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wages. If you have self-employment ■ The portions of the employer’s and
income, you should refer to the in- employee representatives’ shares of
structions for your individual income Tier 1 Railroad Retirement Tax Act
tax return for more information. (RRTA) tax under Secs. 3221(a) and
3211(a), respectively, that each cor-
Corrective procedure for respond to the 6.2% Social Security
mistakes in reporting tax rate due.
If an employer that does not claim Under Sec. 6656, the penalty is 10%
FFCRA tax credits, or is prohibited of the underpayment if the failure is for
from claiming those credits, erroneously more than 15 days and 15% if the tax
reports sick leave wages or family leave is not paid within 10 days of the first
wages to an employee on Form W-2, box notice sent to the taxpayer demanding
14, or in a separate statement, the em- payment. The penalty does not apply:
ployer must either furnish a W-2c, Cor- (1) if the failure is due to reasonable
rected Wage and Tax Statement, or provide cause and not willful neglect; (2) to
a corrected statement to the employee certain first-time depositors; and (3) to
correcting the erroneous reporting. the extent that a failure to deposit any
The Form W-2c or corrected state- the federal employment taxes deferred or all of the tax was due to the taxpayer’s
ment should be sent only to the em- by Section 2302 of the Coronavirus anticipating refundable credits allowed
ployee and should not be filed with the Aid, Relief, and Economic Security under COVID-19-relief provisions.
Social Security Administration if the (CARES) Act, P.L. 116-136, by the ap- As explained in the instructions
sole correction is related to the reporting plicable installment due date will result to Form 941, Employer’s Quar-
of leave wages in box 14. in a penalty under Sec. 6656 that runs terly Federal Tax Return, and FAQs
from the original due date and applies to posted on the IRS website (available at
Form 1040 reporting instructions the entire deferred amount. tinyurl.com/26suudrj), the deferred tax
for self-employed individuals The CARES Act delayed the tim- may be repaid using the Electronic Fed-
As noted above, self-employed individu- ing of required federal employment tax eral Tax Payment System (EFTPS) or
als claiming a tax credit for a qualified deposits for certain employer payroll by mailing in the payment with a 2020
sick leave equivalent amount or qualified taxes and self-employment taxes in- Form 941-V, Payment Voucher.
family leave equivalent amount must re- curred from March 27, 2020 (the date The IRS gave two examples in the
port these qualified sick leave wages and of enactment), through Dec. 31, 2020. PMTA memo showing that the pen-
qualified family leave wages on Form The CARES Act treats these amounts alty would apply to the entire amount
7202, which they should include with as timely paid if 50% of the deferred deferred whether the late payment
their 2021 federal income tax return. amount was paid by Dec. 31, 2021, and was for the first installment or the sec-
These taxpayers may have to reduce the remainder by Dec. 31, 2022. ond installment.
(but not below zero) any qualified sick Because these dates fall on (and are
leave or qualified family leave equivalent immediately followed by two additional) Implications
amounts by these qualified leave wages. Saturdays, Sundays, or legal holidays, Most employers chose to defer tax
From Debera J. Salam, CPP, the Chief Counsel memo confirms that payments in accordance with Section
Washington, D.C. the deadlines are actually Jan. 3, 2022, 2302 of the CARES Act and thus are
and Jan. 3, 2023, under the rules of Sec. potentially liable for Sec. 6656 penalties
7503. All employers may avail them- on the full amount of tax deferred if they
Employment Taxes selves of the payroll tax deposit deferral. fail to pay any portion when due.
Applicable employment Flexibility in repayment dead-
Deferral of penalties for taxes include: lines: The extension of the deadlines
failure to timely deposit
■
IMAGE BY FATIDO/ISTOCK employment taxes Survivors, and Disability Insurance tax planning opportunities. Employers
The employer’s share of Old-Age,
under Sec. 7503 gives employers income
may generally deduct employment taxes
Tax (Social Security) under Sec.
In a Program Manager Technical Advice
3111(a), which is 6.2% of wages up
memo from the Chief Counsel’s office
in the tax year in which the taxes are
paid. Thus, an employer may choose to
(PMTA 2021-07), the IRS determined
to the wage base ($137,700 in 2020);
delay its payments until Jan. 3, 2022,
and
that a failure to deposit any portion of
www.thetaxadviser.com January 2022 9