What Is Payroll Tax Relief?
The coronavirus pandemic has resulted not only in global economic contraction, but also a shift in the ways people shop, what kinds of products and services are relevant to them, and how they organize their budgets. Businesses and organizations have struggled to maintain solid consumer bases and effectively market themselves during these times of rapid change. Employers have also struggled to keep on as many employees as possible while still maintaining financial health. One step the government has taken to ameliorate these difficulties is to lessen the tax burden placed on businesses. As part of the CARES Act and CAA, temporary taxation protocols have been put in place to offer relief to employers through the deferral or diminution of payroll tax payments. Read on to learn more. Payroll tax funds a number of government programs, including Medicare and Social Security. Offering relief by lowering payment quotas means employers can afford to keep more individuals employed and pay them higher salaries. In other words, it allows businesses experiencing drops in profit to survive until consumer behaviors and commercial profits return to normal. In 2020, the CARES Act allowed qualifying businesses a two-year deferral on portions of their payroll tax payments. This offer ended at the conclusion of 2020, but relief is still accessible through a variety of tax credit opportunities introduced with the Consolidated Appropriations Act (CAA) passed last December. Employers whose businesses have been impacted by government shutdown orders or who are realizing less than 80% of pre-pandemic gross profits are eligible for credit based on employee wages. Wages and health benefit costs paid by an employer during such periods of hardship can be credited against payroll tax dues. Accessible credit depends on a companys size but tends toward 70% of the wages and benefits paid to employees making less than $40k per year. Credit may also be obtained by compensating employees during sick leave or family leave. For sick leave, accessible credit is equal to the sum of two weeks full wages, capped at $5,110 per employee. For family leave, credit equals compensation for twelve weeks absence at 2/3 normal pay, capped at $12k. Payments made toward health benefits during periods of leave may also be credited. Eligibility for these credit programs is widespread, but the specifics regarding how much and what kinds of credit a business can receive will depend on its specific employment and fiscal profiles. The IRS website has a number of FAQ pages that can help employers answer more technical questions and learn how to apply for these types of assistance. In addition, as the pandemic continues, the character and extent of government assistance and relief will change, so it is important to keep up to date with deadlines and eligibility quota as things slowly begin to return to normal. Bottom Line: Understanding Payroll Tax Relief Helps You Better Prepare  Now that you better understand what payroll tax relief entails, you can educate your employees and navigate payroll taxes with ease. Again, if anything seems unclear, you can visit the IRS website for more information.