On an LM-2 form, a union reports all amounts withheld from payroll and remitted. However, for those unions who were able to utilize the Employee Retention Credit, the rules are a little different. Let’s see how it works:
Let’s say the amount withheld totals $20,000.
Normally, any difference between Item 67a (total withheld) and Item 67b (total withholdings disbursed) would represent the change in payroll liabilities year over year, but in this case, the difference between these two may represent amounts still due to the taxing authorities plus the amount of CARES Act credits applied against taxes otherwise remitted.
On the LM-2 form, this amount would be reported in Item 67a.
To best complete your LM-2 form, the union should not report any receipt in connection with the credits (because no cash was received) and report in Item 67b (and if applicable, Item 65 for Direct Taxes) the actual amount paid to taxing authorities, with a notation in Item 69 (Additional Information) explaining the value of the credits which were used to off-set taxes not remitted.
However, under this CARES Act provision, the amount remitted might be significantly less than the amount withheld.
Generally, transactions should be reported at gross, not net, in the LM-forms. The key here is that with utilizing the CARES Act credits, no cash is disbursed or received. A similar concept is applied when credit card returns occur in the same credit card billing period – these transactions are also netted for LM-reporting.
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If you have any questions regarding Form LM-2, please contact a member of Withum’s Labor Organization Services Team.
