SPECIAL EDITION • SPRING 2020
We are providing this special edition of Tax News to try and make sense of the recent actions and legislation that have been put into place. Almost daily we have been seeing new announcements and new legislation being offered by both Congress and the Internal Revenue Service (IRS). We are providing information on the first two initiatives to help both businesses and their employees. The recent bill being debated in Congress may provide some additional relief and we are watching the deliberations.
The Internal Revenue Service (IRS) has launched a new webpage at www.irs.gov/coronavirus, to provide up-to-date information.
In compliance with the stay-at-home order issued by our state we are accepting your tax documents by mail, scan and email, fax or drop-off. We are open for business and welcome your questions regarding your tax returns. Based on the volume of phone calls and emails it may take us a day or so to respond but we will respond as soon as possible.
We look forward to seeing you all healthy and safe in the coming weeks and months. We urge you to comply with all announced safe habits by maintaining a safe distance, practicing responsible personal hygiene, and contacting your health professional if needed.
Tax Season Extended
Pursuant to an announcement by Secretary of the Treasury, Steven Mnuchin, the Internal Revenue Service (IRS) has extended the due date for both tax returns and any tax liabilities due. Any amounts due will not be subject to interest, penalties, or additions to tax as long as they are paid by July 15, 2020.
The IRS has also extended the time to pay the first quarter estimated taxes, normally due by April 15th. Those payments have also been extended to July 15, 2020 and will not be subject to interest and/or penalty.
This relief applies to all tax returns which includes individual (Form 1040), trust and/or estate (Form 1041), partnership (Form 1065), association (Form 990), and company or corporation (Forms 1120 and 1120-S). The forms to request an extension of time to file are not required to get the benefit of this automatic filing (and payment) extension.
If an additional extension of time to file is required beyond the due date of July 15, 2020 then Forms 4868 (for individuals) or 7004 (for business returns) must be filed to receive the extension of time to file until October 15th for individuals and corporations and September 15th for S-corporations, partnerships and trusts/estate tax returns.
Under these provisions, the date for contributions to your IRA or HSA has also been extended to July 15, 2020. The date for the June 15th estimated tax payment has not changed. Required minimum distributions (RMDs) for those who delayed their first distribution must be withdrawn by April 1st (no change).
Families First Coronavirus Response Act (Act)
There are two (2) major provisions of the legislation signed into law on March 18th, the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act. Employers with fewer than 500 employees are subject to this Act which is totally funded by the U.S. government. The provisions of the new law will be effective through December 31, 2020. No unused portion of this provision will carryover to 2021 and no benefits are due on separation of service.
Under the Act there may be a total of 12-weeks of paid leave available. The first two weeks would be provided by the Emergency Paid Sick Leave Act based on certain criteria and the subsequent ten (10) weeks would be covered by the Emergency Family and Medical Leave Expansion Act (EFMLEA). They are not reliant upon each other and you may qualify for the EFMLEA without a COVID-19 diagnosis, it is just that the first ten (10) days would be unpaid under these provisions. Your employer may still provide benefits, or you may be able to draw down on available vacation or personal time off (PTO).
Emergency Paid Sick Leave Act (E-PSL)
For those full and part-time employees who are unable to work or telework for reasons related to COVID-19 (the coronavirus) will be eligible for up to 80 hours of additional emergency paid sick leave regardless of how long you have worked for your employer. There are six (6) different scenarios which determine the maximum amount of payment:
If you are subject to a quarantine or isolation order related to the COVID-19, the pay is the greater of your regular rate or the applicable minimum rate which is capped at $511 per day for a maximum benefit of $5,110. Part-time employees pay would be based on the average numbers of hours over the last six (6) months or hours would normally be scheduled (if employment is for less than six (6) months).
If you have been advised by a health care provider to self-quarantine due to COVID-19 concerns, the pay is the greater of your regular rate or the applicable minimum rate which is capped at $511 per day for a maximum benefit of $5,110. Part-time employees pay would be based on the average numbers of hours over the last six (6) months or hours would normally be scheduled (if employment is for less than six (6) months).
If you choose to obtain a medical diagnosis because you are experiencing systems of COVID-19 (people may experience: cough, fever, tiredness, difficulty breathing (severe cases)), the pay is the greater of your regular rate or the applicable minimum rate which is capped at $511 per day for a maximum benefit of $5,110. Part-time employees pay would be based on the average numbers of hours over the last six (6) months or hours would normally be scheduled (if employment is for less than six (6) months).
If you are caring for or assisting an individual who is subject to an order (described in 1 or 2 above) then the pay is at two-thirds (2/3) of the greater of the employees’ regular rate or applicable minimum wage but capped at $200 per day for a maximum benefit of $2,000.
If you are caring for your child because of school or daycare closure, or because the childcare provider is unavailable due to COVID-19, then the pay is at two-thirds (2/3) of the greater of the employees’ regular rate or applicable minimum wage but capped at $200 per day for a maximum benefit of $2,000.
The employee is experiencing any other substantially similar condition specified by Human Health Services, then the pay is at two-thirds (2/3) of the greater of the employees’ regular rate or applicable minimum wage but capped at $200 per day for a maximum benefit of $2,000. This provision has not yet been fully defined and we are still not sure what would qualify.
As a condition of the Act, the employer may not require the employee to find a replacement to cover your scheduled hours. You may first use your own accumulated sick pay; however, the employer cannot require you to do so.
Emergency Family and Medical Leave Expansion Act (EFMLEA)
This provision is generally available to employees with at least 30 days of employment (whereas the E-PSL is available even if only employed one (1) day). There is only one qualifying criteria for this provision:
If you are unable to work or telework due to a need to care for a child under the age of 18 because the school or childcare provider is closed as a result of a COVID-19 restrictions announced by government authority.
The first 10 days of leave may be unpaid (unless you qualify under the E-PSL provisions) or if you elect to use your accumulated vacation or PTO days. The EFMLEA is an additional extension of time after the first 10 days, for a maximum of ten (10) weeks. The amount of the leave pay is limited to $200 per day with a maximum of $10,000.
There were other provisions of the Act which are administered at the state level and you would need to monitor your state’s actions to provide the following:
Expanded food assistance
Expanded unemployment benefits
Healthcare plans, including high deductible health plans, to provide for COVID-19 testing at no cost to the person
There are many initiatives and programs in process that are still be finalized by the Administration, the IRS and the states. We are still waiting for guidance how the application of the new law will be administered.