From changes to labor laws and new COVID-related compliance rules, to workforce issues caused by the need to lay off workers or quarantine sick employees; 2020 has been quite a year for employers and HR teams. Employers are still dealing with the effects of the pandemic but it’s the last quarter and that means it’s time to take care of year-end HR tasks. Today we’re going to take a look at 2020 year-end payroll and tax requirements.
2020 payroll and tax HR checklist
1. Employee Retention Credit. If you did not receive a PPP loan, then you should begin calculating your employee retention credit. This credit is available through the Coronavirus Aid, Relief, and Economic Security (CARES) Act to employers who retained employees during the pandemic. The refundable tax credit is equivalent to 50 percent of qualified wages paid to employees after March 12, 2020, and before January 1, 2021.
2. FFCRA. It is time to review the requirements of the Families First Coronavirus Response Act (FFCRA). Under the FFCRA, private employers with fewer than 500 U.S. employees and government employers with more than one U.S. employee are required to provide employees with paid sick leave or expanded family and medical leave for stated reasons to do with COVID-19. Employers are also required to put up a poster in an area that employees can see that explains the FFCRA requirements.
3. Payroll Tax Holiday. In response to the President’s executive order on August. 28, the IRS issued Notice 2020-65 that allowed employers to suspend withholding and payment of the employee’s portion of Social Security payroll taxes between September 1 and December 31, 2020 as part of COVID-19 relief. Employers should check the tax guidance on this notice to ensure they are in compliance.
4. IRS Form 1096. If your company used independent contractors or freelancers this year, it’s time to prepare your Annual Summary and Transmittal of U.S. Information Returns (Form 1096). Form 1096 is used to transmit paper Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G to the IRS. All forms are due by January 31, 2021.
5. ACA Requirements. If your business is subject to the ACA, then it’s time to get ready to hand
out a Form 1095-C to all full-time employees. This form reports their offer of health insurance for 2020 and must be out by January 31, 2021. Employers must also submit Form 1094-C employer coversheet, along with copies of the Form 1095-Cs to the IRS by February 28, 2021.
6. FICA and FUTA forms. It’s time to prepare IRS (FICA) Form 941, which is due October 30, 2020, for Q3 2020 and January 31, 2021, for Q4. Federal unemployment tax (FUTA) Form 940, which is due January 31, 2021 should also be prepared now. Note: if you deposited all FUTA tax when due, you have until February 10, 2021, to file.
7. Tax filings for Wages and Nonemployee Compensation. Employers should prepare tax forms for wages, profit-sharing distributions, dividends, royalties and nonemployee compensation. All appropriate tax forms must be distributed by January 31, 2021. Extra copies must also be submitted to the Social Security Administration by January, 31, 2021, and to the IRS by February 28, 2021 (if filing by paper) or March 31, 2021 (if filing electronically). Note: employers must use new Form 1099-NEC, which replaces Form 1099-MISC, to report nonemployee compensation paid in 2020. Form 1099-NEC is due February 1, 2021.
How partnering with a PEO can support your business during COVID-19
A PEO provides small businesses with many advantages that they might not otherwise be able to afford. These advantages have become even more important during this international health crisis.
When small business owners’ partner with Makai HR they:
- Gain peace of mind that they are complying with all of Hawaii’s labor laws, which is especially important when decisions are being made about how to handle a health crisis.
- Can provide comprehensive health care plans that allow your employees to go to the doctor for treatment and testing.
We are also here to support your business if you are working remotely:
- Our cloud-based platform means that your employees can manage their HR needs through a computer, tablet or phone, making it easier for them to work from home.
- Our cloud based HRIS platform means that your HR team can manage HR remotely if they are sick or everyone is working remotely.
Pro tip: this is a good time to encourage all employees to update to Direct Deposit to reduce in person bank transactions and continue timely payroll payments. Do not delay. Contact us today to get started!