Workforce Tax Services
Do you drive innovation and influence change to unlock value, or does a changing landscape force you to be reactionary?
Workforce Tax Services
Today’s legislative and regulatory environment is one defined by change. Many HR organizations find it challenging to determine how to integrate new requirements into existing operating models and still take care of the needs of employees.
Business decisions often have a ripple effect across the entire enterprise. More than ever before, understanding the intersection of strategic levers, stakeholder engagement and a changing regulatory environment is paramount.
While some workforce management tasks may seem largely compliance driven, there is an opportunity to turn the tax components of workforce management into a strategic asset for your company.
EY Workforce Tax Services has a long and proven history of helping connect HR, tax, finance, payroll and benefits functions across the employment lifecycle. This holistic approach can provide a foundation for businesses to realize cost savings, address risk, and support the needs of a productive workforce.
The ACA is complex, and in this era of uncertainty, it is more important than ever for companies to make certain that they understand their compliance landscape and that they have the right providers advising them. With all of this change, one thing has remained constant the responsibility of the employer to appropriately report on their compliance with the ACA.
In addition, the IRS has been actively sending Employer Shared Responsibility Payment (ESRP) notices to companies that may owe 4980H(a) and/or (b) penalties. If you have received one of these notices, it is important to understand how to appropriately respond and what options you may have to abate those assessments.
A careful evaluation of your ACA experiences to date can help identify gaps or weaknesses in your ability to manage current and future requirements.
Are your systems and processes able to meet current compliance requirements? Are they nimble enough to adapt quickly to change?
What EY can do for you
EY has been helping clients with the ACA since its inception. Our team of deep subject matter professionals includes certified public accountants and former Treasury and IRS executives, enabling quick response to legislative change.
Our connectivity to legislative activity and ability to understand and help clients respond make our approach truly unique in the marketplace. Regardless of potential changes to the law, we will be able to keep you informed and ready to adapt in a way that helps you protect your business, employees and reputation in the marketplace.
Our high-touch service model provides the hands-on involvement of a team of subject matter professionals and helps your business deal with today’s compliance demands and adapt nimbly to changes that are almost certain to come.
Are you set up for success in 2019 and beyond?
- Have you received any ESRP notices from the IRS? Do you know how you will handle IRS controversy should your organization receive assessment or penalty notices from the IRS?
- What issues did your service provider address with you related to your 2018 Forms? Did they help you determine how your data impacted your IRS idicator codes? How did you address these issues for 2019 reporting?
- Has your service provider shared legislative insights and discussed their potential impact to your business?
- Does your service provider arm you with tools to communicate with employees and leadership around the potential impact of change — taking into consderation what it means to them personally and to the organization so that productivity is not negatively impacted?
- Learn more about ACA:
What is ERC?
CARES Act Section 2301 creates a new employee retention credit (the Retention Credit) for wages paid from March 13, 2020 to December 31, 2020, by employers that are subject to closure or significant economic downturn due to COVID-19. The credit amount takes into account up to 50% of qualified wages, up to $10,000. Thus, the maximum Retention Credit amount is $5,000 per employee. The Retention Credit applies to:
- The employer's share of Social Security tax under IRC Section 3111(a) (6.2% of wages)
- The portion of the employer's and employee representative's share of RRTA tax under IRC Sections 3211(a) and 3221(a) that corresponds to the 6.2% Social Security tax rate due
If the Retention Credit exceeds the employer's Social Security or RRTA tax liability for the quarter, the excess may be refunded to the employer. In the case of an employer for whom wages are paid by a CPEO, the Retention Credit belongs to the customer, not the CPEO.
To be eligible for the Retention Credit, an employer must carry on a trade or business in 2020 that experiences one of the two following COVID-19-related occurrences: (1) operations were fully or partially suspended on orders from a governmental authority due to COVID-19 (COVID-19 Shutdown), or (2) the business experienced a 50% reduction in gross receipts for a calendar quarter as compared to the same calendar quarter in the prior year (Gross Receipts Decline). The gross receipts test is governed by IRC Section 448(c), which evaluates gross receipts on an aggregated basis, combining parents and subsidiaries, brother and sister entities, combined groups, and affiliated service groups, under the rules of IRC Section 52(a) and (b), and IRC Section 414(m) and (o). Tax-exempt organizations may be eligible for the Retention Credit to the extent the organizations' operations experience a COVID-19 Shutdown. Governmental employers and any employer that receives a Paycheck Protection Program loan are not eligible for the Retention Credit.
For employers of more than 100 employees, qualified wages are wages (as defined under the Federal Insurance Contributions Act) paid for services an employee is not providing due to a COVID-19 Shutdown or Gross Receipts Decline. The wages taken into account for such employers are limited to the amount the employee would have been paid for an equivalent amount of work in the 30 days immediately preceding the period for which the employee is paid.
For employers of 100 or fewer employees, qualified wages are wages paid to any employee during a COVID-19 Shutdown or during a calendar quarter of Gross Receipts Decline, without regard to whether the employee is providing services. In determining how many employees are employed, the average number of full-time employees during 2019, as determined under IRC Section 4980H, applies.
In either case, qualified wages include qualified health plan expenses paid or incurred by the employer for health coverage excludable under IRC Section 106(a). These expenses are allocated to qualified wages as prescribed by the Treasury Secretary, but absent a contrary provision by the Secretary, a pro rata allocation among employees is permitted.
The Retention Credit is subject to a number of rules to prevent double-dipping. An employer's deduction for wages must be reduced by the amount of the Retention Credit. In addition, an employer may not take into account the following:
- Wages taken into account under sections 7001 and 7003 of the Families First Act, which provides payroll tax credits for paid leave required to be provided by small employers (see EY Tax Alert 2020-0586)
- Wages taken into account under IRC Section 45S (income tax credit for paid family and medical leave)
- Wages paid to certain related individuals specified in IRC Section 51(i)(1)
- Wages of an employee for whom a work opportunity tax credit is claimed
Review our slip sheet on Helping businesses capture refundable COVID-19 employee retention credits.
On December 27, 2020, the President signed the Consolidated Appropriations Act, 2021 (CAA), which extended the COVID-19 Employee Retention Credit (ERC) through June 30, 2021. In addition to an increase in credit value per employee, the credit was amended to allow employers that received a loan under the Paycheck Protection Program (PPP) to also claim the ERC both proactively and retroactively. This modification could create significant benefit for our clients, especially small-to-midsized employers.
Issues facing our clients:
Employers need to navigate both the legislative changes to the ERC and the potential for obtaining benefits of both the ERC and the PPP. Complexity exists related to the wages that can be applied to each program, qualified wage limits in 2020 and 2021 and the differences in calculating the ERC based on the total number of full-time employees.
Key changes under the CAA include:
- The CAA permits PPP recipients to claim the ERC retroactive to March 13, 2020. PPP recipients may take the ERC on qualified wages that are not paid for with forgiven PPP proceeds.
- The total ERC benefit per qualified employee can be up to $19,000 ($5,000 in 2020 and $14,000 in 2021).
- For Q1 and Q2 2021, eligible employers that had 500 or fewer full-time employees in 2019 may claim the ERC on up to 70% of wages paid to employees, without regard to whether the employee provided services.
- The CAA adds several new categories of forgivable expenses (60% of PPP proceeds must still be used on payroll costs in order to receive full forgiveness)
Example: An employer obtains a PPP loan of $1,000,000 and incurs $1,000,000 in payroll costs and $400,000 in other PPP-eligible expenses.
Expenses included in PPP forgiveness application:
- 60% payroll costs
- 40% other PPP covered expenses (rent, mortgage interest, etc.)
An eligible employer may be able to use the ERC to cover the remaining 40% of unforgiven payroll costs.
As one of the world’s largest tax advisory and compliance firms, EY has significant employee retention credit experience dating back to Hurricane Katrina retention credits in 2005. EY has the technical know‑how, subject‑matter resources and digital platforms to quickly assist businesses to qualify, compute and claim the COVID‑19 employee retention credit. EY brings the multi‑functional tax technical capabilities and experience of our Employment Tax, Tax Credits and Compensation & Benefits practices to assist our clients during this unique time.
EY is at the forefront of the ERC - Our National Tax office has been working closely with the Government agencies to fully understand and assist employers with the complexities of this new credit. We have experience assisting more than 250 employers across many industries, including essential businesses, in evaluating eligibility and claiming the credit.
We bring the right combination of technical, project management skills, qualified credits and incentives, benefits, and employment tax experience along with a deep knowledge of your business — all key components to a successful engagement. Our real-time experience assisting employers with the complexities involved in gathering the right data and properly assessing eligibility for the ERC, include:
1. Applying complex rules to our clients’ unique business situations
- Determining whether the company is an eligible employer (e.g., partial suspension of operations or significant decline in gross receipts)
- Identifying impacts based on company policies, customer considerations, disruptions to supply chain
- Determining methods for identifying, qualifying and quantifying time employees are not providing services
2. Navigate the nuances involved with properly calculating the ERC
- Tracking and applying changing government orders by geography and industry
- Evaluating circumstances that create a partial suspension of operations for a trade or business by location
- Quantifying wages not related to the provision of services for employees in varying situations including reduced hours and furlough populations
We can help
EY employment tax professionals work every day with businesses to address and manage the federal, state and local payroll tax issues they face. Here’s how we help our clients identify risks and opportunity within their employment tax operations.
Download the Employment Tax Advisory Services brochure.
Watch our video.
Employment Tax Audit Defense and Risk Controversy Services
Whether a business is seeking an employment tax audit risk evaluation or assistance with a current employment tax audit, our professionals offer the skills and experience needed to provide assistance throughout the process. Our dedicated employment tax team works across Ernst & Young LLP tax service lines in order to provide a wide range of risk management services.
Download the Employment Tax Audit Defense and Risk Controversy Services brochure.
Employment Tax Master Data Review Services
With the support of Ernst & Young LLP’s tax technology resources and our experienced team of employment tax professionals, we provide a holistic approach to the review of employee state and local payroll tax configurations and the related payroll processes. A thorough review and robust feedback process provide our clients with the knowledge and information they need to comply with payroll tax requirements.
Download the Employment Tax Master Data Review Services slipsheet.
Employment Tax Process Improvement Services
From point of hire to the transmission of tax returns, numerous individuals, systems and vendors are relied upon to get it right. With rules and systems constantly changing, the chance always exists that something important is overlooked. One way that professional tax advisors can assist businesses in gaining insights about their risks and opportunities is through an independently conducted employment tax process review.
Our employment tax process review is performed through staff interviews, data analysis and random sampling, where we identify areas of opportunities and risk.
Download the Employment Tax Process Improvement brochure.
Watch our video.
US Short-Term Business Traveler Services
Travel occurs in almost any business and when it crosses state and local borders, the requirements can be complex and fraught with risk. States are becoming much more sophisticated and stringent in enforcing their non-resident income tax withholding requirements.
The significant tax dollars derived by the states from their enforcement efforts are now leading them to target highly paid corporate executives and other employees who travel and spend time in their state for any business reason. From onboarding to policy design, our experienced professionals help businesses manage this risk.
Download the US Short-Term Business Traveler brochure.
State Information Withholding and Reporting Services
Like the federal government, state taxing authorities also impose information reporting requirements that include Forms W-2, 1099-MISC, 1099-R, etc. Additionally, states have different requirements as to when income tax withholding is required from nonemployee compensation. Our experienced professionals assist businesses in navigating their state information reporting requirements.
Download the State Information Reporting and Withholding Services brochure.
At the core of employment tax compliance are the tax configuration settings within the payroll system for pay and deduction codes. These settings direct whether a compensation type is included in federal, state and local taxable wages and if a deduction reduces taxable wages.
TaxAbility™ is the first of its kind in the industry, offering automatic evaluation of the accuracy of pay and deduction code tax setups as well as a host of other exception reports to assist businesses in detecting potential compliance issues.
TaxAbility™ is supported by a robust library of tax configuration settings for more than 160 pay and deduction types with unique navigation features for quick identification of the tax rules that apply. TaxAbility™ pairs technology with insights and guidance from our experienced employment tax and compensation and benefits professionals.
Download the TaxAbility™ slipsheet.
Watch our video.
Employment Tax Strategy and Transactions
The moment a merger, acquisition or reorganization is contemplated, an intricate system of federal, state and local employment tax requirements is triggered. From due diligence to the filing of returns, opportunities arise to manage employment tax costs. And, because most taxing jurisdictions allow businesses to file corrections for prior periods, it is often not too late to look back for savings and refund opportunities after the transaction is complete.
With years of experience in guiding businesses through these transactions, our employment tax team is positioned to provide the employment tax skills necessary in due diligence and in the planning, implementation and post-implementation review of mergers, acquisitions and reorganizations.
Download the Employment Tax Strategy and Transactions brochure.
Unemployment Claims Management and Advisory Services
Unemployment insurance (UI) is a tax that most US businesses are required to pay and it is one that employers can influence through efficient management processes and adequate planning. We offer an integrated service that includes both UI claims administration and tax rate management. We understand that effective unemployment insurance management is a strong component of an overall employment tax management program that can lead to significant savings for businesses. Our extensive tax planning experience, combined with a focus on efficient unemployment cost management, helps clients address and organize their employment tax needs.
Download the Unemployment Claims Management and Advisory Services brochure.
Disaster Relief and Recovery Services
When the President declares an emergency or major disaster, a series of special tax provisions are triggered, many of them of directly benefiting employees impacted by the event. Our experienced professionals are familiar with the disaster relief tax provisions and, by working with our colleagues in compensation & benefits and exempt organizations, can offer a full range of services for employers needing assistance in understanding the various ways it can assist the workforce and the tax implications that apply.
Download our Disaster Relief and Recovery Services placemat.
Read our Disaster Relief special report.
To contain the outbreak of COVID-19 in the US, numerous states and local governments temporarily closed nonessential businesses and issued “stay-at-home” orders, creating a historic disruption to the US workforce. In its wake, businesses have had to balance the need to retain experienced employees while addressing temporary declines in revenues.
The way that employees work has also changed with more employees than ever before working remotely from their homes, an arrangement that is new for many employers. Telecommuting raises numerous questions, from the tax treatment of equipment and supplies to the broad tax implications involved.
The following services are designed to assist employers with the unemployment insurance and telework issues they face.
Download our Workshare Services brochure
Download our Telework Tax Advisory Services brochure
Download our Telework Tax Advisory Services slipsheet
People are the foundation of your business. The services provided through the EY Talent Operate give you the confidence that your workforce processes function with a keen focus on quality and efficiency.
Our portfolio of Talent Operate services allow you to go beyond compliance, and helps look at ways to leverage technology, unlock value, improve efficiency and enhance the employee experience.
What EY can do for you
- I-9 Services
Immigration compliance and related employer reporting is becoming increasingly scrutinized and audited by the government. It is important for employers to have an efficient means to track compliance with Form I-9 requirements.
Your company needs an I-9 service delivery model utilizing technology that can be configured to meet the demands of your business, regardless of corporate size or structure.
Moreover, it can be used as a standalone model or be fully integrated with either front-end recruitment systems or an HRIS platform. Additional benefits provided by our technology include: flexible work flows and permission roles based on your business requirements, reporting services to assist in analyzing your locations’ performance in terms of timely form completion via E-Verify submission, tracking expiring forms and identifying incomplete forms.
- Dependent Eligibility Verification Assistance (DEVA)
Health care costs are rising, and as employers seek to provide high-value beneﬁts to their employees, they must also consider the cost to their organization. In many cases, businesses inadvertently subsidize health care beneﬁts for dependents who aren’t qualiﬁed recipients. These costs can be material and can also expose a business to risk under the Employee Retirement Income Security Act (ERISA), Sarbanes-Oxley (section 302) and Department of Labor guidelines.
If it has been some time since you have conducted a review, or if you have never done one as a company, the cost savings can be quite significant. Industry averages show that 3-10% of your current spouse and dependent population could be ineligible, and with an average spend of $4,000-5,000 per year on subsidized premiums and claims in a self-insured plan, the ineligible spend can really add up.
Our DEVA services assist our clients in requesting and evaluating employee-provided documentation to verify that the dependents enrolled on employer sponsored plans are eligible.
- Earned Income Tax Credit (EITC) services
Helping your employee’s with their financial wellness goals is more than a wellness initiative — it impacts your bottom line.
Research shows that for every $1 spent on financial wellness programs, employers may see a return of $3.1
The Earned Income Tax Credit (EITC) is a refundable federal benefit currently available to employed individuals in moderate to low income brackets. Eligibility for the EITC is based on three factors: adjusted gross income (AGI), total number of eligible dependents and tax filing status.
The amount of the refundable credit varies depending on the number of qualifying dependents and can be extremely impactful for families. However, according to the IRS, the EITC participation rate is around 80%, which means that 20% of qualified employees are not taking advantage of this offering.2 Based on the average EITC value of $2,400, taxpayers are missing out on nearly $16.5B in potential credits.
Due to the complexity of tax filing protocols and the lack of access to experienced tax filing providers, the credit often goes unclaimed by those who need it most. By educating your employees, the opportunity to secure the refund becomes more realistic for them. EY provides an end-to-end service allowing employees to screen for eligibility and file an amended return to receive their EITC. We make it easy for employees through EY TaxChat™, the EY proprietary mobile tax preparation service. EY TaxChat™ combines do-it-yourself convenience with the quality of a tax return filed by EY. We provide an objective service that provides financial guidance paired with product education.
- Employment/Wage Verification
Spending time completing employment verifications can result in higher labor costs and decreased productivity of your internal teams. Through a teaming relationship with one of our software vendors, requests for both employment and income verification are easily completed. We can automate and standardize all of your current inbound verification requests through a flexible and customizable technology.
- Government Sponsored Coverage (GSC)
GSC provides an employer the opportunity to screen and educate their employees on a potential benefit option. GSC can offer a cost-effective coverage alternative for employees (individuals and families) while allowing them to offset some of their benefit expense.
The GSC programs include Medicaid, Medicare, TRICARE, ChampVA, and Indian Health Services. Indirect benefits to an employer as a result of employees taking up GSC are fewer sick days, greater productivity, less turnover and greater job satisfaction.
EY has developed a streamlined approach to screening for GSC eligible employees. During the initial phase, we work with you to co-develop a screening methodology that aligns with your business needs and is comfortable for you and your employees. As part of the overall service, we help you communicate with your employees and deal with ongoing compliance requirements. Ultimately, the goal is to help you provide your employees with the right health coverage and potentially offset some of your health care related costs.
- Unemployment Claims Management and Advisory Services
Unemployment insurance (UI) is a tax that most US businesses are required to pay and it is one that employers can influence through efficient management processes and adequate planning. We offer an integrated service that includes both UI claims administration and tax rate management.
We understand that effective unemployment insurance management is a strong component of an overall employment tax management program that can lead to significant savings for businesses. Our extensive tax planning experience, combined with a focus on efficient unemployment cost management, helps clients address and organize their employment tax needs.
- I-9 Services
In a business environment where labor is in short supply and demand is greater than ever, recruiting and retaining a workforce continues to be a top priority. Has your company taken the steps to increase workforce diversity and expand sourcing to consider new pools of talent (e.g. disadvantaged veterans), while lowering your overall cost of recruitment?
WOTC, and other workforce programs, can lower your tax liability, incentivize workplace diversity and increase talent value and retention. Isn’t it time for a change?
Work Opportunity Tax Credit (WOTC) is a program that provides federal tax incentives to employers that hire employees from various targeted groups who consistently face barriers to employment. The tax credit benefit can range from $2,400 to $9,600 depending upon the employee’s category of eligibility.
What EY can do for you
For many, the monetary gain from the WOTC and other hiring credit programs is an obvious benefit. What is often not immediately unveiled are the additional benefits realized from an integrated service offering. Our WOTC program us a highly automated, efficient and embedded process that seamlessly fits into your existing onboarding process.
We understand the importance of the employee experience — and our goal is to help ensure that the screening process enhances the experience and employee satisfaction stays high, while you realize the financial benefit.
Our turnkey processes and technology platforms leverage a low touch integration of data feeds and proactive account management to analyze, calculate and capture a complex tax credit; we make it easy for you.
Replacing the daily management of your hiring programs with a strategic approach is our specialty. Simply managed. Strategically delivered.
Work Opportunity Tax Credit (WOTC) services
Not only does the WOTC program provide a significant financial impact to your company’s bottom line, it also impacts the organization from a people perspective by encouraging an inclusive culture and supporting the local communities.
Our technology-enabled process streamlines compliance requirements and provides the necessary documentation to substantiate credits in the event of an audit.
WOTC, the Affordable Care Act and other EY Workforce Tax Services all depend on similar workforce data elements and process streams. Leveraging our existing WOTC Services infrastructure, we can help you with a broad spectrum of workforce analytics, reporting and tax compliance needs.
Other hiring credits and services
In addition to WOTC, EY clients often realize additional federal and state tax credits — and these additional credits can generate significant financial benefits for your company. We have a fully integrated team of more than 300 credits and incentives professionals who can help your organization to identify, qualify, pursue and obtain the full spectrum of tax credits available to your business.
Our integrated screening process provides bundled screening for other federal opportunities such as the Federal Empowerment Zone (FedEZ) and Indian Employment Credits (IEC). Additionally, EY collaborates with tax and HR teams to determine which states warrant the capturing of state hiring credits.
As legislation continues to present new opportunities, EY is on the forefront of these new and ongoing developments. Our legislative and lobbying group, Washington Council EY, is continuously monitoring the latest legislative activity and keeping you abreast of how policy changes will impact your business. Whether it is disaster-related tax credits or hiring retention credits, EY has the technical expertise to simplify the complexities and unveil more opportunities.
Talent Outreach Services (TOS)
Talent Outreach Services assists employers in taking a proactive approach to increasing Work Opportunity Tax Credits (WOTC) and meeting diversity and inclusiveness goals. As the labor market tightens, employers are challenged with finding qualified applicants.
Our Talent Outreach Services offer a way to supplement recruiting efforts by leveraging the candidate pools within community-based organizations (CBOs). Creating and expanding relationships with CBOs and hiring from their targeted populations allows employers to reduce recruiting costs while enhancing the diversity of their workforce.
Our historical data has shown that, overall, 60% of all CBO-referred hires screen WOTC eligible with the largest impact from veteran and vocational rehabilitation eligible hires.
1. “returns diminish as volume increases — there is not a straight line correlation between financial spend and return on investment.”