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New Covid-19 Vaccine Tax Credit for Select Employers

On Wednesday, April 21, 2021, President Joe Biden announced a refundable tax credit available for select businesses that pay employees that need to take time off to get vaccinated for Covid-19. This is part of the administration’s effort to involve employers to promote vaccination.

“Today we hit 200 million shots,” Biden said. “It’s an incredible achievement for the nation. I’m calling on every employer, large and small, in every state, to give employees the time off they need with pay to get vaccinated,”
said the President.

Here are the details of the new tax credit:

  • The tax credit will apply to businesses with fewer than 500 employees.
  • The tax credit amount equals up to two weeks (80 hours), limited up to $511 per day for each employee and $5,110 in the aggregate at 100% of the employee’s pay rate.
  • Tax credit is available between April 1 and September 30, 2021.
  • Tax credit is refundable, meaning the employer is entitled to payment of the full amount of the credit if the tax credit amount exceeds the employer’s share of the Medicare tax.
  • Employers can claim the credit using IRS form 941 – Employer’s Quarterly Federal Tax Return.

This tax credit was authorized under The American Rescue Plan Act of 2021 (ARP) which was signed into law on March 11, 2021.

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Legislative Update October 28, 2020

Will WOTC get renewed?

As we enter the elections and remaining part of Q4, many companies are wondering about the status of the Work Opportunity Tax Credit (WOTC) and its renewal. For those who may not know, the current WOTC program is set to expire on December 31, 2020, and unless congress passes legislation, the program will enter into a state of hiatus. Hiatuses are not uncommon for WOTC. In fact, since WOTC was created in 1996, it has had its share of hiatuses, which generally means that employers continue to screen and file the time-sensitive Form 8850 as usual, but certifications for employees hired after the program expired are not issued until the program in renewed. This leaves us with the question that most employers are wondering about: Will WOTC get renewed?

Possible New Target Group for WOTC

As is generally the case in an election year, legislation becomes more and more difficult as we approach the election. As we have seen, this proved to be true with the hopes for an additional stimulus bill. Everyone has been hopeful that a new economic stimulus bill would pass since there is a good chance the bill would include a new target group for WOTC centered around unemployment driven by the pandemic. With unemployment running very high, this could prove to be a significant group. There is also the possibility of expansion of other credits as well. However, as it turns out, the hope of a new stimulus bill appear to be stalled until after the election, at which point a great deal will depend on what happens in the election results.

Republicans have disagreed among themselves as to what should happen with the next round of stimulus. Senate Republicans wanted no more than $500B in additional aid. They felt there is no need for any additional stimulus. The administration, while somewhat inconsistent in their position, has argued for a much larger package, around $1.8 trillion. If they were successful in negotiating that package, which would probably have been the case with the administration package. Hence, the reason Senate Majority Leader Mitch McConnell (R-KY) was suggesting to the administration to postpone the stimulus bill until after the election.

3 Major Areas of Disagreement

Additionally, there have been disagreements between the administration and the Democrats. There are three major areas of disagreement.

  1. First is the size of the stimulus, with the Democrats wanting a much larger amount.
  2. Second is the issue of state and local aid because it might be perceived as bailing out poorly run cities.
  3. And the third issue relates to liability protections for businesses, with the Democrats opposed to such protections.

While the election will have a significant impact on what will happen with the stimulus bill, there are bills which will need to be passed in a lame-duck session. For instance, the current continuing resolution funding the government expires in early December; therefore, another CR of funding bill will need to be passed soon. As such, we continue to push and lobby for these bills to contain an extension of the expiring tax provisions, including WOTC.

Next Steps

In conclusion, the next steps on the stimulus bill are contingent on the election results.

  1. The first question is who wins the election. If Joe Biden wins, there will likely be pressure to avoid negotiating with the administration in a lame-duck session and just wait until the new administration assumes power. Hence, they would delay the stimulus until February. However, House Speaker Nancy Pelosi (D-CA) has expressed she would prefer not to wait; however, it is unclear if the bill could pass the senate.
  2. The second question is whether the Republicans maintain control of the senate. If the senate shifts to Democratic control, they will be able to control what bills will be brought to the floor. Therefore, there will likely be pressure to wait for February to enact more stimulus. Regardless of the outcome, we remain optimistic there will be an extension of the expiring provisions, including WOTC, and believe there is also a good chance the program will be expanded. Exactly how all that will unfold will depend on what happens November 3rd.

We hope you find this update useful. As your trusted advisor, Walton remains committed to driving lobbying efforts and keeping you abreast of important updates. As always, should you have any questions, please don’t hesitate to contact us.

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28 day WOTC deadline with IRS form 8850

IRS Extends WOTC Form Filing Deadline

IRS Issues Notice to Extend WOTC Form Filing Deadline

On April 9, IRS issued Notice 2020-23 to provide relief relating to certain deadlines for taxpayers in response to the COVID-19 national emergency, declared in March of this year. Under the notice, a “time-sensitive act” due to be performed on or after April 1, 2020 and before July 15,2020 can be performed by July 15, 2020.

While WOTC and Form 8850 were not explicitly mentioned in the notice, the Notice explicitly includes as an “Affected Taxpayer” a person performing any of the time-sensitive acts identified in Revenue Procedure 2018-58, which provides an updated list of time-sensitive acts that may be postponed in the event of a federally-declared disaster, under Section 7508A. The list includes employers pursuing Work Opportunity Tax Credit (WOTC), which requires the filing of Form 8850 with a State Workforce Agency no later than 28 days from the employee’s start date. As a result, the filing deadline for 8850s due between April 1 and July 15 has been extended to July 15, 2020.

This is great news for employers that may have missed 8850 filings during this time period. This also demonstrates the overall strong support of the WOTC program. In the coming days, Walton’s team will work with employers impacted by this notice to take advantage of this great opportunity. In the meantime, if you have any questions, don’t hesitate to contact us.

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Breaking News: House Passes H.R. 1865

Important developments are happening very rapidly. As expected, yesterday afternoon, the House voted 297-120 to approve H.R. 1865, Further Consolidated Appropriations Act, 2020, with a one-year extension of WOTC, including VOW to Hire Heroes Act and retroactive extensions for Federal Empowerment Zones (FEZ) and the Indian Employment Credit (IEC).

Continue reading “Breaking News: House Passes H.R. 1865”

Health Insurance Exchange — Reimbursing Employee Premiums

Businesses choosing not to provide a health insurance plan directly to employees must provide reimbursement to employees for the premiums they pay for a qualified health insurance plan that they must acquire through either the health insurance exchange or independently. The IRS has posted FAQs that address the consequences of an employer reimbursing its employees for these premiums. Continue reading “Health Insurance Exchange — Reimbursing Employee Premiums”

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