Expertise Beyond the Numbers

COVID-19 Tax Implications for Individuals and Businesses

Updated 3/20/2020 at 3:49pm ET.

The Federal Government has announced new updates since yesterday’s deadline push – the April 15 deadline for filing and payment has been moved to July 15. This means that now both the filing and payment deadlines are both July 15. As stated yesterday, this change only governs the federal tax return and associated payments, along with first quarter 2020 estimated tax payments, that on a combined basis do not exceed the previously outlined dollar caps of $10 million for corporations and $1 million for non-corporate taxpayers. It is possible that the caps will not apply anymore, but we are awaiting guidance from the IRS on that issue.

Maryland will follow suit, as will certain states like California and Connecticut, however there is no official word at the time of this post as to what other states will to do react to this morning’s shift in the filing deadline.

We will continue to monitor the news and provide updates on all individual state situations as they’re officially announced.

What remains unchanged after Friday’s announcement is that taxpayers who expect a refund can file right now and get their payments once the return is processed.

Our Tax Services team will continue to monitor the situation and Government responses and provide updates as things change.

—-

The SC&H Group Tax Services team has been keeping close tabs on how the pandemic response will impact taxes for both individuals and businesses. The following post details the latest information as of March 19th and we will continue to provide updates as the situation evolves. 

Updates on Tax Filing Deadlines   

The IRS has issued new guidelines for American taxpayers to help ease the burden during the economic upheaval due to the coronavirus. The new rules only govern the federal tax return and associated payments, along with first quarter 2020 estimated tax payments.

As this is a state by state case, many states are considering easing their filing rules, and our team is monitoring these updates as they happen to communicate updates as needed.

Traditionally, both the filing of the federal return and the payment of any remaining federal income taxes were due on April 15 following the tax filing year. Taxpayers could file an extension to delay the filing of a return until October 15 of the same year.  The federal tax amount owed was still due on April 15. In other words, the money is always due by April, but with an extension, the form could be delayed until October. Income tax not paid by April 15 began accruing interest and penalty at that time.

However, with the new guidelines, the payments for both 2019 and any estimated 1st quarter 2020 payments (up to a certain “Applicable Postponed Amount”), are not due until July 15, 2020.

For each consolidated group, or C corps that don’t file consolidated returns, the Applicable Postponed Amount is $10 million. For all others, no matter their filing status (individual, married filing jointly, etc.), the applicable amount that can be delayed is $1 million. However, the amount owed over this amount must be paid by April 15, or interest and penalties start to accrue.

In short: if you file a joint tax return, for example, your first $1 million in federal tax owed in four short weeks can be delayed until July 15.

This opens up a new scenario for tax returns this year if you owe federal taxes!

Maryland taxpayers currently have the following options to consider:

  • Stick to the regular April 15 deadline for filing and payment. Some people may find it easier (or better) to ignore the change in payment deadline. If you don’t owe any federal tax, and especially if you’re owed a refund, you want to file by April 15 rather than delaying until October. If you owe income taxes, there’s no particular reason to pay by April 15.
  • File return by April 15, delay payment until July 15. If you already have your taxes done, this might be the easiest way to handle your taxes. Whether you have the money set aside now or not, delaying payment is a good idea for many taxpayers. It’ll give you time to save up if you don’t have the funds set aside. And if you do, you can put it in a 3-month CD or high-interest rate savings account to squeeze out a few more pennies before you have to turn it over. Those whose credit cards were stolen or implicated in a cybersecurity breach should get their tax return in on time, rather than filing an extension. They’re most at risk of having someone else file a fraudulent tax return, so they need to file theirs first. Because it’s happened before, the IRS can unwind a fraudulent return, but it does take some work and persistence on the taxpayer’s part to take care of identity theft.
  • File extension for October 15, delay payment until July 15. If you always wait until the last minute, this option is for you! Just remember your payment will still be due by July 15, and interest will be charged on your balance if you don’t pay your estimate and/or extension payment by then. If you haven’t even started your tax prep yet, go ahead and ask to file an extension. As noted above, the delay gives you some time to put together the payment. This is a good alternative for those who are in the middle of upheaval during this time and obtaining all of your tax data is not practical.

Emergency Family Leave Provisions

Due to the volatility in the stock market, cancellations of large-scale events, schools, and more, the Trump Administration and Congress have been taking steps to mitigate the impact this pandemic will cause individuals and businesses. Today, President Trump signed the Families First Coronavirus Act (H.R. 6201) which includes several provisions that should help businesses and individuals struggling with the current dynamics.

  • Emergency paid sick leave for anyone quarantined or symptomatic or caring for a child or other family member
    All public sector employers and private ones with fewer than 500 employees (though those with fewer than 50 may be exempted) must pay sick leave of up to two weeks for full-time and average hours (for a two-week period) for part-time employees.
    The daily limit for those who are sick themselves is $511/day and $5,110 total. The cap is $200/day and a total of $2,000 for those caring for others.
  • Emergency paid family and medical leave
    The same employers must cover up to 12 weeks of leave for an employee caring for a child whose school is closed. The first 10 days may be unpaid. The employee must be paid 2/3 of their wages, up to a ceiling of $200 per day and $10,000 total.
    The Department of Labor is authorized to issue regulations exempting employers with fewer than 50 employees and certain health care organizations from these requirements.
  • Employer tax credits
    For providing these benefits, the employer will receive a 100% refundable tax credit on their social security payroll taxes up to the amount of sick wages paid under this act. Additional wage payments due to the act will not be subject to employer payroll taxes.
  • Unemployment insurance
    Up to $1 billion will be provided to the states for fiscal 2020 to handle processing and payment of unemployment insurance. Workers in states with increased unemployment may qualify for an additional 13 weeks (and some states, 20 weeks) of benefits.
  • Medicaid increase
    For the duration of the emergency, the government provides states with a 6.2% increase in funding for medical services during the pandemic.
  • Other, including food assistance and coronavirus testing

Our Tax Services team will continue to monitor the situation and Government responses and provide updates as things change.