COVID-19 Tax Law Updates from BRS CPA
Federal Tax Updates (Updated 3/24/20)
The 2019 Tax Filing Deadline is July 15, 2020
The Treasury and IRS have announced that they will extend the 2019 tax filing deadline to July 15, 2020. The IRS expects to continue to process refunds as normal. The IRS typically issues nine out of 10 tax refunds within 21 days or less from acceptance with e-file and direct deposit – the fastest way to get a refund.
Do I need to file an extension to file past April 15? No, you do not need to take any action for your clients. The July 15 extension applies to all taxpayers automatically.
Will the extension of the tax deadline delay my client’s tax refund? No, the IRS expects to continue to process refunds as normal.
Do my clients have more time to contribute to their IRAs? Yes, taxpayers now have until July 15 to make payments to IRAs for 2019.
Will the deadlines for state taxes also be extended? Most states are conforming to the new July 15 tax deadline. However, some states have different deadlines and guidance. Please see the updated list of tax guidance and information by state below.
Relief for Individuals and Businesses with Taxes Due
The Treasury and IRS also announced the deferment of federal tax payments, interest free and penalty free, for 90 days, until July 15. Individuals can defer up to $1 million in payments, and businesses can defer up to $10 million in payments. This deferment also applies to tax year 2020 estimated tax payments previously due on April 15, 2020. Corporations can defer up to $10 million in federal payments.
Who qualifies for the extended payment deadline? According to the Secretary of Treasury, anyone with a Federal Tax Payment related to their 2019 taxes and their tax year 2020 estimated tax payments due 4/15/20 can defer their tax payment, free of penalties and interest for 90 days for purposes of the relief.
What do I do if I already filed my client’s taxes, and they scheduled their payment for April 15? If your client has already filed and scheduled their payment for April 15, they will need to cancel their payment and reschedule it. Changes to payments need to be made no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
Does this extension apply to 2020 quarterly estimated tax payments? First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020. However, second quarter 2020 estimated income tax payments are still due on June 15, 2020.
What if my client needs more time past the July 15 deadline to pay? If your client needs additional time beyond July 15 to file, you will need to file an extension. An extension will still give you until October 15, 2020, to file, but your client will need to pay any taxes owed by July 15 or be subject to penalties and interest.
The Families First Coronavirus Response Act (H.R. 6201)
On Wednesday, March 18, President Trump signed into law the Families First Coronavirus Response Act, or H.R. 6201, which includes relief for individuals, self-employed and businesses.
Relief for Individual Taxpayers. Eligible employees impacted by COVID-19 may receive paid sick and emergency sick leave.
Emergency Sick Leave: Employees who were required to be quarantined, took care of a family member who was required to be quarantined, or had to care for your child due to school or daycare closures may be able to take 12 weeks job-protected leave under FMLA.
Paid Sick Leave: Employees who were quarantined or seeking care for COVID-19 may receive two weeks paid sick leave at full pay and two-thirds pay to care for a family member or child.
Relief for Self-Employed and Small Businesses. The Families First Corona virus Response First Act provides relief in the form of refundable tax credits for sick leave and family leave for eligible self-employed and small business owners.
Self-Employed Tax Credit for Sick Leave: Self-employed individuals may be eligible for a refundable tax credit equivalent to a qualified sick leave amount. Qualified sick leave is based on average daily self-employment income.
Self-Employed Tax Credit for Family Leave: Eligible self-employed individuals may be eligible for a refundable tax credit equal to 100 percent of a qualified family leave equivalent amount.
Small Business Tax Credit for Paid Sick Leave: Small business owners who paid sick leave wages to employees may be eligible for a refundable tax credit equal to 100 percent of qualified sick leave paid.
Small Business Tax Credit for Paid Family Leave: Small business owners who paid qualified family leave wages to employees may be eligible for a refundable tax credit equal to 100 percent of qualified family leave wages paid.
The IRS is expected to issue additional guidance on the COVID-19 tax relief.