New COVID-19 Tax Credit Guidance available from the IRS

By Bello Welsh LLP

The IRS has issued a set of Frequently Asked Questions relevant to the tax credits available for payments made by employers to employees taking leave under the Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020.  Among other things, this guidance states that if an eligible employer that is required to pay qualified leave wages does not have sufficient federal employment taxes set aside for deposit to cover those payments, it can get an advance of the credits by filing a new Form 7200 (instructions available here).

The IRS has also issued a set of Frequently Asked Questions relevant to the separate refundable tax credits available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, for employers incurring payroll costs and experiencing economic hardship related to COVID-19 (referred to as the Employee Retention Credit).  Of particular interest may be the questions that relate to how employers can claim the tax credits or get advances on the credits.

More information on the FFCRA, the CARES Act, and other COVID-19 related issues is available on the News & Alerts portion of our website, including a summary of key provisions of the FFCRA,  an overview of the CARES ACT (including numerous programs made available to employers), detailed discussion of the Paycheck Protection Program and unemployment related provisions of the CARES Act, and additional analysis of new and existing employer obligations for dealing with the effects of the COVID-19 pandemic.

And as always, you can reach out to any of the attorneys at Bello Welsh LLP for further guidance.

HR Manager’s Remarks Regarding Nature of Hiring Process May Help Employee Establish Discrimination Case

Written by Alexandra D. Thayer (posted by Martha Zackin)

On November 12, the Payroll Fraud Prevention Act of 2013 (S. 1687) was introduced in the United States Senate.   The bill, which would amend the Fair Labor Standards Act, seeks to impose new rules and penalties relating to misclassification of employees as independent contractors.  The changes would apply to all entities covered by the FLSA, including those that do not use independent contractors or other “non-employees.”

Although the Payroll Fraud Prevention Act would not prohibit the use of properly classified independent contractors, the bill would make it unlawful to “wrongly classify an employee . . . as a non-employee,” even if the misclassification is unintentional and made in a good faith attempt to comply with the law.  If passed as currently written, the bill would:

  • Impose treble damages for misclassification when the misclassification is combined with a violation of the minimum wage or overtime pay requirements of the FLSA;
  • Require every entity covered by the FLSA issue a classification notice to all workers, informing them of their status as an “employee” or “non-employee,” and directing them to the Department of Labor for guidance.   Failure to provide the required notice would result in penalties of up to $1,100 for each individual who did not receive notice.  This penalty would increase to up to $5,000 per individual for a second offense or a willful violation;
  • Authorize the Secretary of Labor to report misclassification information to the IRS, impose additional penalties upon employers that misclassify employees for unemployment compensation purposes, and conduct targeted audits within certain industries.

The issue of misclassification continues to be front and center for many lawmakers and regulators at both the state and federal levels.  Bills similar to the Payroll Fraud Prevention Act of 2013 have been repeatedly introduced in Congress since 2010, and numerous states have recently passed or introduced legislation specifically addressing misclassification.  The IRS and DOL are also actively pursuing employers in industries in which misclassification is viewed as prevalent.

Although in the current atmosphere of partisan gridlock on Capitol Hill the proposed bill is likely to face significant push-back, the issue of “misclassification” has been in the forefront for lawmakers and regulators in recent years and is unlikely to go away soon.  The broad scope of S. 1687 means employers will be well served to stay on top of this legislation should it move forward through Congress.