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Relief From Failure To Make Employment Tax Deposit

April 3, 2020
By Martin D. Hauptman and Steven A. Holt

The IRS provides that an employer will not be subject to a penalty under Code Sec. 6656 for failing to deposit employment taxes relating to qualified leave wages or qualified retention wages in a calendar quarter if:

(1) The employer paid qualified leave wages or qualified retention wages to its employees in the calendar quarter prior to the time of the required deposit;

(2)(a) For purposes of qualified leave wages, the amount of employment taxes that the employer does not timely deposit is less than or equal to the amount of the employer's anticipated credits under Sec. 7001 and Sec. 7003 of the FFRCA for the calendar quarter as of the time of the required deposit;

(2)(b) For purposes of qualified retention wages, the amount of employment taxes that the employer does not timely deposit, reduced by the amount of employment taxes not deposited in anticipation of the credits claimed for qualified leave wages, qualified health plan expenses, and the employer's share of Medicare tax on the qualified leave wages, is less than or equal to the amount of the employer's anticipated credits under Sec. 2301 of the CARES Act for the calendar quarter as of the time of the required deposit; and

(3) The employer did not seek payment of an advance credit by filing Form 7200 with respect to the anticipated credits it relied upon to reduce its deposits.

For purposes of employment taxes related to qualified leave wages, the total amount of any reduction in any required deposit may not exceed the total amount of qualified leave wages and qualified health plan expenses and the employer's share of Medicare tax on the qualified leave wages in the calendar quarter, minus any amount of qualified leave wages, qualified health plan expenses, and the employer's share of Medicare tax that had been previously used (1) to reduce a prior required deposit in the calendar quarter and obtain the relief provided by this notice, or (2) to seek payment of an advance credit.

For purposes of employment taxes related to qualified retention wages, the total amount of any reduction in any required deposit may not exceed the total amount of qualified retention wages in the calendar quarter, minus any amount of qualified retention wages that had been previously used (1) to reduce a prior required deposit in the calendar quarter and obtain the relief provided by this notice, or (2) to seek payment of an advance credit. (Notice 2020-22, Sec. 3, 2020-17 IRB)

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