WorldWide Drilling Resource®

Drilling Into Money Not Boring by Mark E. Battersby Payroll Pitfalls and Coronavirus The coronavirus pandemic has disrupted many drilling operations and businesses. Fortunately, lawmakers have created a variety of tax benefits for employer and employee alike, ranging from tax credits for retaining workers to payroll tax delays. Unfortunately, there are also quite a few potential pitfalls everyone should be aware of. The Coronavirus Aid, Relief and Economic Security (CARES) Act contained a credit against payroll taxes for wages paid to employees in 2020. The credit, a reduction in the operation’s tax bill rather than a deduction from the income that tax bill is based on, is available to drilling operations forced to shut down or suspend operations due to the coronavirus outbreak. The refundable credit equals 50% of the first $10,000 of qualified wages paid to an employee during the year ending December 31, 2020. It should be noted, however, an employer can’t claim both the employee retention credit and the family and medical leave credit for the same wages. The CARES Act also allowed drilling operations affected by the coronavirus pandemic to defer payroll taxes that would normally be due in 2020. Different from the President’s controversial payroll tax holiday, this applies to the employer’s share of the 6.2% Social Security tax component. Under the new rules, an employer can choose to pay 50% of the required amount by December 31, 2021, with the remaining 50% due by December 31, 2022. A similar deferral is available for self-employed individuals. They can defer 50% of their self-employment tax by paying 25% by December 31, 2021, and the remaining 25% by December 31, 2022. Given the current economic climate, many laid-off workers remain unemployed. Employers eager to hold down payroll costs reportedly hesitate to hire back older and more experienced workers - and the question of a controversial payroll tax cut is on the table as lawmakers discuss further stimulus legislation. It is important for every drilling operation to have a plan in place to pay employees when disaster strikes. One important part of that plan should be alternative payroll options. This will not only help the business meet its legal obligations, but also help ensure employees receive their pay on time. If employee layoffs are necessary during the recovery or rebuilding process, certain steps must be taken with regard to notification and preparation to handle unemployment claims and other necessary paperwork. Disaster aid and insurance checks may continue to be slow in coming, making it difficult to help employees who may be facing real financial costs. Resolving employee- or employmentrelated issues is obviously important for everyone. The many benefit programs and plans available - and the potential pitfalls - make professional advice and assistance almost mandatory. Mark Mark E. Battersby may be contacted via e-mail to michele@ 14 OCTOBER 2020 WorldWide Drilling Resource ® The dinosaurs became extinct before the Rockies or the Alps were formed. December Issue Deadlines! Space Reservation: October 25th Display & Classified Ad Copy: November 1st