WHAT TO DO IF YOU CANNOT PAY YOUR STATE EMPLOYMENT TAXES BECAUSE OF COVID-19

On: November 18, 2020

One of the effects of COVID-19 is that it has become more difficult for businesses to pay their obligations.  One such obligation is the payment of taxes, including employment taxes.

In response to COVID-19, with the enactment of the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security Act, the Federal government has taken certain action to help businesses pay their employment taxes, including certain payment deferral and refundable tax credit provisions.

The states have also taken various action to help businesses pay their employment taxes.

Possible Extension of Time to Pay State Employment Taxes

One action approved by several states is to possibly extend the due date for payment of employment taxes.

For example, in California, according to the California Employment Development Department, if a business is directly affected by COVID-19, it can request a 60-day extension to file state payroll reports and deposit state payroll taxes without penalty or interest.  The written request for extension, which should note the impact of COVID-19, must be received within 60 days from the original delinquent date of the payment or return.

The extension request should reference Section 1111.5 of the California Unemployment Insurance Code (the authority for the extension) and provide detailed information as to why the report(s) and/or payment(s) could not be submitted in a timely manner.

The letter of extension should be mailed to the address specified on the corresponding employment tax form(s).  If the employer has already been charged a late filing or payment penalty, the employer should send a written request for an extension to Employment Development Department, PO Box 826880, Sacramento, CA 94246-0001.

Exclusion of State Employment Taxes for Certain Telecommuting Workers

One of the effects of COVID-19 is that because of government and “social distancing” restrictions, certain employees are unable to work at their regular company office, and instead are working from home.  For these telecommuting workers, if their residence is in a different state than the location of their company office, the question arises whether they have created a sufficient “nexus” in their home state to establish state employment tax liability in their home state.

A few states have announced that temporary telecommuting because of COVID-19 will not create a sufficient “nexus” in the employee’s home state to establish state employment tax liability.  For example, in Georgia, the Georgia Department of Revenue has stated that it will not use someone’s relocation, that is the direct result of temporary remote work requirements arising from and during the COVID-19 pandemic, as the basis for establishing Georgia nexus, where (i) there is an official work from home order issued by an applicable federal, state or local government unit, or (ii) pursuant to the order of a physician in relation to COVID-19 or due to an actual diagnosis of COVID-19, the employee is working at home.

You should always check with your applicable state tax authority to determine the specific state tax rules concerning your situation.

If you need tax help, always make sure to call Leading Tax Group and don’t attempt to do it yourself.