020

Everyone has been living with the new W-4 for almost half a year. The results aren’t encouraging. Employees are finding the IRS’ withholding estimator difficult to use.

Employees can rectify withholding mistakes during the second half of the year, but they must act fast.

Common mistakes. Employees still haven’t gotten the hang of the new form. Their biggest mistake to date: Employees who want less taxes withheld are filing forms instructing Payroll to withhold more. Some employees have approached their payroll departments asking for tax refunds. No can do: The IRS refunds taxes, not you. The best you can tell them is to refile their W-4s and ask you to withhold less taxes for the remainder of the year.

Help us, please! Employees are turning to you for help in filling out their forms. Payroll departments are standing pat and not giving employees tax advice. But doing nothing is rarely good for customer service. Here are some ideas to help you reach out to employees:

  • Run your own tests to check if employees used the estimator correctly. If they made mistakes, show them where you think they went wrong and advise them to use the estimator again.
  • If your system allows, encourage employees to run their own tests to confirm their entries.
  • Give employees the facts about how to fill out the form, what the W-4 does and how the math works. Caution: Facts are fine, but don’t tell employees what entries they should make on their forms—that’s bordering on providing tax advice.
  • Ask employees what they want their W-4s to do—withhold close to their tax liability, withhold more or withhold less—and advise them that although you can’t tell them the right amount to withhold, you can show them what their withholding would be for each scenario. Then, allow them to fill out the forms themselves.
  • Provide employees with a semiannual summary of their wages and withholding (technically, they should be able to glean this information from their pay statements, but employees mostly ignore those statements), project the semiannual figures for the second half of the year and ask employees if that’s what they intended. If it’s not, advise them to refile their forms for the remainder of the year.

A step-by-step payroll compliance guide to each pay period, month and calendar quarter of the year is now available. Download it free here.

EEOC’s annual EEO-1 reports postponed until March 2021

Employers won’t have to submit annual EEO-1 reports to the EEOC this year. The commission announced May 7 it was temporarily postponing collection of EEO-1 workplace demographic data because of the coronavirus pandemic.

June 2020: Employer’s business tax calendar

Here’s your monthly guide to critical payroll due dates.

Payroll deferrals vs. Reduced payroll deposits

The Coronavirus Aid, Relief, and Economic Security Act provides employers with what seems like a bewildering array of choices: reduce your payroll deposits in anticipation of taking a credit, get an advance on your tax credits, defer your share of Social Security taxes. After surfing around and reading comments from payroll pros, it’s abundantly clear that confusion still abounds.

Coronavirus rescue laws reach into benefit plans

Together, the Families First Coronavirus Response Act (P.L. 116-127) and the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) loosen up the 401(k) rules and some rules for high-deductible health plans and health savings accounts. A new provision allows you to defray employees’ student loans.