APA's Top Payroll Questions & Answers for 2020 - 116

Special Supplement: COVID-19 - Questions & Answers

SPECIAL
SUPPLEMENT:
COVID-19

APA's Top Payroll Questions & Answers for 2020

Additional COVID-19 Related Questions
and Answers
COVID-19 payment to interns not hired

Q.

Due to the COVID‐19 quarantine, our company has made the decision
to rescind the job offers we made to the seven summer interns we
planned on having work for us. The company has also decided to issue
a one‐time payment to these individuals. I'm trying to figure out if these
payments should be reported on Form W-2 or a Form 1099. None of
the interns began work with us this year, but two interns had worked
with our company the previous summer.
I think the two that worked for us last year would receive the
payment through payroll and receive a W-2 but I am not sure about
the others because they are not in our HR system, did not go through
orientation, did not provide us with paperwork (Forms I-9, W-4, etc.),
and did not perform any actual work.

A.

An employment relationship was established with these interns
(employment offers were extended and accepted) and the payments
are tied to those employment relationships. This makes the payments
wages subject to all federal payroll taxes (federal income tax
withholding and social security, Medicare, and FUTA taxes.) and
reporting on Form W‐2.
It doesn't matter that most of these interns never actually began
working or had a prior work history with your company; the payments
are nonetheless taxable wages. Consider that a signing bonus or
relocation bonus for a new hire that never begins work is taxable
federal wages (see The Payroll Source®, §3.4-4).
This same approach would also apply to the two interns that would
have been rehired for the summer. There is an employment relationship
at the heart of their rehire. Whether you look at the payment to them
as a signing bonus or as dismissal pay, the payment likewise is taxable
federal wages (see The Payroll Source®, §3.4-23).

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APA's Top Payroll Questions & Answers for 2020

Table of Contents for the Digital Edition of APA's Top Payroll Questions & Answers for 2020

Table of Contents
APA's Top Payroll Questions & Answers for 2020 - Intro
APA's Top Payroll Questions & Answers for 2020 - Cover1
APA's Top Payroll Questions & Answers for 2020 - a
APA's Top Payroll Questions & Answers for 2020 - b
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APA's Top Payroll Questions & Answers for 2020 - Table of Contents
APA's Top Payroll Questions & Answers for 2020 - e
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