SECTION 3. RELIEF FROM — Internal Revenue Bulletin 2020-17

FAILURE TO MAKE A DEPOSIT OF TAXES

a. Employment Taxes Related to Quali- fied Leave Wages

An employer will not be subject to a penalty under section 6656 for failing to deposit Employment Taxes relating to Qualified Leave Wages in a calendar quar ter if—

(1) The employer paid Qualified Leave Wages to its employees in the calendar quarter prior to the time of the required deposit,

(2) The amount of Employment Taxes that the employer does not timely deposit is less than or equal to the amount of the employer’s anticipated credits under sec tions 7001 and 7003 of the Families First Act for the calendar quarter as of the time of the required deposit, and

(3) The employer did not seek payment of an advance credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, with respect to the an ticipated credits it relied upon to reduce its deposits.

Thus, an employer may reduce, with out a penalty under section 6656 of the Code, the amount of a deposit of Employ ment Taxes by the amount of Qualified Leave Wages and Qualified Health Plan Expenses paid by the employer in the cal endar quarter prior to the required deposit, plus the amount of the employer’s share of Medicare tax on such Qualified Leave Wages, as long as the employer does not also seek an advance credit with regard to the same amount.

For purposes of this section 3.a of this notice, the total amount of any reduction

in any required deposit may not exceed the total amount of Qualified Leave Wag es and Qualified Health Plan Expenses and the employer’s share of Medicare tax on the Qualified Leave Wages in the cal endar quarter, minus any amount of Qual ified Leave Wages, Qualified Health Plan Expenses, and employer’s share of Medi care tax that had been previously used (1) to reduce a prior required deposit in the calendar quarter and obtain the relief pro vided by this notice or (2) to seek payment of an advance credit.

b . Employment Taxes Related to Quali- fied Retention Wages

An eligible employer will not be sub ject to a penalty under section 6656 for failing to deposit Employment Taxes re lating to Qualified Retention Wages in a calendar quarter if—

(1) The employer paid Qualified Re tention Wages to its employees in the calendar quarter prior to the time of the required deposit,

(2) The amount of Employment Taxes that the employer does not timely depos it, reduced by the amount of Employment Taxes not deposited in anticipation of the credits claimed for Qualified Leave Wag es, Qualified Health Plan Expenses, and the employer’s share of Medicare tax on the Qualified Leave Wages under sections 7001 and 7003 (as described in section 3.a of this notice), is less than or equal to the amount of the employer’s anticipated credits under section 2301 of the CARES Act for the calendar quarter as of the time of the required deposit, and

Thus, after a reduction, if any, of a de posit of Employment Taxes by the amount of credits anticipated for Qualified Leave Wages under sections 7001 and 7003 (as described in section 3.a of this notice), an employer may further reduce, without a penalty under section 6656 of the Code, the amount of the deposit of Employment Taxes by the amount of Qualified Reten tion Wages paid by the employer in the calendar quarter prior to the required de posit, as long as the employer does not

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also seek an advance credit with regard to the same amount.

For purposes of this section 3.b of this notice, the total amount of any reduction in any required deposit may not exceed the total amount of Qualified Retention Wages in the calendar quarter, minus any amount of Qualified Retention Wages that had been previously used (1) to reduce

a prior required deposit in the calendar quarter and obtain the relief provided by this notice or (2) to seek payment of an advance credit.