$2.2 Trillion Economic Rescue Package
As of 1:05 PM on 3/26/20 we currently await approval by the House after the Senate has passed the latest version of the $2.2 trillion economic rescue package. Speaker of the House Nancy Pelosi has said that the house will be approving this bill tomorrow (Friday).
Many clients have been asking what this bill means to them in terms of paying their employees and whether or not their employees should file for unemployment.
As of this moment, I would advise any business who needs to lay their employees off to do so and have them file for unemployment. If employees do not file they risk being unable to file for benefits. Even when the bill passes, there will likely be some amount of time before it takes affect.
Employees must file for unemployment each Sunday in order to receive benefits the following week. This can only be done after the application for unemployment has been completed.
Once the bill does take affect, we are anticipating that employers will be able to take advantage of approximately $50 Billion that will allow companies to retain employees on payroll and cover 50% of workers' paycheck up to $10,000. This would likely be a credit against the employer portion of social security tax (6.2%). Any liability above and beyond this credit would be given as a refund.
It remains to be seen how the actual implementation of this would take place. One reasonable assumption is that this credit will be processed in the same way that the Paid Sick Leave Credit is being processed. Employers will essentially be able to use the funds from Federal Employee Withholdings immediately and then file for an accelerated payment from the IRS for any liabilities above and beyond that amount. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced sometime in the coming days.
"Republicans won inclusion of an employee retention tax credit that’s estimated to provide $50 billion to companies that retain employees on payroll and cover 50% of workers’ paycheck up to $10,000. Companies would also be able to defer payment of the 6.2% Social Security payroll tax."
"Prompt Payment for the Cost of Providing Leave
When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week."