3/4/2023 0 Comments Irs guidance on unemployment![]() Since this initial Revenue Ruling, the IRS expanded the scope of the SUB-Pay exception in subsequent Revenue Rulings. This exception from FICA and FUTA tax, which has no statutory basis in the Internal Revenue Code (the Code) nor the Treasury Regulations, was the result of a combined policy decision of the US Departments of Labor and the Treasury. SUB-Pay is pay provided to employees who were involuntarily separated from service and is linked to their receipt of state unemployment benefits. However, in Revenue Ruling 56-249 the Internal Revenue Service (IRS) introduced an administrative exception from FICA and FUTA tax for supplemental unemployment benefits (SUB-Pay) to encourage employers to provide financial assistance to employees in the event of a downsizing. Generally, severance payments made by an employer to former employees on account of their separation from service are subject to FICA and FUTA tax. A supplemental unemployment benefits plan allows employers to supplement state unemployment benefits for their laid off workers while saving both the employer and employee share of FICA and FUTA taxes. ![]() Even with these programs, some employers are considering layoffs, but would like to provide additional financial support to their laid off employees while such employees are receiving state unemployment benefits. The recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act offers employers dramatically affected by the coronavirus (COVID-19) crisis several options to retain their employees, including allowing businesses to delay payment of the employer portion of payroll taxes, up to $5,000 in refundable tax credits, and the Paycheck Protection Program and corresponding loan forgiveness opportunity for small businesses. Employers considering layoffs in the face of the coronavirus (COVID-19) crisis have additional opportunities to support furloughed workers, aside from options offered by the CARES Act. ![]()
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