COVID-19 (Coronavirus) Update
All of us filing and preparing taxes have been affected by technical changes related to the COVID-19 pandemic. The information below is intended to update you on laws and regulations that have been implemented/changed as a result of COVID0-19. As much as we can, this office will help assist with understanding all of the various programs out there and update you as more information becomes available. A lot of the information below pertains to businesses with employees, but there are other item which may be of interest to you.
FEDERAL LAWS RELATING TO THE COVID-19 PANDEMIC
From Yahoo Lifestyle article by Cameron LeBlanc, March 24, 2020:
So far, two federal tax bills addressing the coronavirus pandemic have become law. The first was an allocation of $8.3 billion in emergency funds to the federal agencies responding directly to the outbreak, the Centers for Disease Control (CDC) , Small Business Administration (SBA) and the Department of State among them.
The other was the Families First Coronavirus Response Act. According to the Congressional Research Service summary, it “responds to the coronavirus outbreak by providing paid sick leave and free coronavirus testing, expanding food assistance and unemployment benefits, and requiring employers to provide additional protections for health care workers.”
Families First Coronavirus Response Act:
For businesses an important component of this law is the effect on an employer’s obligation to provide paid sick leave or expanded family and medical leave. These provisions are effective for wages paid for the period from April 1, 2020 through December 31, 2020.
ALL employers with less than 500 employees are covered by this law, but employers with less than 50 employees may be able to qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern (but would still be obligated under the other sick and family leave provisions). The exact qualifications for exemption and the method by which to request exemption are yet to be disclosed by the Department of Labor (who oversees enforcement), but is expected to be forthcoming in April.
Generally, the ACT provides covered employers must provide to all employees:
- Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
- Two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine, or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19.
A covered employer must provide to employees it has employed for at least 30 days:
- Up to an additional 10 weeks of paid expanded family and medical leave at 2/3 the employee’s regular rate of pay where an employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.
More details about the new rules, what qualifying reasons for leave are, and how to calculate the leave pay can be found at: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave#_ftnref4
I will update this information with the qualifications for exemption and how to apply for exemption when that information is made available.
A series of frequently asked questions (FAQ’s) may prove helpful and is located here:
The poster you are REQUIRED to post in your business is here:
The Families First Coronavirus Response Act (FFCRA) as it pertains to employer paid leave is an expansion of the Family and Medical Leave Act. This act only applied to private-sector employers with 50 or more employees during 20 or more workweeks in a year. For those employers only employees who worked at least 1,250 hours during the 12 months preceding the leave were covered. The revisions under the recently passed FFCRA includes ALL employers with less than 500 employees.
Some FAQ’s related to how the FMLA act applies under COVID-19 can be found here:
If you are currently under Oregon’s Paid Sick Leave rules, I assume this law (FFCRA), being more extensive, supersedes the Oregon rules, unless you have received an exemption on certain coverage, in which case Oregon’s rules would still apply.
Private employers will be paying for expanded leave benefits up front, but the government is offering payroll tax credits for qualified sick leave wages and family leave paid by an employer. Wages paid under the extended sick leave or expanded family medical leave are exempt from Social Security taxes but not from Medicare taxes.
CHANGES RELATED TO FILING AND PAYING INCOME TAXES:
On March 20, 2020 the US Treasury Department and the Internal Revenue Service changed the April 15, 2020 filing deadline to July 15, 2020 This includes filing individual 1040 returns, corporation 1120 returns, and trust and estates 1041 returns which were due on April 15, 2020. In addition. payments required to be made by April 15, 2020 have also been extended to July 15, 2020 which includes any balance due to be filed with one of the above listed returns as well as any estimated tax payments due April 15, 2020.
There will be no penalties or interest calculated on any amount originally due on April 15, 2020. Such interest and penalties will begin accruing if not paid by July 15, 2020.
There is nothing to file to request a delay in filing or paying to July 15, 2020. If a return won’t be filed by the July 15, 2020 date, a filing extension should be sent to the IRS by the new July 15, 2020 deadline. Any balance due and all April 15th estimated taxes should be paid by July 15, 2020.
June 15 2020 estimated taxes are still due June 15, 2020.
The deadline to make your 2019 IRA and Health Savings Account (HSA) contributions for 2019 has also been extended to July 15, 2020.
The above rules only apply to FEDERAL returns and payments.
Both California and Oregon have adopted the filing and paying deadline changes for 2019 income tax returns. However, Oregon has not extended the time to pay the April 15, 2020 estimated tax payment for tax year 2020 which are still due on April 15, 2020. California extended the 2019 return payment date to July 15, 2020, and the April 15, 2020 extension date to June 15, 2020.
CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY (CARES) ACT:
As of Friday March 27th the US House of Representatives voted to approve a massive $2 trillion stimulus bill that policy makers hope will blunt the economic destruction of the coronavirus pandemic, the legislation to the President for enactment (which is expected).
- More than 150 million US households would receive checks under the legislation. Single individuals with incomes above $99,000 are not eligible. That amount rises to $11,250 for head of household filers and $150,000 for joint filers. The phase out changes depending on how many children are in the family. The rebate will use the 2019 tax returns (2018 if the taxpayer has not filed for 2019 at the point funds are disbursed) to determine the advanced rebate amount and reconcile the rebate based on 2020 income. This means taxpayers who receive a smaller rebate than they are eligible for based on 2020 income will receive the difference after filing a 2020 tax return, but overpayments of rebates due to a higher 2020 income in 2020 will not be clawed back.
- Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis. The credit would be available to employers whose businesses were disrupted due to virus shutdowns and those that had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit can be claimed for employees who are retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.
- Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50 percent owed on December 31, 2021 and the other half owed on December 31, 2022.
- Certain employer payments of student loans on behalf of employees are excluded from taxable income. Employers may contribute up to $5,250 annually toward student loans, and the payments would be excluded from an employee’s income.
- The bill creates a $300 partial above-the-line charitable contribution for filers taking the standard deduction and expands the limit on charitable contributions for itemizers.
- The bill waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus related challenges. Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps. Eligible retirement accounts include individual retirement accounts (IRA’s), 401Ks and other qualified trusts, certain deferred compensation plans and qualified annuities. The bill also waives required minimum distribution rules for certain retirement plans in calendar year 2020.
- The bill includes almost $400 billion to help small business retain their payrolls and $250 billion to boost unemployment insurance increasing the maximum benefit available over and above what the state may provide. Included in this portion is $350 billion allocated for the Paycheck Protection Program, which is meant to help small business (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses (utilities, rent/mortgage payments) from February 15 to June 30. Notability small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year. Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation. We are expecting to see more information about how to apply for this program by the end of next week.
- The bill expands unemployment insurance for workers including a $600 per week increase in benefits for up to four months and federal funding of UI benefits provided to those not usually eligible for unemployment, such as the self-employed, independent contractors, and those with limited work history.
- The bill also provides hundreds of billions of dollars in emergency federal aid for large corporations suffering due to the coronavirus outbreak.
It is possible some of the above information was tweaked prior to final passage. There will be more information on what’s in this massive spending legislation in the days and weeks to come and I will send out updates as more information is available.
SMALL BUSINESS ADMINISTRATION (SBA) EMERGENCY LOAN
The SBA provides low-interest disaster loans to help businesses and homeowners recover from declared disasters. As noted above some forgiveness of the loan balance may be available under the CARES act.
Find information about the SBA Disaster Assistance loans here:
MORE INFO AT IRS.GOV
As mentioned previously, I will update this information as more details become available.