Recent actions and changes that may affect you due to COVID-19 tax relief measures recently passed are summarized below:
Families First Coronavirus Response Act, H.R. 6201
The Senate has passed the House’s coronavirus relief bill, the Families First Coronavirus Response Act, H.R. 6201. The bill includes provisions that will allow for expanded paid leave and tax credits aimed at providing relief during the coronavirus pandemic. The bill is intended to be more inclusive than the protections under the existing Family and Medical Leave Act.
Tax Credits for Employers
Among the many provisions in the coronavirus relief bill are several tax credits for employers who provide paid sick leave or family or medical leave for their employees who take leave for coronavirus related reasons.
Payroll Tax Credit for Paid Family Leave
The bill provides an employer payroll tax credit that equals 100% of the qualified family leave wages paid by the employer mandated by the bill, subject to certain limitations. The bill mandates employers with fewer than 500 employees to provide paid family leave when an employee is unable to work due to a need to care for a child of an employee if that child’s school or child care has been closed due to coronavirus. The payroll tax credit is generally available for up to $200 in wages for each day an employee receives qualified family leave wages. A maximum of $10,000 in wages per employee would be eligible for the credit.
Payroll Tax Credit for Paid Sick Leave
The bill also provides an employer payroll tax credit that equals 100% of the qualified sick leave wages paid by the employer mandated by the bill, subject to certain limitations. The bill mandates employers with fewer than 500 employees to provide up to 80 hours of paid sick time through the end of 2020 if the employee is unable to work for any of the following reasons:
- to comply with a requirement to quarantine due to exposure to or symptoms of coronavirus;
- to care for an at-risk family member under quarantine; and
- to care for a child if that child’s school or child care has been closed due to coronavirus.
The payroll tax credit is generally available for up to $511 in wages (for workers who are quarantined or who have COVID-19) and wages of up to $200 for other workers for each day an employee receives qualified sick leave pay. The credit is available for a maximum of 10 days per calendar quarter.
Small Business with less than 50 Employees
The coronavirus relief bill does provide the Secretary of Labor with authority to exempt small businesses with fewer than 50 employees from these mandated paid leave requirements when the imposition of such requirements would jeopardize the viability of the business.
Self Employed Individuals
Self-employed individuals would also be eligible for the refundable credits for qualified family leave and qualified sick leave equivalent amounts.
Tax Deadline Relief
On March 13th, the President issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in the response to the ongoing coronavirus pandemic. The Emergency Declaration instructed the IRS “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant
Code Sec. 7508A(a)
.”
On March 17th, Treasury Secretary Steven Mnuchin announced at a press conference that certain tax payments could be postponed without interest or penalty. The IRS has since issued Notice 2020-17 which provides guidance on deferring tax payments.
Relief for Individuals
The IRS has extended the April 15th tax payment deadline to July 15th for most Americans. The payment extension is available to taxpayers who have a 2019 tax balance due of $1 million or less and who file a return or an extension form with the IRS by April 15th. All taxpayers still need to file a tax return or a tax extension by April 15th even if delaying tax payment. Interest and penalties will not accrue on these deferred payments so long as a return or extension is filed by April 15th. Any excess tax due over the $1 million threshold should be paid by April 15th.
Example
A taxpayer has a federal 2019 tax liability of $32,500. During the year, the taxpayer had $30,000 of federal taxes withheld from his paycheck. The taxpayer has a balance due of $2,500 with the filing of his 2019 tax return. As long as the taxpayer files a return or an extension by April 15th, the taxpayer has until July 15th to pay the remaining $2,500 balance.
Individuals that are due Refunds
The IRS will continue to process tax refunds and it currently does not anticipate any refund delays. Treasury Secretary Steven Mnuchin has encouraged people who will be getting tax refunds to continue to file their tax returns by April 15th.
2020 Estimated Tax Payments
Many taxpayers who pay quarterly estimated taxes can delay their April 15th 2020 Q1 Estimated payment until July 15th. However, the amount deferred, in addition to any 2019 tax owed, cannot exceed $1 million. The IRS has not yet provided guidance on second quarter quarterly estimates that are due June 15th.
Timeline for Individuals
The current guidance provides for the following timeline:
April 15, 2020: File a return or an extension with the IRS. Taxpayers who have a balance due of $1 million or less are not required to pay until July 15th. This $1 million threshold includes both 2019 balances due and Q1 2020 estimated tax payments.
June 15, 2020: Pay a Q2 2020 estimated tax payment if you are required to make estimated tax payments throughout the year.
July 15, 2020: Pay your remaining 2019 tax balance due if you were eligible to defer the payment. Also pay a Q1 2020 estimated tax payment if you are required to make estimated tax payments during the year.
State Deadlines
State filing and payment deadlines vary and are not always the same as the federal filing deadline. While some states are following the federal model, some are setting their own deadlines, and some states have not yet mandated any extensions.
The Massachusetts Department of Revenue website provides that in the event the Internal Revenue Service (IRS) issues tax relief to taxpayers with federal filing obligations, the DOR is prepared to follow the IRS in offering similar relief for taxpayers with Massachusetts tax filing obligations.
Relief for Corporations
C-Corporations that have a tax liability of $10 million or less due April 15th can also delay payment for three months.
Sincerely,
The EJC Leadership Team
