COVID-19: Payroll Tax and Unemployment Rules

InsightsClient Alert

The coronavirus (COVID-19) pandemic is affecting small businesses in multiple ways. The recent interruptions caused by COVID-19 in the United States has caused small business owners to be deeply concerned regarding the future of their businesses and their employees.

As part of the government’s response to address these interruptions, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed and allocates $2 trillion dollars for businesses, individuals, and federal and state government agencies. There are numerous provisions of the CARES Act that impact small businesses, such as the Paycheck Protection Loan and the SBA Economic Injury Disaster Loan programs.

But what if you are not eligible for these relief programs? The information below is intended to inform small business owners of the new payroll tax and unemployment rules that were enacted in response to COVID-19.

Please note, if a small business has received loans under the Small Business Act and such loans will be forgiven under section 1106 of the CARES Act, then such taxpayers are not eligible for the relief described below.

Unemployment Benefits

Georgia Department of Labor (GDOL) Employment Security Law Rule 300-2-4-0.5 Partial Claims was re-adopted on March 19, 2020, mandating employers to file partial claims online and on behalf of their full and part-time employees who work less than full-time due to a partial or total company shutdown caused by the COVID-19 emergency. Any employer found to be in violation of this rule will be required to reimburse GDOL for the full amount of unemployment insurance benefits paid to the employee.

Under the CARES Act, (1) unemployment benefits will increase, (2) more of the workforce will qualify, and (3) benefits will be available for an extended amount of time. However, as of April 3, 2020, the GDOL has not received the implementation guidance from the USDOL. In the meantime, employees that qualify for unemployment benefits will only receive payment from GDOL. Once the CARES Act is implemented in Georgia, GDOL will be able to backdate any payments for eligible weeks beginning March 29, 2020.

Currently, until the CARES Act comes into effect, just those who have been receiving a Form W-2 from their employer qualify for unemployment benefits. Those who qualify can receive between $55 to $365 per week in benefits. The GDOL also extended the number of weeks for benefits to be received, from 14 weeks to 26 weeks.

Once the USDOL provides its guidance, individuals who are self-employed should be able to file for unemployment benefits and an additional $600, from the Federal Pandemic Unemployment Compensation of the CARES Act, will be added to Georgia’s existing unemployment benefits package and the amount of time could increase 13 additional weeks. Following the implementation of the CARES Act, the maximum weekly benefit will increase to $965 from the federal and state benefit packages for unemployment.

The Families First Coronavirus Response Act (FFCRA)

FFCRA became effective April 1, 2020, and gives businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs, to care for family members, or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19. These funds will come in the form of a tax credit for the 2020 tax filing year.

Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.

US DOL guidelines on FFCRA:

Delay of Employer Payroll Taxes

 Section 2302 of the CARES Act allows employers to defer the deposit of the 6.2 percent OASDI portion of the employer’s FICA liability that would otherwise be required to be made during the period beginning on March 27, 2020, and ending on December 31, 2020. The CARES Act allows employers to deposit 50 percent of the deferred taxes on or before December 31, 2021, and the remaining 50 percent by December 31, 2022.

In conclusion, the COVID-19 pandemic has created uncertainty for many small businesses. At Draffin & Tucker, LLP, we are committed to providing our clients with the latest information related to COVID-19. Please don’t hesitate to contact us with any questions or concerns.

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