What COVID-19 tax relief is available for small businesses?
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As the coronavirus sweeps across the country, businesses are being affected. Congress has responded and passed a law that provides at least some relief. Additionally, the IRS announced that taxpayers can defer any amount of federal income tax for 90-days.
What is the new law?
On March 18, the Senate passed the House’s coronavirus bill, the Families First Coronavirus Response Act. President Trump immediately signed the bill. It includes:
- Paid leave benefits to employees
- Tax credits for employers and self-employed taxpayers
- FICA tax relief for employers
What are the new tax filing and payment extension dates?
In Notice 2020-18, the IRS provides relief for taxpayers with a federal income tax payment due April 15, 2020. The due date for making federal income tax payments normally due April 15, 2020, is now postponed to July 15, 2020.
Late last week, the IRS also announced the 2019 income tax filing deadline will also be moved to July 15, 2020, from April 15, 2020, to match the payment deadline.
Treasury Department Secretary Steven Mnuchin announced on Twitter, “we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”
Previously, the U.S. Treasury Department and the IRS had announced that taxpayers could defer making income tax payments for 2019 and estimated income tax payments for 2020 due April 15 (up to certain amounts) until July 15, 2020. Later, the federal government stated that you also don’t have to file a return by April 15.
If you are due a refund, you are encouraged to file as soon as possible so you can receive your refund money. And you can still get an automatic filing extension, to October 15, by filing IRS Form 4868. Contact us with any questions you have about filing your return.
Can any amount be deferred?
In Notice 2020-18, the IRS stated: “There is no limitation on the amount of the payment that may be postponed.” (There was some confusion with this announcement because originally the IRS had placed dollar limits on tax deferrals in the first press conference, but the announcement on March 21 was clear that taxpayers can postpone payments regardless of the amount owed.”)
In Notice 2020-18, the due date is postponed only for federal income tax payments for 2019 normally due on April 15, 2020, and federal estimated income tax payments (including estimated payments on self-employment income) due on April 15, 2020, for the 2020 tax year.
As of this writing, the IRS hasn’t provided a payment extension for the payment or deposit of other types of federal tax (including payroll taxes and excise taxes).
This only outlines the basics of the federal tax relief available at the time this was written. New details are coming out daily. Be aware that many states have also announced tax relief related to COVID-19. And Congress is working on more legislation that will provide additional relief, including sending checks to people under a certain income threshold and providing relief to various industries and small businesses.
We’ll continue to keep you updated. For additional information call us at 949-860-9893 or click here to contact us.