There are several federal and state tax law changes related to the Coronavirus/COVID-19 and there are new developments seemingly every day. Three recent changes, that may affect your tax situation, are explained below.
Interest and Penalty Relief for Federal Taxes Due April 15, 2020
Treasury has granted interest and penalty relief for federal tax payments due April 15,2020. This includes the balance due on the 2019 federal income tax return as well as the first quarter estimated tax payment for 2020.
Individuals can postpone payment up to $1,000,000 regardless of filing status, corporate taxpayers can postpone up to $10,000,000. Balances over these threshold amounts will be due by April 15, 2020.
At this time, this is not an extension of the tax deadline. It is only a postponement of the payment date. As such, your federal income tax return will need to be filed or extended by April 15th. In either case, you are allowed to use the postponed payment date.
If you choose to file your tax return by April 15, 2020, please be sure to return Form 8879 to our office and we will electronically submit the tax return. Then, you can wait until July 15th to pay the balance due. You can also defer your first quarter estimated tax payment until July 15th. Please note, that your second quarter estimated tax payment will be due June 15,2020. This date was unchanged.
If you choose to extend your tax return you must do so by April 15, 2020. Your extension payment will not be due until July 15, 2020 regardless of when you file your return. Similarly, your first quarter estimated tax payment will not be due until July 15, 2020. The tax return extension allows a six-month extension of time to file, but the interest and penalty forgiveness is only for a three-month period.
CPA groups continue to advocate for a delay in the tax filing deadline and we will notify you if that date changes.
At this time, Minnesota has not enacted similar changes, but we expect to see changes from the state, as well.
Minnesota Sales Tax Deferment for Certain Industries
Minnesota Department of Revenue has granted a one-month deferment of sales tax for businesses affected by the state shutdown of bars, restaurants, and other places of public accommodation. This applies only to the sales and use tax payment due March 20, 2020. Payment will still be required on April 20, 2020.
Families First Coronavirus Relief Act
There are several tax implications from the Families First Coronavirus Relief Act (FFCRA), including a 100% tax credit for amounts paid out to employees under the FFCRA. Please note that this provision applies only to employers with 500 employees or less and there are certain other exemptions for employers with under 50 employees. This legislation was enacted late in the day on March 18, 2020 and takes effect 15 days after enactment. The bill provides the following benefits to employees:
- Employees who are on sick leave because they are sick can receive their full pay, up to $511 per day, or $5110 total.
- Leave taken to care for children whose schools or daycares have closed is paid at two-thirds the employee’s regular rate of pay, with a maximum of $200 per day or $10,000 total.
- Employers cannot force employees to use up vacation or other sick time before receiving this benefit.
- Self-employed individuals can also receive a benefit up to the limits described above.
- There is a ten-day waiting period before this benefit applies. Employees can use existing sick or vacation time to cover these days.
Employers receive a tax credit on their quarterly payroll tax return for wages paid under the FFCRA in that quarter. This credit is refundable if the total wages related to the FFCRA exceed the total payroll tax liability. Due to the fact that the bill takes effect 15 days after enactment and there is a 10-day waiting period this will likely mean that employers will receive the credit on their second quarter payroll tax returns, due July 31, 2020.
A full analysis of the tax implications of this bill will be forthcoming.