Payroll Library from Bloomberg Law for HR Professionals gives you reliable, up-to-date guidance and analysis in every area of payroll administration and compliance, and includes hundreds...
By Michael Baer
A plan under development by the Internal Revenue Service would give some small businesses a research credit of up to $250,000 against their employer Social Security tax liability in 2016, an IRS official said.
Implementation of the credit is among several employment tax provisions enacted under the Protecting Americans From Tax Hikes (PATH) Act of 2015 (Division Q of Pub. L. 114-113), which was signed Dec. 18 by President Barack Obama.
Janine Cook, deputy associate chief counsel for Tax Exempt and Government Entities in the IRS Office of Chief Counsel, reviewed changes to be implemented by this law and other initiatives at a Jan. 29 session of the American Bar Association Section of Taxation midyear conference in Los Angeles.
Under the permanent extension of the research tax credit, Cook said the law now allows qualified small employers to apply their 6.2 percent Social Security contributions, up to a limit, toward the research tax credit. While these employers would not receive the credit until filing corporate tax returns in 2017, the IRS has “a lot to do to get ready for it,” Cook said.
There is precedent for providing cash to employers through payroll tax credits, Cook said. Payroll taxes were used to pay for the Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy implementation, a temporary economic stimulus initiative passed in 2009.
Using payroll taxes to more quickly provide employers with credit amounts in 2016 would likely be similar to the earlier law, Cook said. However, there are many questions to be answered as the IRS builds the process to account for the credits and the amount of payroll taxes paid, as well as other processes necessary to implement the provision, Cook said.
The new Jan. 31 filing date that employers have been given for filing Forms W-2, Wage and Tax Statement, with the Social Security Administration has generated “a lot of attention,” Cook said, noting that the due date does not apply to the 2015 forms.
Additionally, there has been some misinterpretation of a provision that allows the IRS to no longer require Social Security numbers on W-2s, Cook said. The new law allows the IRS to make such a change, but it would not take effect until the agency has released guidance, she said.
Separately, Cook commented on Announcement 2016-2, which generally allows employers that provide identity theft protection to exclude the cost of the services from employees' gross income and wages regardless of whether a data breach occurred.
The provision does not apply to cash received in lieu of identity-protection services or to proceeds received under an identity-theft insurance policy, the IRS said.
Additionally, employers do not have to report the amounts on an information return, the agency said.To contact the reporter on this story: Michael Baer in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Trimarchi at email@example.com.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)