The IRS recently extended penalty relief (Notice 2021-24
) for failure to deposit payroll taxes under Section 6566 to account for several recently enacted credits.
The relief builds on Notice 2020-22
, which was issued last year to provide penalty relief with respect to employer deposits of federal employment taxes related to the refundable tax credits provided under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Notice 2021-24 now extends the penalty relief provided by Notice 2020-22 to apply to deposits of employment taxes reduced in anticipation of the following credits:
- Paid sick and family leave credits under the FFCRA
- Paid sick and family leave credits under Sections 3131, 3132, and 3133, with respect to qualified leave wages
- The employee retention credit under the CARES Act with respect to qualified wages
- The employee retention credit under Section 3134
- The credit for Continuation Coverage Premium Assistance under Section 6432 for COBRA continuation coverage premiums
An employer claiming the employee retention, paid sick and family lead or COBRA continuation credits will generally not be subject to a penalty under Section 6656 for failing to deposit employment taxes in a calendar quarter if the employer satisfies all of the following:
- The employer paid its employee the qualified leave wages, qualified health plan expense, or qualified retention 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
- The employer did not seek payment of an advance credit by filing Form 7200
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