More parents may owe “nanny tax” this year, due to COVID-19

In the COVID-19 era, many parents are hiring nannies and
babysitters because their daycare centers and summer camps have closed. This
may result in federal “nanny tax” obligations.

Keep in mind that the nanny tax may apply to all household
workers, including housekeepers, babysitters, gardeners or others who aren’t
independent contractors.

If you employ someone who’s subject to the nanny tax, you aren’t
required to withhold federal income taxes from the individual’s pay. You only
must withhold if the worker asks you to and you agree. (In that case, ask the
nanny to fill out a Form W-4.) However, you may have other withholding and
payment obligations.

Withholding FICA and FUTA

You must withhold and pay Social Security and Medicare taxes
(FICA) if your nanny earns cash wages of $2,200 or more (excluding food and
lodging) during 2020. If you reach the threshold, all of the wages (not just
the excess) are subject to FICA.

However, if your nanny is under 18 and childcare isn’t his or
her principal occupation, you don’t have to withhold FICA taxes. Therefore, if
your nanny is really a student/part-time babysitter, there’s no FICA tax
liability.

Both employers and household workers have an obligation to pay
FICA taxes. Employers are responsible for withholding the worker’s share of
FICA and must pay a matching employer amount. FICA tax is divided between
Social Security and Medicare. Social Security tax is 6.2% for the both the
employer and the worker (12.4% total). Medicare tax is 1.45% each for both the
employer and the worker (2.9% total).

If you prefer, you can pay your nanny’s share of Social Security
and Medicare taxes, instead of withholding it from pay.

Note: It’s unclear how these taxes will be affected by the
executive order that President Trump signed on August 8, which allows payroll
taxes to be deferred from September 1 through December 31, 2020.

You also must pay federal unemployment (FUTA) tax if you pay
$1,000 or more in cash wages (excluding food and lodging) to your worker in any
calendar quarter of this year or last year. FUTA tax applies to the first
$7,000 of wages. The maximum FUTA tax rate is 6%, but credits reduce it to 0.6%
in most cases. FUTA tax is paid only by the employer.

Reporting and paying

You pay nanny tax by increasing your quarterly estimated tax
payments or increasing withholding from your wages — rather than making an
annual lump-sum payment.

You don’t have to file any employment tax returns, even if
you’re required to withhold or pay tax (unless you own a business, see below).
Instead, you report employment taxes on Schedule H of your tax return.

On your return, you include your employer identification number
(EIN) when reporting employment taxes. The EIN isn’t the same as your Social
Security number. If you need an EIN, you must file Form SS-4.

However, if you own a business as a sole proprietor, you must
include the taxes for your nanny on the FICA and FUTA forms (940 and 941) that
you file for your business. And you use the EIN from your sole proprietorship
to report the taxes. You also must provide your nanny with a Form W-2.

Recordkeeping

Maintain careful tax records for each household employee. Keep
them for at least four years from the later of the due date of the return or
the date the tax was paid. Records include: employee name, address, Social
Security number; employment dates; wages paid; withheld FICA or income taxes;
FICA taxes paid by you for your worker; and copies of forms filed.

Contact us for help or with questions about how to comply with
these requirements.

© 2020


The possible tax consequences of PPP loans

If your business was fortunate enough to get a Paycheck
Protection Program (PPP) loan taken out in connection with the COVID-19 crisis,
you should be aware of the potential tax implications.

PPP basics

The Coronavirus Aid, Relief and Economic Security (CARES) Act,
which was enacted on March 27, 2020, is designed to provide financial
assistance to Americans suffering during the COVID-19 pandemic. The CARES Act
authorized up to $349 billion in forgivable loans to small businesses for job
retention and certain other expenses through the PPP. In April, Congress
authorized additional PPP funding and it’s possible more relief could be part
of another stimulus law.

The PPP allows qualifying small businesses and other
organizations to receive loans with an interest rate of 1%. PPP loan proceeds
must be used by the business on certain eligible expenses. The PPP allows the
interest and principal on the PPP loan to be entirely forgiven if the business
spends the loan proceeds on these expense items within a designated period of
time and uses a certain percentage of the PPP loan proceeds on payroll
expenses.

An eligible recipient may have a PPP loan forgiven in an amount
equal to the sum of the following costs incurred and payments made during the
covered period:

  1. Payroll costs;
  2. Interest (not principal) payments on covered mortgage
    obligations (for mortgages in place before February 15, 2020);
  3. Payments for covered rent obligations (for leases that
    began before February 15, 2020); and
  4. Certain utility payments.

An eligible recipient seeking forgiveness of indebtedness on a
covered loan must verify that the amount for which forgiveness is requested was
used to retain employees, make interest payments on a covered mortgage, make
payments on a covered lease or make eligible utility payments.

Cancellation of debt income

In general, the reduction or cancellation of non-PPP
indebtedness results in cancellation of debt (COD) income to the debtor, which
may affect a debtor’s tax bill. However, the forgiveness of PPP debt is
excluded from gross income. Your tax attributes (net operating losses, credits,
capital and passive activity loss carryovers, and basis) wouldn’t generally be
reduced on account of this exclusion.

Expenses paid with loan proceeds

The IRS has stated that expenses paid with proceeds of PPP loans
can’t be deducted, because the loans are forgiven without you having taxable
COD income. Therefore, the proceeds are, in effect, tax-exempt income. Expenses
allocable to tax-exempt income are nondeductible, because deducting the
expenses would result in a double tax benefit.

However, the IRS’s position on this issue has been criticized
and some members of Congress have argued that the denial of the deduction for
these expenses is inconsistent with legislative intent. Congress may pass new
legislation directing IRS to allow deductions for expenses paid with PPP loan
proceeds.

PPP Audits

Be aware that leaders at the U.S. Treasury and the Small
Business Administration recently announced that recipients of Paycheck Protection
Program (PPP) loans of $2 million or more should expect an audit if they apply
for loan forgiveness. This safe harbor will protect smaller borrowers from PPP
audits based on good faith certifications. However, government leaders have
stated that there may be audits of smaller PPP loans if they see possible
misuse of funds.

Contact us with any further questions you might have on PPP loan
forgiveness.

© 2020


Thoughtful onboarding is more important than ever

Although many businesses have had to reduce their workforces
because of the COVID-19 pandemic, others are hiring or may start adding
employees in the weeks or months ahead. A thoughtful onboarding program has
become more important than ever in today’s anxious environment of safety
concerns and compliance challenges.

Crucial opportunity

Onboarding refers to “[a formal] process of helping new hires adjust
to social and performance aspects of their new jobs quickly and smoothly,”
according to the Society for Human Resource Management.

Traditionally, a comprehensive onboarding program’s objective is
to deliver multiple benefits to the company. These include stronger employee
performance and productivity, higher job satisfaction and a deeper commitment
to the business. New hires who are properly onboarded should also experience
reduced stress and an enhanced sense of career direction.

What’s more, an onboarding program allows you to be crystal
clear about compliance procedures, HR policies, compensation and benefits
offerings. In other words, this is a crucial opportunity for you to explain to
a new hire many issues, including all the measures you’re using to cope with
the COVID-19 crisis.

3 parts to a program

What does a comprehensive onboarding program look like?
Specifics will depend on the size, industry and nature of your company.
Generally, however, an onboarding program can be segmented into three parts:

1. Preparing for the job. The
onboarding process should begin before
a new hire starts work. This involves steps such as discussing his or her
specific acclimation needs, choosing and preparing a workspace (or introducing
the platform and procedures for working remotely), and designating a coach or
mentor.

2. Optimizing day one. As the
saying goes, “You never get a second chance to make a good first impression.”
An onboarding program might involve an itemized start-date schedule that lays
out everything from who will greet the new employee at the door — or who will
conduct a first-day video call — to what paperwork must be completed to a
detailed itinerary of meetings (virtual or otherwise) throughout the day.

3. Following up regularly. Even a
great first day can mean nothing if a new hire feels ignored thereafter. An
onboarding program could establish continuing check-in meetings with the
employee’s direct supervisor and coach/mentor for the first 30 or 60 days of
employment. From then on, interactions with the coach/mentor could be arranged
at longer intervals until the employee feels comfortable.

When the time is right

Onboarding in the year 2020 and beyond involves so much more
than giving new employees their marching orders. It entails helping a new hire
feel safe, supported and fully informed. We can help you calculate when the
time is right to expand your workforce and accurately measure the productivity
of workers added to your payroll.

© 2020


2019 Q2 tax calendar: Key deadlines for businesses and other employers

Here are some of the key tax-related deadlines that apply to businesses and other employers during the second quarter of 2019. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

April 1

• File with the IRS if you’re an employer that will electronically file 2018 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and/or Form W-2G.
• If your employees receive tips and you file electronically, file Form 8027.
• If you’re an Applicable Large Employer and filing electronically, file Forms 1094-C and 1095-C with the IRS. For all other providers of minimum essential coverage filing electronically, file Forms 1094-B and 1095-B with the IRS.

April 15

• If you’re a calendar-year corporation, file a 2018 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004) and pay any tax due.
• Corporations pay the first installment of 2019 estimated income taxes.

April 30

• Employers report income tax withholding and FICA taxes for the first quarter of 2019 (Form 941) and pay any tax due.

May 10

• Employers report income tax withholding and FICA taxes for the first quarter of 2019 (Form 941), if you deposited on time and fully paid all of the associated taxes due.

June 17

• Corporations pay the second installment of 2019 estimated income taxes.

© 2019


Getting wise to the rise of “smart” buildings

Nowadays, data drives everything — including the very buildings in which companies operate. If your business is considering upgrading its current facility, or moving to or constructing a new one, it’s important to be aware of “smart” buildings.

A smart building is one equipped with a variety of sensors that gather and track information about the structure’s energy usage and performance. With this data, the owners can better regulate the building’s energy consumption and, ultimately, save money.

Has this been the case in real life? The results of a 2018 Forbes Insights/Intel survey seem to indicate so. Of the 211 business leaders from around the world who responded, 66% answered affirmatively when asked whether smart building management technologies have produced a return on investment.

What’s out there

The name of the game with smart buildings is integration. Traditional building management and control systems don’t easily converge with today’s technology-driven and Internet-connected infrastructure. (This infrastructure is often referred to as “the Internet of Things.”) Sensor-collected data, however, flows directly to the management and control system of a building to automate everything from HVAC to lighting to security features.

Smart technology isn’t limited to new construction. When real estate developers renovate commercial space, it’s increasingly retrofitted with smart technology. By the same token, many large companies have renovated their own buildings to install data-gathering sensors. Doing so is an expensive undertaking but may be worthwhile if your business owns facilities in a prime location and doesn’t want to move.

At the same time, don’t assume every building will be completely automated. In the health care sector, for example, some facilities are finding that manual control of lighting and ventilation systems remains more effective because high traffic volume hampers computerized efforts to regulate energy usage.

Criteria to consider

The primary advantage of smart technology is simple. Over time, you should save money on energy costs by more accurately tracking and regulating usage — dollars that you can redirect toward more profitable activities. Any property you buy, however, must still fit a sensible budget and fulfill other functional criteria, such as being “right-sized” to your on-site workforce and perhaps coming with tax incentives.

When leasing, you’ll need to get specifics from the owner regarding the smart building in question. Was it built new with sensors or retrofitted? Are the sensors and data-processing equipment themselves up to date? You’ll also need to research local energy costs to ensure that the property owner is passing along the savings to you under a reasonable lease agreement.

Here to stay

Just as auto manufacturers no longer make cars without built-in computers, developers and contractors generally aren’t constructing buildings without smart technology. Bear this in mind as you shop for space. Whether you’re looking to lease, buy or build, we can help you weigh the pertinent factors and make the right decision.

© 2019