Page 4 - Employers Supplemental Guide

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The Medicare tax rate is 1.45% each for the employee Definition of marriage. A marriage of two individuals is
and employer, unchanged from 2019. There is no wage recognized for federal tax purposes if the marriage is rec-
base limit for Medicare tax. ognized by the state, possession, or territory of the United
Social security and Medicare taxes apply to the wages States in which the marriage is entered into, regardless of
of household workers you pay $2,200 or more in cash wa- legal residence. Two individuals who enter into a relation-
ges in 2020. Social security and Medicare taxes apply to ship that is denominated as marriage under the laws of a
election workers who are paid $1,900 or more in cash or foreign jurisdiction are recognized as married for federal
an equivalent form of compensation. tax purposes if the relationship would be recognized as
Disaster tax relief. Disaster tax relief is available for marriage under the laws of at least one state, possession,
those impacted by disasters. For more information about or territory of the United States, regardless of legal resi-
disaster relief, go to IRS.gov/DisasterTaxRelief. dence. Individuals who have entered into a registered do-
mestic partnership, civil union, or other similar relationship
that isn't denominated as a marriage under the law of the
Reminders state, possession, or territory of the United States where
such relationship was entered into aren't lawfully married
Moving expense reimbursements. Section 11048 of for federal tax purposes, regardless of legal residence.
P.L. 115-97, Tax Cuts and Jobs Act, suspends the exclu- Certification program for professional employer or-
sion for qualified moving expense reimbursements from ganizations (PEOs). The Stephen Beck, Jr., Achieving
your employee’s income for tax years beginning after a Better Life Experience Act of 2014 required the IRS to
2017 and before 2026. However, the exclusion is still establish a voluntary certification program for PEOs.
available in the case of a member of the U.S. Armed PEOs handle various payroll administration and tax re-
Forces on active duty who moves because of a perma- porting responsibilities for their business clients and are
nent change of station due to a military order. The exclu- typically paid a fee based on payroll costs. To become
sion applies only to reimbursement of moving expenses and remain certified under the certification program, certi-
that the member could deduct if he or she had paid or in- fied professional employer organizations (CPEOs) must
curred them without reimbursement. See Moving Expen- meet various requirements described in sections 3511
ses in Pub. 3, Armed Forces’ Tax Guide, for the definition and 7705 and related published guidance. Certification as
of what constitutes a permanent change of station and to a CPEO may affect the employment tax liabilities of both
learn which moving expenses are deductible. the CPEO and its customers. A CPEO is generally treated
Work opportunity tax credit for qualified tax-exempt for employment tax purposes as the employer of any indi-
organizations hiring qualified veterans. Qualified vidual who performs services for a customer of the CPEO
tax-exempt organizations that hire eligible unemployed and is covered by a contract described in section 7705(e)
veterans may be able to claim the work opportunity tax (2) between the CPEO and the customer (CPEO con-
credit against their payroll tax liability using Form 5884-C. tract), but only for wages and other compensation paid to
For more information, go to IRS.gov/WOTC. the individual by the CPEO. To become a CPEO, the or-
COBRA premium assistance credit. Effective for tax ganization must apply through the IRS Online Registration
periods beginning after 2013, the credit for COBRA pre- System. For more information or to apply to become a
mium assistance payments can't be claimed on Form 941, CPEO, go to IRS.gov/CPEO. Also, see Revenue Proce-
Employer's QUARTERLY Federal Tax Return (or Form dure 2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/
944, Employer's ANNUAL Federal Tax Return). Instead, 2017-03_IRB#RP-2017-14.
after filing your Form 941 (or Form 944), file Form 941-X, Outsourcing payroll tax duties. Generally, as an em-
Adjusted Employer's QUARTERLY Federal Tax Return or ployer, you’re responsible to ensure that tax returns are
Claim for Refund (or Form 944-X, Adjusted Employer's filed and deposits and payments are made, even if you
ANNUAL Federal Tax Return or Claim for Refund) to contract with a third party to perform these acts. You re-
claim the COBRA premium assistance credit. Filing a main responsible if the third party fails to perform any re-
Form 941-X (or Form 944-X) before filing a Form 941 (or quired action. Before you choose to outsource any of your
Form 944) for the return period may result in errors or de- payroll and related tax duties (that is, withholding, report-
lays in processing your Form 941-X (or Form 944-X). For ing, and paying over social security, Medicare, FUTA, and
more information, see the Instructions for Form 941 (or the income taxes) to a third-party payer, such as a payroll
Instructions for Form 944). service provider or reporting agent, go to IRS.gov/
No federal income tax withholding on disability pay- OutsourcingPayrollDuties for helpful information on this
ments for injuries incurred as a direct result of a ter- topic.
rorist attack directed against the United States. Disa- If a CPEO pays wages and other compensation to an
bility payments (including Social Security Disability individual performing services for you, and the services
Insurance (SSDI) payments) for injuries incurred as a di- are covered by a contract described in section 7705(e)(2)
rect result of a terrorist attack directed against the United between you and the CPEO (CPEO contract), then the
States (or its allies) aren't included in income. Because CPEO is generally treated as the employer, but only for
federal income tax withholding is only required when a wages and other compensation paid to the individual by
payment is includable in income, no federal income tax the CPEO. However, with respect to certain employees
should be withheld from these payments. See Pub. 907, covered by a CPEO contract, you may also be treated as
Tax Highlights for Persons With Disabilities. an employer of the employees and, consequently, may

Page 2 Publication 15-A (2020)