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COVID-19 (Coronavirus) Tax Update

Income Tax Payment Relief

The IRS has released Notice 2020-17 which provides more detail on the previously announced deferral of income tax payments due April 15th. The notice states that the due date for making Federal income tax payments due April 15, 2020 is postponed to July 15, 2020. The postponed payment amount is up to $10,000,000 for C Corporations and $1,000,000 for all other taxpayers. The relief provided is available with respect to Federal income tax payments (including payments of tax on self-employment income) due on April 15, 2020, in respect of a taxpayer’s 2019 taxable year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for a taxpayer’s 2020 taxable year.

The notice specifically states that no extension is provided in this notice for the payment or deposit of any other type of Federal tax, or for the filing of any tax return or information return.

M&A Summary & Commentary:

If you are an individual with a payment due with your return or for 2020 1st quarter estimates of less than $1,000,000 (combined), penalties and interest will not start accruing until July 16, 2020. Note that this only applies to payments due with the return or with 2020 1st quarter estimates. If you had an estimated payment due January 15, 2020, that was not made, interest and penalties would presumably continue to accrue on that amount.

If you are a C Corporation, you receive the same treatment for up to $10,000,000.

The time for filing is not extended – tax returns previously due April 15th are still due April 15th, but automatic extensions are available for all taxpayers.

It should be noted that this only applies to payments due on April 15, 2020, and presumably does not apply to payments due on any other date, including 2020 2nd quarter estimates due June 15th, or fiscal year filers with payments due on any other date.

This also does not apply to any state payments due, or to payments of any tax other than income tax.

Employer Payroll and Self-Employment Tax Credits for Paid Sick Leave and Paid Family Medical Leave

The Families First Coronavirus Response Act (H.R. 6201) has been signed into law and provides tax credits for paid sick leave and paid family medical leave. Employers with fewer than 500 employees that are required to provide paid sick leave and paid family leave benefits are able to apply the credit against the employer’s share of payroll tax liabilities. The credit is refundable and claimed on a quarterly basis.

Paid Sick Leave

The amount of the credit for paid sick leave is equal to 100% of the amount of sick leave wages paid, up to $200 per day, per employee, or $511 per day if the employee is:

  • on leave because of a government mandated quarantine or isolation order,
  • has been advised by a health professional to self-quarantine, or
  • is experiencing COVID-19 symptoms and is seeking a medical diagnosis.

An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.

Paid Family Leave

The credit amount for paid family leave is limited to $200 per day, per employee, with a total cap of $10,000 per employee.

Self-Employed Individuals

Refundable credits are also available to offset self-employment tax. The credit equals 100% of a self-employed individual’s sick-leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing.

The sick-leave equivalent amount is the lesser of average daily self-employment income, or $511/day to care for the self-employed individual, or $200/day to care for a sick family member or child following a school closing. The credit can be taken for as many as 50 days multiplied by the lesser of $200 or their average self-employment income.

All of the above rules only apply to the period beginning on a date to be determined by the Secretary of the Treasury that is within a fifteen-day period of the date of enactment and ending on December 31, 2020.

The Act also states that sick leave and medical leave paid under the Act will not be subject to FICA tax.

As always, we’re here to answer your questions. Do not hesitate to reach out to us.

 




This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although McKonly & Asbury has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

About the Author

Mark Heath

Mark is a Partner with McKonly & Asbury. Serving as Director of Tax Services, he brings a wealth of experience in federal, state, and international income as well as franchise tax issues for both publicly and privately held corporatio… Read more

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