Doug Houser:
From Rea & Associates studio, this is unsuitable, a management and financial services podcast for entrepreneurs, tenured business leaders, and others who are ready to look beyond the suit and tie culture for meaningful, measurable results. I'm Doug Houser. On this weekly podcast thought leaders and business professionals break down complicated and mundane topics and give you the tips and insight you actually need to grow as a leader while helping your organization to grow and thrive. If you haven't already hit the subscribe button so you don't miss future episodes. And if you want access to even more information, show notes, and exclusive content, please visit our website at www.reacpa.com/podcast and sign up for updates.
Today Dee Gray, client service specialist at Rea & Associates is here to talk about COVID-19 sick pay and the credits available, employee retention credits, and social security deferral options, both employer and employee and W2 issues involved in some of the Cares Act legislation. So a lot of stuff going on related to payroll and those kinds of policies, employee benefits, things like that. So we're very, very pleased to have Dee on today to help straighten us out. So welcome to unsuitable again, Dee.
Dee Gray:
Thank you very much. Thanks for having me.
Doug:
Absolutely, you are our payroll expert by far, and I can't even imagine the questions and all the stuff you've been trying to deal with related to COVID since this has hit. I imagine it's just been a whirlwind for you, correct?
Dee:
Well let's say it's been a challenging year that's for sure. Everything is ever-changing. As soon as you feel like you have your arms wrapped around something, they come out with some new legislation that changes everything you already knew.
Doug:
Yeah, we're very thankful to have a resource such as you and your team to be able to rely on, because I know enough to be dangerous and we get so many questions from our clients, like what, this has changed, that's changed, and how do I do this? How do I deal with that? Talk about just high level, some of the biggest impacts related to some of the Cares Act or, or related legislative changes that we've seen.
Dee:
Okay. One of the things that is really affecting employers that some of them really aren't aware of is the COVID-19 sick pay. So part of the Family First Coronavirus Act included mandatory sick pay for companies that have less than 500 employees. There is an opt-out if you have I think less than 25 employees, you can opt-out of it, but that is even a process that you have to follow in order to opt-out of it. So basically if you're a company with less than 500 employees, and you have an employee that either has COVID-19 or has to quarantine, either due to exposure or because they have symptoms, you're required to pay them up to two weeks of their pay. That's either 80 hours for a full-time employee or the average hours for a two week period for a part-time employee.
The other side of that is there's a credit that you can take immediately to offset those costs. So you pay the employee and you can reduce your 941 deposit immediately to regain the funds for both the wages that you've paid and the employer portion of Medicare that's included on those wages.
Doug:
Yeah. A big change obviously for many small businesses out there that weren't necessarily used to having to deal with that.
Dee:
Right, yes, for sure. And then the taxability of that item is different than the taxability of a regular item too. So it's not actually subject to employer social security, so if you are an employer and you have COVID-19 sick pay and you're not sure how it works, reach out and contact somebody. There's special reporting on the 941 form quarterly for it, and it's going to have to be reported separately on the W2's. So it is in your best interest to have it set up correctly to begin with.
Doug:
So it changes even how the W2 reporting is?
Dee:
Yes.
Doug:
Okay. So yeah, that's a big thing got to make sure employers are aware of that and adhering to those new guidelines.
Dee:
Typical of the ever-changing. This COVID 19 sick pay has been available since April 1st, and it's just been within the last two or three weeks that they announced that it's going to have to be reported separately on box 14 of the W2.
Doug:
Nice. So as we get to your end obviously, W2's become imperative.
Dee:
Yeah, you're right, so just be aware.
Doug:
You've got to either your payroll prepare or seek out and obviously professional help like that you can provide.
Dee:
Yes.
Doug:
Boy, that's a lot for folks to tackle in the midst of everything else going on.
Dee:
Right.
Doug:
Talk about the impact of these employee retention credits and what you've seen the kind of with clients and their businesses. What's kind of the impact you've experienced thus far in talking to folks?
Dee:
So the COVID 19 sick pay, what I've found is that a lot of people just aren't even aware of it. They've had their employees coming in saying well you have to pay me for this, and they have no idea. I probably honestly receive five to 10 calls per day from clients that are just like, gosh, we didn't even know this was out there. Not that we had to add a whole webinar series on it.
Doug:
Right, I know you have.
Dee:
There's so much information out there that it's hard to stay on top of all of it.
Doug:
Yeah.
Dee:
Now for the employee retention credit, that is available for businesses that did not take the PPP loan.
Doug:
Right.
Dee:
Anybody that received PPP funds that they anticipate having forgiven, they're automatically excluded from the employee retention credit. If you did not receive PPP money, you should absolutely look into the employee retention credit. If you were suspended, fully or partially suspended, during the first, second, third, or even fourth quarter of this year due to the COVID-19 pandemic. That credit has been big dollars for some of our clients that haven't received PPP money, and it's another one that people really aren't hearing a lot about it I think.
Doug:
Yeah. And again, contact Dee or our folks that are... I know we've got several within our firm that have been kind of specialists in dealing with that. I've been working a lot with PPP recipients, but as you suggest by the same token that doesn't mean that's the only program out there to benefit businesses. And the idea is obviously to provide some relief, so you should take full advantage of that where you can. And who knows what else is coming, right Dee, I mean-
Dee:
Yeah, a lot of these are set to expire on December 31st, but I have to imagine it's going to be replaced. It's either going to be extended or replaced with something else.
Doug:
Yeah. There's clearly a need and a desire it seems like to provide some additional relief programs, obviously what those look like we don't know at this point, hopefully, we will hear soon. But one of the things that came out was through I believe a kind of an executive order, the social security deferral option, this caused a lot of confusion too. What happened there?
Dee:
That is the optional employee social security deferral.
Doug:
Yeah.
Dee:
And that is theoretically a reporting nightmare actually. The majority of our clients have not chosen to participate in that because you have the ability to defer the employee portion of social security withholding from September 1st through December 31st, and then you're going to have to recoup that between January 1st and April 30th. So if you have deferred the social security for an employer who's no longer an employee that is terminated for whatever reason, the employer is on the hook to pay those funds back however they need to.
The other guidance that they have just come out with is if you have chosen to participate in this deferral, you file your 2020 W2's minus that social security that should have been withheld. So you file the W2's as you created payroll, and then on April 30th when those funds have been repaid, you have to amend every one of your 2020 W2's. They're not carrying the reporting requirement forward to 2021, they're making you amend your 2020 returns.
Doug:
Holy cow. Yeah, that's I think hardly worth the trouble when you talk about all of the mess that you'd have with that.
Dee:
Right.
Doug:
Oh my goodness, yeah.
Dee:
Now originally I know they were talking about trying to get that tax abated and forgiven as opposed to paying back, but it really doesn't look like that's going to happen. I think the majority of private businesses have chosen not to participate, but I know that for all government employers and the military, it was mandatory, so they're all going to be dealing with this. [inaudible 00:09:57]
Doug:
Yeah, what a mess right? We've all of a sudden you didn't have that social security withheld, right, at the employee level, and you got to go... The employer has to go recoup that as you suggest that the beginning of 21, and maybe somebody's left, moved on and you're still liable for that. What a reporting nightmare too if you're required to amend.
Dee:
Right. And the entire theory behind it is to put more money in your pocket, which is excellent for the four months that it's happening, but what a lot of people don't realize is that was holding is going to double up January through April, so you're just going to be having double withheld the following four months. So the net effect is zero, but it could make for a tough winter for some employees that live paycheck to paycheck.
Doug:
Yeah. That could be very painful, I'm not sure that one was very well thought through for sure.
Dee:
Yeah.
Doug:
Now what about... Talk a little bit about the state-level Dee, do you know of any proposed changes, are you hearing anything in terms of stuff that might happen at the state level, from the employers, employees should be aware of?
Dee:
Not anything specific other than the municipal standardization that was passed in House Bill 5 I think in 2014 or 2015, that's been contested multiple times, but we did just get a notification that that has been upheld, and it's just basically the central reporting, which we've been doing for years, but there had been discussion about that going away, and it appears that we're going to continue doing that. Most people are using the Ohio Business Gateway for centralized reporting, which has been really helpful with the municipalities going forward. But that's about the only thing that I'm hearing on the state level right now.
Doug:
Yeah, I know there's been some frustrations with the user-friendliness with the Ohio Business Gateway, but at least as you say it's a centralized portal that I think allows for that consistency, so that's good.
Dee:
But it's still not across the board. Municipalities do not have to participate in it, and I believe on their side of it there is a charge to do that. So we still have a handful of small communities that we have to physically write a check and mail a voucher to every month, but you'll always have the exception to the rules. Otherwise, it has made things a lot easier.
Doug:
Yeah, that's good. I know one of the things I've seen in the news recently, when COVID hit and everybody kind of went to this whole work from home type of model, and there was some initial legislation that said, yeah, you're withholding should continue to be at that municipality where you were working pre-COVID. Now there's a push I saw this week in the Ohio Legislature to perhaps change that. Have you seen that at all?
Dee:
I think long-term they will change that. To continue to withhold based on your actual work location pre-pandemic is really only good as long as there is an emergency action in effect. As soon as that is recalled for whatever reason, then that initiation is off the table and then you will have to withhold based on where they work. Other than the extension of saying as long as this pandemic is in effect, will withhold based on your old work location. In the real world, before that, it would have been based on your home location if you were working from home. So you're right. I did hear that after December 31st or at some point going forward, they are pushing to change that back to you pay tax based on your physical location, whether it's in the office or your home.
Doug:
And that would make sense as you suggest, as long as it's kind of post-pandemic, whenever that's determined to be. But I know there's some push to change that pretty quickly and I'm thinking, gosh, the impact of different municipal revenues if all of a sudden the City of Columbus, a lot of people working from home and they're not seeing all those tax revenues.
Dee:
Right.
Doug:
I can't even imagine, let alone the reporting nightmare, which obviously you would see.
Dee:
Right, yeah, that's always fun. And then you have currently if you have a courtesy withholding that doesn't open you up for nexus in the community where your employees are working from home right now, but if we move forward to this, then your employees working from home could open you up for nexus for other tax obligations where they're working from.
Doug:
Yeah, that's scary stuff, right?
Dee:
That's a podcast for the salt team.
Doug:
Yeah. We'll get Joe Pop on for that one. that's certainly scary stuff. Gosh, so much to think about. Dee, when you talk about the payroll services and things that we do as a firm, talk about the typical client that you work with in terms of client size, sweet spot, the types of services that you can bring to the table.
Dee:
Okay. We offer full-service payroll. Our average client has between 15 and 75 employees I would say. We are very personal with our clients, and our payroll processing is on an individual basis. So we don't sweep the funds from the client's account and hold those in our account until their taxes are due, we handle each payroll individually when we pay the taxes on the date that they're due from the client's account. We offer payroll tax services, we make the tax payments associated with the payroll. We can upload the 401k deferrals and match each payroll. We offer direct deposit, online pay stubs, and you can pick and choose which services are the best fit for your firm. Obviously, we also offer expert advice on all of the COVID-19 changes that are constantly happening.
Doug:
Yeah. I think that's awesome because I know as having been a former CFO at a small business it's so difficult to keep up with all the rules and regulations and to have full-time expertise that you provide with you and your team, I mean, it's just so much easier than trying to do that in-house. I'm still amazed at how many prospective clients and things like that I go out and visit and they're doing all that stuff in the house. It's a lot to keep up with.
Dee:
Right. And we offer our expertise to our clients that do their own payroll, that outsource their payroll to somebody else. We're always here to answer questions and offer advice the best way we can.
Doug:
That's awesome, yeah, great to know, and I think that's so very, very important. Well, Dee, on another note, talk about COVID, we're in this period, now we're getting into winter and all this, what's been... I like to ask this of the guests to keep it positive, if you can pinpoint something that's been positive for you through this period, whether it's personal or professional, what would you put forth?
Dee:
Well I would say personally we live about a mile from Atwood Lake and this year we were on our boat in March and we were on our boat last weekend.
Doug:
Wow.
Dee:
We have spent more time on the lake this summer than we have in the 25 years that we've had a boat, so I've really enjoyed that. And it's someplace where you can go and have good outdoor fun without worrying about the social distancing and wearing a mask and all of that stuff.
Doug:
That's awesome, yeah, good family time for sure.
Dee:
Yeah.
Doug:
I know a lot of folks, and we have included, we've tried to certainly kind of simplify let's say, and focus on spending time with friends and families as best you can, and it's certainly been enjoyable from that perspective, but that said, hoping for a better 21 right?
Dee:
Right. Well and I'm super glad that my kids are not school aged kids, that I haven't had to juggle that, so that's another positive for me. I really admire the parents that have had to navigate working from home and schooling from home and just the juggling act of all of that. I'm very grateful that I'm in a place of my life where I didn't have to do that.
Doug:
Yeah, same. My children are adults at this point, but yeah, it's challenging for everybody and we're all... I think we've entered a new era where a lot of these changes certainly will become permanent, so.
Dee:
Yeah. Unfortunately, I think you're right.
Doug:
Yeah. Well Dee, as always thanks for being on, it's always great insight and you have such great expertise into the changes in the guidelines and rules, regulations around payroll and payroll services for both the employer and employee side. So certainly for our business owners in the audience don't hesitate to reach out to Dee, she's just a tremendous, tremendous resource for our clients and our firm, so thanks for being on, really appreciate it.
Dee:
Thank you very much, I really enjoyed it.
Doug:
Absolutely. And if you want to hear more business tips and insight, or to hear previous episodes of unsuitable, visit our podcast page at www.reacpa.com/podcast. And while you're there sign up for exclusive content and show notes. Thanks for listening to this week's show, be sure to subscribe to unsuitable on Apple podcast, Google podcast, or wherever you're listening to us right now, including YouTube. I'm Doug Houser, Join us next week for another unsuitable interview from an industry profession.
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