Year-end always requires additional time and attention from payroll admins and payroll companies alike. And it’s no surprise that 2020 will be a year-end like no other, given all the payroll-related items that were introduced as a response to the COVID crisis. PayNorthwest’s Year-End Guide walks you through the important steps for making sure your 2020 payroll reporting is accurate, complete and ready to go for a fresh start in 2021.
In addition, here are a few important reminders of some of the COVID-related items to keep in mind for this year-end:
- Employer Social Security tax deferral (CARES Act): Employer can still defer their Social Security through the end of this year (December 31, 2020). For employers that have chosen to defer, nothing is due to be paid back until December 31st of next year (2021). 50% of the deferred amount will be due then. The second 50% will be due on December 31st of 2022. Clients of PayNorthwest will have their deferred amounts tracked by us and will be contacted ahead of time to arrange for collection and payment of the amounts by their due dates.
- Emergency paid sick leave and expanded FMLA (FFCRA): This program runs to December 31 2020 and then ends. Credit amounts that were not able to be taken from your payroll liability can be claimed on Form 7200 or via an overpayment on your 941. Total amount of leave paid and credits taken must be reported in the 941 and W-2s. PayNorthwest clients have access to reports on the amounts taken and PayNorthwest will report, as required, on the 941 and W-2s we produce.
- Employee Retention Credit (Cares Act): This program ends on December 31, 2020. Reporting is quarterly so make sure that all credits applied to payrolls in the quarter are reported properly on the Q4 2020 941. This will be done automatically if you utilized PayNorthwest to calculate the credit for you.
- PPP Loan: Application for forgiveness of loans can occur anytime before the maturity date of the loan though it is important to ask details of the forgiveness process from your bank. While many PPP borrowers will not be applying for or receiving forgiveness in 2020, the IRS did hand down important (though disappointing) guidance that if forgiveness is likely, borrowers can not deduct business expenses paid by the PPP loan for this year’s income tax purposes (making the PPP loan, in essence, taxable). Clients of PayNorthwest have access to reports on payroll and payroll-related expenses that can help in making these year-end income tax adjustments.
- Employee Social Security deferral (Presidential Memorandum): Though little used by employers, the program ends December 31st, 2020. Amounts deferred by employees must begin to be ratably collected from employees who elected to defer and paid back over the course of the first four months of 2021 (January 1- April 30).
Year-end is an especially busy time, and 2020 was an especially tumultuous year. Taking a little extra time to make sure that all the details and changes in payroll regulations this year are taken in account will make moving on to 2021 even more enjoyable and relieving.