H&P COVID-19 TAX UPDATE 3-21-2020
COVID-19 BUSINESS AND TAX UPDATE
Released March 21, 2020
On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic. On March 18, Notice 2020-17 was issued to provide payment relief which postponed the due date for certain Federal income tax payments from April 15, 2020 to July 15, 2020. On March 20, 2020 Notice 2020-18 was issued to restate and expand upon the relief provided in Notice 2020-17 and provided for a postponement of the filing deadline. Further, the President of the United States signed the Families First Coronavirus Response Act (H.R. 6201, Families First Act) on March 18, 2020 providing additional relief to employers and employees impacted by COVID-19. Further legislation, including economic stimulus in response to COVID-19 is expected in the coming days. In response to the rapidly changing economic environment resulting from the COVID-19 pandemic, we wanted to provide a brief summary of the primary relief provisions impacting local businesses and individuals. Please recognize that this is only an overview of information available through March 20, 2020. These provisions include multiple details in how they are applicable to individual circumstances, and accordingly, should be discussed with a tax and/or legal professional in more detail.
Highlights of the recently enacted legislation include:
• Postponement of Filing and Payment Deadline to July 15, 2020 – The due date for filing Federal income tax returns and making Federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020. There is no limitation on the amount of the payment that may be postponed and no interest, penalty, or addition to tax for failure to file or pay will accrue during this time. Relief is available solely with respect to Federal income tax payments (including payment of tax on self-employment income) but does not apply to state tax payments or payments of other federal taxes. This relief applies to 2019 taxes as well as estimated tax payments for 2020 originally due on April 15, 2020. See also https://www.irs.gov/pub/irs-drop/n-20-18.pdf
• Emergency Paid Sick Leave: Employers with fewer than 500 workers will be required to provide sick leave (80 hours for full-time employees and average hours over a two-week period for part-time employees) in response to COVID-19. This is applicable to employees who are experiencing COVID-19 symptoms, in self-isolation or quarantine due to a federal, state, or local quarantine or isolation order related to COVID-19, or to care for a family member or for a child whose school or place of care is closed due to COVID-19. The paid leave is capped at $511 per day/$5,110 in the aggregate for those on leave because of their own health issue, and $200 per day/$2,000 in the aggregate for those caring for others. The US Department of Labor (DOL) has authority to issue regulations to exempt small businesses with fewer than 50 employees.
• Emergency Family and Medical Leave Expansion: Employers with fewer than 500 workers must provide as many as 12 weeks of job-protected leave to employees to care for a child under 18 if school or child care is unavailable due to a public health emergency. Employers will be required to pay employees at a rate of two-thirds of their regular rate of pay, not to exceed $200 per day/$10,000 in the aggregate for leave that extends beyond 10 days. The first 10 days could be unpaid, although a worker could choose to use other accrued leave. Small employers of fewer than 25 employees would be allowed an exception from providing Public Health Emergency Leave if certain conditions are met.
• Tax Credits for paid sick and family and medical leave: Wages required to be paid due to the Emergency Sick Paid Leave or Emergency Family and Medical Leave Expansion would not be subject to the employer portion of the Social Security/Medicare (FICA) tax. Further, employers will receive a 100% refundable payroll tax credit on the wages required to be paid under such leave. It is expected that Forms 941 and 941-X will be redesigned to report payments exempt from the employer portion of FICA and to claim the 100% refundable federal tax credit for these payments. We are awaiting further guidance.
• SBA Loans: The U.S. Small Business Administration (SBA) is providing a streamlined process for disaster loans. Up to $2 million is available for business and $200,000 for homeowners. Visit https://www.sba.gov/disaster-assistance/coronavirus-covid-19
• Other Items:
o Qualifying disaster relief payments paid by an employer to employees who incur unreimbursed expenses as a direct result of COVID-19 will be considered tax-free.
o Group health plans are required to provide full coverage for COVID-19 testing .
o COVID-19 Scams – If you receive calls, emails, or other communications claiming to be from the Treasury Department and offering COVID-19 related grants or stimulus payments in exchange for personal financial information, or an advance fee, tax, or charge of any kind, including the purchase of gift cards, please DO NOT respond. These are scams. Please contact the FBI at www.ic3.gov so that the scammers can be tracked and stopped.
We plan to update our website as new guidance, information, and legislation is available. Please feel free to contact Henry & Peters, P.C. at 903-597-6311 (Tyler office) or 903-758-0648 (Longview office) if you have any questions.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice. Please contact Henry & Peters P.C. or other tax professionals prior to taking any action based upon this information.