COVID-19 Tax Updates
2019 and 2020 Coronavirus Tax Relief
Congress and the Trump Administration have passed/announced numerous provisions in response to the struggles in the economy right now with loss of jobs and business/school closings.
Some highlights of tax law changes follow as well as links to additional information and resources for available programs and benefits.
Tax law highlights (items not related to programs)
Most Tax Deadlines extended to July 15, 2020
- Federal income tax filing and payment deadlines are postponed to July 15, 2020. Interest, penalty, and failure to pay calculations will be suspended during this period.
- The postponement applies to 2019 tax year payments, Q1 2020 estimated tax payments, and Q2 2020 estimated tax payments.
- Calendar year trusts, estates, and C Corporations returns are also eligible for the July 15, 2020 extension.
- 2019 Traditional or Roth IRA and HSA (Health Savings Accounts) contributions are also extended to July 15, 2020.
Net operating losses (NOL) arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years and temporarily removes the taxable income limitation to allow an NOL to fully offset income.
Cost recovery for investments in Qualified Improvement Properties, is corrected retroactively and will allow businesses that made these investments in 2018 and 2019 to receive tax refunds now. Enables businesses (particularly retail establishments, restaurants, and hotels) to write off immediately costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building. This provision corrects an error in the Tax Cuts and Jobs Act.
Programs and support available to Individuals/Employees
- Recovery Rebate checks / direct deposits coming in the immediate weeks ahead. $1,200 per adult taxpayer, $500 per child under age 17 in 2020. However, if your income exceeds certain thresholds ($99k Single filers, $198k Joint filers, $136k Head of Household filers), you do not qualify. Details are here. Eligible individuals, visit the IRS’s Get My Payment page to check your payment status.
- Increased Unemployment Benefits, including benefits if one’s hours have been reduced or if unable to work because schools or childcare is unavailable.
- Self-employed individuals: Forbes article for self-employed individuals about choosing between unemployment and Paycheck Protection Program.
- Provisions for IRA flexibility
- The taxes on that withdrawal can be spread over three years
- You can re-contribute the funds back into an IRA within three years
- If you are under 59.5, the ability to withdraw up to $100,000 from your IRA and not pay the 10% early withdrawal penalty.
- If you are subject to Required Minimum Distributions (inherited IRA’s are also included), you may skip the 2020 withdrawal.
- If you have already taken an RMD in 2020 (and your custodians could not do a reversal), you may now roll the amount over by August 31, 2020 per IRS announcement IR-2020-127.
- Certain employees impacted by COVID-19 are eligible for 2 weeks of paid sick leave, plus an additional 10 weeks of emergency leave. See the following posters: Federal Employee Rights and Employee Rights. More detailed information detailed below under businesses.
Programs and support available to Businesses
- Signed into law on March 18, 2020, the FFCRA Provides up to two weeks paid sick leave plus an additional 10 weeks emergency leave for certain employees impacted by COVID-19. Details including Q&A are available at https://www.dol.gov/agencies/whd/pandemic/ffcra-questions.
- Thank you to Kristy and the team at BenefitMall, a payroll and HR firm, for providing this summary of the Families First Coronavirus Response Act for employers regarding emergency paid sick leave.
- Loans (partially forgivable!) available to small businesses including sole proprietors, self-employed and independent contractors. The initial funding of $349 billion has been committed. Additional funding of $310 billion was approved but is expected to move quickly.
- Important warnings regarding the Paycheck Protection Program loans in this Forbes article.
- Forgivable amount - the amount the borrower would expend during the covered period (24 weeks beginning on date of loan) on sum of payroll (maximum of $100k/year per employee), mortgage interest, rent, and utilities – payroll includes retirement and health benefits. Payroll for self-employed individuals is net earnings up to same maximum of $100k/year of compensation, but does not include retirement and health benefits.
- Borrowers with PPP loans in existence prior to passing of the PPPFA can choose between the original 8 week period or the new 24 week period for forgiveness.
- The payroll portion of the PPP loan proceeds must be at least 60% to allow the loan to be forgivable.
- Can NOT be used in conjunction with the Employee Retention Credit (see below).
- SBA details for Paycheck Protection Plan (PPP) Loans
- SBA PPP Loan Forgiveness Application
- Similar credit to the Families First Act credit (prior act signed 3/18/20) designed to encourage Eligible Employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19.
- Payroll tax deferral to 12/31/20, or in some cases to 2021 or 2022.
- Can NOT be used in conjunction with the Paycheck Protection Program (see above).
- Up to $10,000 emergency grant cash advance (subject to funding) that is forgiven if spent on paid leave, maintaining payroll, or several other obligations. SBA low-interest loan due to Coronavirus (COVID-19).
Additional information/links helpful to taxpayers:
- We found this article by the San Francisco Business Times to be useful for more resources and detailed information for small business owners and employees.
- This NPR article discusses steps to take regarding mortgage, credit cards, health care, and more if you lost work due to the coronavirus.