You May Be Able to Donate Your Unused Employee Vacation, Sick, or Personal Leave to Ukrainian Relief
There is a little-known disaster provision of the tax code that, where if an employer has adopted a leave-based donation program, the employees can forgo paid vacation, sick, or personal leave in exchange for their employer making equivalent cash payments to qualified charitable organizations. This does not necessarily mean the employee also forfeits the time off; it will not be paid time off to the extent it is converted to leave-based donation payments.
If you claimed the employee retention credit (ERC) in the fourth quarter of 2021, you better read this about a retroactive change affecting the credit for the fourth quarter of 2021.
Like many small business owners, you probably find yourself very busy in the wake of the COVID slowdown and are getting back up to speed. But don’t forget about your future.
Many companies, as an incentive to employees to help grow the companies’ market value, will offer stock options to key employees. The options give the employee the right to buy up to a specified number of shares of the company’s stock at a future date at a specific price. Generally, options are not immediately vested and must be held for a period of time before they can be exercised. Then, at some later date, and assuming the stock price has appreciated to a value higher than the option price of the stock, the employee can excise the options (buy the shares), paying the lower option price for the stock rather than the current market price. This gives the employee the opportunity to participate in the growth of the company through gains from the sale of the stock without the risk of ownership.
President Trump issued a Presidential Memorandum on August 8, 2020, that directs the Treasury Secretary to use his authority to defer the withholding, deposit and payment of employees’ portions of Social Security taxes from September 1 through December 31, 2020. The goal is to put more money in the pockets of workers during the COVID-19 pandemic emergency. The deferral applies to the 6.2% tax on wages or compensation paid for a bi-weekly pay period of less than $4,000 or the equivalent threshold amount for other pay periods. In other words, employees with annual wages up to $104,000 are generally eligible for the deferral.
If you hire a domestic worker to provide services in or around your home, you probably have a tax liability that you don’t know about – or one that you do know about but are ignoring. Either situation can come back to bite you. When the worker is your employee, your liability includes both withholding and paying payroll taxes as well as issuing a W-2 after the close of the year.
With jobs at a premium during the COVID-19 pandemic, you might consider hiring your children to help out in your business. Financially, it makes more sense to keep the family employed rather than hiring strangers, provided, of course, that the family member is suitable for the job. Note, however, that wages paid to children and other relatives aren’t eligible for the Employee Retention Credit created by Congress in 2020 as part of the COVID-19 emergency relief measures for employers.
Self-employed individuals, unlike employees, don’t have someone withholding Social Security or Medicare (FICA) taxes along with pre-payments toward their federal (and state, where applicable) income tax from their wages during the year.
Taxpayers often will hire an individual or firm to provide services at the taxpayer’s home. Because the IRS requires employers to withhold taxes for employees and issue them W-2s at the end of the year, the big question is whether or not that individual is a household employee.