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TAX UPDATE – CORONAVIRUS ASSISTANCE: Updated March 20, 2020
On March 17th the IRS came out with guidance to assist taxpayers as the effects of coronavirus are felt across the country. Here is a summary of the actions that the IRS has taken:
- Individual tax returns are now due July 15th, and the deadline to pay the tax liability has been extended 90 days automatically until July 15th. Normal extensions of time to file the return still exist and can be filed anytime between now and July 15th.
- C Corp tax returns are now due July 15th and the deadline to pay the tax liability has been extended 90 days automatically until July 15th. Normal extensions of time to file the return still exist and can be filed anytime between now and July 15th.
- 2020 first quarter estimates are also extended until July 15th. More information on the IRS action can be found by reading IRS Notice 2020-18.
- The state of Minnesota has indicated they will match the IRS filing deadlines but they have not yet taken official action. We expect that Minnesota and other states are likely to align their due dates with the federal legislation which delays the due date to July 15th.
On March 19th the President signed HR 6201 into law which provides a variety of assistance for individuals and businesses affected by the coronavirus. Here is a summary of the key items in the bill:
- Unemployment Compensation– gives states additional flexibility for determining qualifications of displaced workers, extends benefits for longer periods of time
- Paid Sick Leave– requires that employers with less than 500 employees provide two weeks of paid sick leave available to anyone directly affected by coronavirus like 1) quarantined individuals, 2) self-isolation under the advice of a health care provider, 3) employee is experiencing symptoms of COVID-19 and seeking medical diagnosis, 4) caring for a family member, 5) caring for children if schools are closed or 6) experiencing substantially similar conditions specified by the Secretary of Health. Employers subject to the requirement claim a tax credit equal to 100% of the qualified sick leave wages paid out, subject to a cap of $511 per day (under 1, 2 or 3) or $200 (under 4, 5, or 6) and 10 days per employee. Refundable credit applied against payroll taxes. Similar credit available for self-employed people, presumably calculated on their individual tax credit to reduce self-employment taxes.
- Paid Family and Medical Leave– requires that employers with less than 500 employees provide up to ten additional weeks of paid family and medical leave which provides for pay at 2/3 the normal rate after the two weeks of sick leave has been taken. Employers subject to the requirement claim a tax credit equal to 100% of the paid family and medical leave subject to a cap of $200 per day and $10,000 overall per employee. Refundable credit applied against payroll taxes. Similar credit available for self-employed people, presumably calculated on their individual tax credit to reduce self-employment taxes. Self-employed people need to fit under the same criteria as employees of other businesses to qualify. In addition, they need to regularly carry on a trade or business.
- Various Programs– requires private health plans to cover the diagnostic testing, waives the cost for those on Medicare, money available for other health programs. Increases Federal contributions to a variety of state programs.
We have created a spreadsheet to calculate the tax credits for the paid sick leave and the paid family medical leave. It’s based on the language in the house bill, but it can be used as a guide to understand how employers will be reimbursed. Please contact your CPA at Boyum Barenscheer to request a copy.