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PENALTY RELIEF EXTENDED FOR PANDEMIC PAYROLL CREDITS

PENALTY RELIEF EXTENDED FOR PANDEMIC PAYROLL CREDITS

The IRS recently released Notice 2021-24 that amplifies and extends prior penalty relief provided with regards to employers' deposits of federal employment taxes, including deposits of withheld income taxes and employment taxes, that are reduced in anticipation of tax credits under legislation that was enacted to address the ongoing COVID-19 pandemic. The penalty relief applies to deposits of employment taxes that an employer reduces in anticipation of any of the following credits:

  • Paid sick and family leave credits under the Families First Coronavirus Response Act (January 1 - March 31, 2021)
  • Paid sick and family leave credits under Secs. 3131, 3132, and 3133, as added by the American Rescue Plan Act of 2021 (April 1 - September 30, 2021)
  • The employee retention credit as enacted under the CARES Act and extended by the American Rescue Plan Act (January 1 - December 31, 2021)
  • The credit for Continuation Coverage Premium Assistance for COBRA continuation coverage premiums not paid by assistance-eligible individuals for such coverage (April 1 - September 30, 2021)

The amount of unemployment taxes that the employer does not timely deposit must be less than or equal to the amount of the employer's anticipated credits for the calendar quarter as of the time of the required deposit. In addition, the employer must not have filed a form 7200 seeking an advance payment of the anticipated credit of the amount by which they reduced their payroll tax deposit. The extension of this penalty relief will allow employers to take immediate advantage of various credits enacted in response to the ongoing pandemic.

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