CA Worker Classification Laws Gone Bad

This article does a good job of showing how the CA laws and court decisions making it harder to work as a contractor are harming those the law was supposed to protect.

With the Gig economy gaining increased momentum during the COVID pandemic, many of these attempts to make everyone an employee are archaic and behind the times. Odd for such a “progressive” state like CA

Wall Street Journal Article About comedians (and others) loosing work

The Payroll Tax Deferral – Just a Short-Term Loan

Recently, the President signed an Executive Order allowing deferral of Social Security taxes starting with pay periods on or after September 1, 2020 until the last pay period ending December 31, 2020. Prior to official IRS guidance that was released this week, the implementation of this Executive Order was vague.

The Order turns out to simply be a deferral, not an exemption like it was presented in the beginning. In other words, what you do not pay now you will have to pay in the first four months of 2021.

Basically, this is the plan- If you make less than 4K bi-weekly (104K a year), you can choose to defer  your Social Security Taxes that you would pay on your income the rest of the year to the first four months of next year (2021). Social Security taxes are 6.2% of your wages so if you make 1K each pay cycle, you can put off paying the $62.50 with each check until December 31 and then pay it back by April 30, 2021. After May 1, 2021, interest and penalties would begin to accrue.

Really just a small, short term, interest free loan.

Should you do it?

Generally, no. First, this puts some employers in a bind as they are now deputized as tax collectors should an employee elect to defer the tax and leave the company before the due date of the payback. Second, the amount is not significant. Even if you did make the maximum of 4K every two weeks, it would potentially be a $1500 liability going into 2021. It is a deferral lasting less than half a year and most people need the loans much longer. Lastly, with all the changes each week with COVID, few people can predict what life will be like on Aril 30.

Will it be forgiven? That is an unknown. Section 4 of the Order instructs the Treasury to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” This is a possibility so for some, it might be worth the gamble. See  https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/

Reference: https://www.irs.gov/pub/irs-drop/n-20-65.pdf

Are COVID Assignments Exempt from Social Security Tax?

We have received a number of messages asking if those working temporarily in COVID disaster areas are exempt from Social Security taxes and Medicare taxes (please see image below).

It’s also found here: Tax Withholding for Government Workers

This does not apply to COVID related assignments for two reasons. 1) The page on the IRS website applies to GOVERNMENT workers – working with a staffing agency is not a government employer and 2) these exemption applies to NATURAL disasters, not biomedical disasters.

Congress would have to pass a bill allowing this and right now, they cannot agree which is why you see more executive orders from the President.

Really Dumb Tax Articles

ny covid

I have been reading articles like the one linked below and it reminds me yet again, how really ignorant the media is about taxes (or anything else requiring some thought). In fact, the list of tax ignoramuses in my book consists of

  1. Media
  2. Mortgage underwriters
  3. Most investment advisers
  4. Diners at Waffle House

The article decries the fact that NY is taxing the wages of those healthcare professionals who came to NY from out of state to help with the COVID patients. Why is this such a dumb article? The workers in NY would have to pay taxes on the same income to their home state – someone failed to read that memo. If the NY is allowed to tax it, then the home state will credit them for the NY taxes.

I was a Respiratory Therapist for 25 years and working in the worst areas of exposure is the equivalent of combat. I get that and support whatever things can be done to reward those that put themselves in harm’s way during our national emergency. But this is just another example of how the media sensationalizes by omission.

Here is one of the articles: NY Taxing Out of State Healthcare Workers

Free Housing for Front Line Workers

hotel

We’ve had this question multiple times in the last 2 weeks. Here is the scenario:

“My pay package includes a housing stipend because I am finding housing on my own. However, hotels are offering free stays for front-line workers, that is not provided by my company or the hospitals. At the hotel I do pay for parking. What will happen to the housing stipend if I accept the free stay at the hotel, considering I have to duplicate expenses?”

The answer is that you will need to duplicate expenses for lodging since the lodging is being provided by a third party. The solution is to pay SOMETHING to the hotel, maybe a tip to the housekeeping staff or for other amenities that they offer that you will use in the room.  Parking does not count as lodging expenses, unless you are a hippie! : ) Under the rules there needs to be SOME expense to trigger the exclusion of the per diems.