IRS Tag

Legal Update Header

On Dec. 16, 2020, The U.S. Treasury Department and Internal Revenue Service published final regulations on the deduction for qualified transportation fringe (QTF) expenses, following changes made by the Tax Cuts and Jobs Act (TCJA).

The final regulations became effective upon publication and replace proposed regulations and interim guidance provided in IRS Notice 2018-99.

Legal Update Header

The IRS has added or updated more than 80 answers to questions in its series of FAQs on “COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses.”

The changes affect questions in all 13 of the subtopics covered by the FAQs.

Refundable tax credits are available to businesses for employee paid leave taken under the federal Families First Coronavirus Response Act (FFCRA), enacted in March 2020 and effective through Dec. 31, 2020.

Legal Update HeaderThe IRS has released Revenue Procedure 2020-45, which includes cost-of-living adjustments for employee qualified transportation fringe benefits for the 2021 taxable year, along with annually adjusted numbers for 2021 for a number of other tax provisions.

The combined monthly limit for transportation in a commuter highway vehicle and a transit pass remains unchanged from 2020 at $270. The monthly limit in 2021 for qualified parking is also unchanged from 2020, also at $270.

Legal Update HeaderThe Internal Revenue Service (IRS) has released Notice 2020-79, containing cost-of-living adjustments for 2021 that affect amounts employees can contribute to 401(k) plans and IRAs, most of which remain unchanged.

Key limits that remain unchanged include the following:
  • The employee contribution limit for 401(k) plans will remain $19,500. The catch-up contribution limit for employees aged 50 and over also remains unchanged at $6,500.
  • The employee contribution limit for IRAs will remain $6,000. The catch-up contribution limit for employees aged 50 and over also remains unchanged, at $1,000.
  • The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans will remain $13,500.
  • The limits used to define a “highly compensated employee” and a “key employee” will remain $130,000 and $185,000, respectively.

HR Compliance Bulletin headerOn Sept. 2, 2020, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) released Notice 2020-68, which provides guidance on certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).

Key SECURE Act provisions addressed by the notice include:
  • The small employer automatic enrollment credit (Section 105);
  • The repeal of the maximum age for traditional Individual Retirement Account (IRA) contributions (Section 107);
  • Participation of long-term, part-time employees in 401(k) plans (Section 112); and
  • Qualified birth or adoption distributions (Section 113);

HR Compliance Bulletin headerThe Coronavirus Aid, Relief and Economic Security Act (CARES Act) creates an employee retention tax credit, which is designed to encourage eligible employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19.

The employee retention credit is a fully refundable tax credit equal to 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. This tax credit applies to qualified wages paid after March 12, 2020, and before Jan. 1, 2021. The maximum credit for qualified wages paid to any employee is $5,000.

Small and midsize employers may begin using two new refundable payroll tax credits to obtain reimbursement for the costs of providing coronavirus- related leave to their employees, the U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) announced on March 20, 2020.

This relief is provided under the Families First Coronavirus Response Act (the Act), which was enacted on March 18, 2020. The Act provides funds for employers with fewer than 500 employees to provide paid leave, either for their employees’ own health needs or to care for their family members. The Act aims to help employers keep workers on their payrolls while ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the coronavirus (COVID-19). This Compliance Bulletin provides the DOL and IRS’ guidance.