The IRS released a new FAQ today covering the tax credits for COVID-19 related paid leave.
We are currently reviewing this information to determine recommended best practices and the extent of changes needed to support handling these tax credits.
Initial programming changes are projected to include:
- A way to specify COVID-19 related paid leave wages using specific payroll wage types, general ledger accounts, job codes, and cost centers and account for these wages and related payroll taxes as credits. (See our previous post about setting these up.)
- Including credits for COVID-19 paid leave wages and taxes on the payroll tax deposit window to reduce the payroll tax deposit.
- A report to calculate the regular rate of pay for each employee to use in paying COVID-19 paid leave.
- Handling the special taxability status for Social Security taxes of COVID-19 paid leave wages.
Additional changes will be released later, but these initial changes should cover immediate needs.
There will be changes to the Form 941 to report the COVID-19 paid leave credits.
We are also looking into creating a report in the HR program for qualified health plan expenses which are eligible for a tax credit. This report would cross reference COVID-19 paid leave in the payroll system with enrollment records and plan cost information in the HR system, to produce a total of qualified health plan expenses that can be added to the total credits.
If you have questions about COVID-19 paid leave, please email the support department at support@datatechag.com.
Due to current volume of support calls, we may not be able to provide individual responses, but questions may be used as the basis for the next blog post and a new FAQ on the COVID-19 paid leave.