August 2024 Compliance Updates: Second ERC Voluntary Disclosure Program & New State Taxes

Federal Updates

Second Employee Retention Credit Voluntary Disclosure Program

The Internal Revenue Service (IRS) has announced a second ERC Voluntary Disclosure Program for employers to resolve erroneous claims for credit or refund involving the Employee Retention Credit (ERC). Those that filed for and erroneously received the ERC face enforcement action from the IRS and are subject to assessment and collection procedures. The IRS is offering employers an opportunity to resolve their civil tax liabilities under this second ERC Voluntary Disclosure Program and avoid potential civil litigation, penalties, and interest.

Any participant that has claimed the ERC for tax periods in 2021 and has received a credit or refund prior to August 15, 2024, is eligible to participate in this second ERC Voluntary Disclosure Program, provided that:

• The participant is not under criminal investigation and they have not been notified that the IRS intends to commence a criminal investigation;
• The IRS has not received information from a third party alerting the IRS to the participant’s noncompliance, nor has the IRS acquired information directly related to the noncompliance from an enforcement action;
• The participant is not under an employment tax examination by the IRS for any tax period(s) for which the taxpayer is applying for this second ERC Voluntary Disclosure Program;
• The participant has not been notified by the IRS that the ERC they received is being recaptured for any tax period(s) for which the taxpayer is applying for this second ERC Voluntary Disclosure Program;
• The participant has not previously received notice and demand for repayment of all or part of the claimed ERC.

If you believe you qualify for the Voluntary Disclosure Program, you must notify the IRS by completing and submitting Form 15434, Application for Employee Retention Credit Voluntary Disclosure Program, by November 22, 2024. Participants must submit Form 15434 and any required attachments electronically via the Document Upload Tool at irs.gov/DUT.

Form 15434 will help a participant calculate how much they will be required to pay to the Department of the Treasury under the terms of the second ERC Voluntary Disclosure Program.

For the full IRS statement, please refer to A-2024-30 (irs.gov).

New Taxes

Delaware – Paid Family Leave

ETA: Contribution begin January 1, 2025; Benefits begin January 1, 2026

Between Sept. 1 and Dec. 1, 2024, employers will be expected to either opt in to Delaware Paid Leave or get private-plan approval. 

Participating in Delaware Paid Leave is mandatory for most businesses with 10 or more employees working in Delaware.

More information to come as the contribution date approaches: Delaware Paid Leave Is Coming - Delaware Department of Labor

Maryland – Paid Family Leave

ETA: Contribution begin July 1, 2025; Benefits begin July 1, 2026

For those enrolled in the State Plan:

• For employers with 15 or more workers:The rate will be 0.90% of covered wages up to the Social Security cap, and will be equally divided between workers and employers.
• For employers with 14 or fewer workers:Employers are not required to contribute but will still collect the 0.45% payments from their workers.

Employers may choose to cover part or all of their workers' contributions.

More information to come as the contribution date approaches: Employers (maryland.gov)

State Updates

Alabama - Overtime Exemption

Overtime compensation provided in accordance with the federal Fair Labor Standards Act will be exempt from Alabama income tax, under a bill (HB 407) that will go into effect on Oct. 1. The purpose of this bill, per the state, is to expand the exemption of covered overtime to include certain workgroups (specifically firefighters in various cities/counties), as these employees may be paid overtime on a “work period” basis that is not based on a 40-hour workweek.

In 2023, Alabama passed a law exempting overtime compensation from state income taxes from Jan. 1, 2024, to June 30, 2025. The exemption applies to overtime compensation paid during the period to employees paid on an hourly basis for hours worked in excess of 40 hours in a week.

Starting Oct. 1, 2024, the exemption will instead apply to any overtime compensation provided in accordance with the FLSA. HB 407 also amends employer reporting requirements to conform with the exemption modification. The

The FLSA defines overtime as, unless exempt, hours worked over 40 in a workweek paid at a rate not less than time and one-half their regular rates of pay. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days. An employee's workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. It need not coincide with the calendar week but may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees.

bea0 (aboutbtax.com)

Alabama House of Representatives (youtube.com)

Youth Work Permits

Removed youth work permits as of June 1, 2024 under SB 53.

As of June 1, an eligibility to work form is no longer required for each 14- and 15-year-old employed, under Act. No. 2024-352. Previously, an eligibility to work form had to be signed by a school official before a 14- or 15-year-old could be hired, and the form had to be kept on file by the employer. Under this act, the form is eliminated but employers must maintain a complete list of all 14- and 15-year-olds employed. Requirements for a child labor certificate and posting the state’s child labor laws in the workplace remain. Child labor certificates limit the amount of time school-age children can work and prohibit work in certain fields. The law continues to call on school administrators to notify the Alabama Department of Labor if employed 14- and 15-year-olds are truant or if their grades suffer. Once notified the department can revoke or suspend the employment.

Child Labor - Alabama Department of Labor

D.C.  - Paid Family Leave Tax

The family-leave insurance tax rate rose to 0.75% from 0.26% effective July 1, 2024. The 3Q24 tax deposits and returns will be remitted at the newly assigned tax rate.

Employer Information » DOES Office of Paid Family Leave (dc.gov)

Georgia

The Department of Revenue has updated withholding percentage and allowance as of July 1, 2024. This change is effective retroactively to January 1, 2024. There is no recommended action required for employees. The updated rate has been lowered to 5.39% instead of 5.49%, and a state allowance of $4,000 annually instead of $3,000

2024 Employer’s Tax Guide revisions 

Kansas - SUI: EIN Update

KS Department of Labor is in the process of a system modernization. Part of the agency update will be a change to the Employer Identification Number (EIN) format. Currently, employer EIN’s are a 6-digit number. The new EIN format will be a 10-digit number. For existing, active accounts, a leading zero will be added, and three zeros added to the end: 0######000. Any newly registered accounts will be assigned a 10-digit number.

This update will take effect as of September 2024. The agency will have additional information posted to the website. At this time, they are not planning on issuing a notice with the updated EIN, however, the employer rate notice for 2025 will show the updated EIN and any notices issued after September 18^th 2024. On Sept. 23, 2024, all employers are required to establish new usernames and passwords to access the new portal. Your old login will not work. At this time, existing TPA authorization is expected to carry over to the new system.

Additional details can be found here: Unemployment Insurance Technology Enhancement (UITE) Employer Resources | State of Kansas Department of Labor, KS

Withholding: Updated Withholding Calculation

The Department of Revenue has updated the withholding calculations effective July 1, 2024.

The agency has updated the Withholding Tax Guide to reflect the new guidelines.

The updates are listed below:

• Based on three tax brackets of zero, 5.2%, and 5.58%, instead of four tax brackets
• The value of a withholding allowance now varies based on an employee’s filing status
• All employees are entitled to one allowance, which is $18,320 annually for employees who are married filing jointly or $9,160 annually for employees of other statuses
• One additional allowance of $2,320 annually can be claimed by heads of households and more additional allowances of $2,320 annually can be claimed by all statuses for each dependent

The state K-4 has been updated and should be used for new employees going forward. The agency is advising employers to notify their employees of this update and have them review their current withholding. If an employee wishes to make a change to their withholding, they will need to complete a new K-4 form.

Additional information regarding this update and the impact on KS employees will be provided by ProLiant in the coming weeks.

Notice 24-06 Withholding Tax Tables Updated (aboutbtax.com).