As we announced earlier, tax payments for tax year 2019 and 2020 first quarter estimates originally due on April 15 were deferred automatically to July 15. As an update to that announcement, yesterday Treasury Secretary Steven Mnuchin sent out a tweet stating “At @realDonaldTrump’s direction, 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.” Friday evening March 20 the IRS released Notice 2020-18 which formalizes this announcement and superceded the prior announcement, the release can be viewed here. The Notice states that all tax year 2019 federal income tax filings and payments and first quarter 2020 estimated payments originally due on April 15th are now automatically postponed until July 15th and there is no limit on the amount of the payment that can be deferred. Further, no forms need to be filed to obtain this relief.
Despite there still being a lot of unanswered questions, this provides real relief for many taxpayers who are unable to access or transmit information in a timely manner to their tax professionals, or for those tax professionals who are experiencing issues due to the personal impact of Covid-19.
In addition to this announcement, there are two pieces of legislation before the Senate and House that we are monitoring: S. 3535 “Tax Filing Relief for America Act” and the “Coronavirus Aid, Relief, and Economic Security (CARE) Act.” Some of the items in these pieces of legislation that may be of interest are (Note: these items are considered phase 3 of the Coronavirus relief measures, they have not been passed and are subject to change):
- Estimated payments for 2020 not due for April, June or September until October 15.
- Retirement plan distributions up to $100,000 for coronavirus-related distributions. These may be repaid. Coronavirus related includes diagnosis of yourself, spouse, dependent; or experiences adverse financial consequences from quarantine, furlough, lay off or work hours reduced; or unable to work due to lack of childcare. Income inclusion over three years (these are the same provisions as in the Disaster Bill). Loans allowed from qualified plans up to $100,000 (from $50,000). Delay of repayment provisions.
- Partial above the line charitable contributions (not to exceed $300).
- Delay estimated tax payments for corporations until October 15.
- Delay payment of 50% of 2020 employer payroll taxes until December 31, 2021 with the other 50% due December 31, 2022. Also 50% of 2020 SE taxes not due until those same dates (i.e., 25% of 2020 SE tax due December 31, 2021 and remaining December 31, 2022).
- Temporary repeal of 80% income limitation for use of net operating losses for years beginning before 2021. Carrybacks allowed for 2018 and 2019.
- Repeal of limit on excess losses for noncorporate taxpayers for 2018, 2019 and 2020. Elimination of wages in the business income definition and a modification of capital loss inclusion in the computation.
- Change in the 163(j) special rules for 2019 and 2020, increasing adjusted taxable income percentage from 30% to 50%. 2019 income may be used in place of 2020 for the computation.
- Qualified Improvement Property fix to allow for bonus depreciation.
- Section 965(h) overpayments not to apply against future 965(h) payments, but instead apply to estimated taxes (by election).
- Restoration of limitation on downward attribution of stock ownership to prevent subsidiaries from deemed ownership of their parent company’s other subsidiaries.
- Expansion of items that can be reimbursed out of HSA, Archer MSA, HRAs to include menstrual care products.
- Direct primary care service arrangements not treated as health plan. (Fixed periodic fee) Limited to $150 per month (twice that if more than one individual).
The states continue to react to the federal deferral of time to file and pay, and we are actively monitoring those as well for delays in filing income, sales and use, personal property, and other state and local based taxes. You can view the current status of states response here.
At RFS we are committed to providing you the best possible service and have implemented the tools and technology to continue doing just that through this crisis. We are set up for remote work for all our employees and have been doing so since March 16 with no disruptions to our clients and partners.
To assist with the preparation of your tax returns we ask that you use our secure information gathering tools to send us information so that the entire engagement team has the same information vs. sending information through an email. For our business clients, we have provided the use of our online Engagement Organizer and for our individual clients we have provided TaxCaddy. If you have not received a link yet for either of these please reach out to your team members and we will provide that to you.
We encourage each of you to reach out to your RFS team and schedule your tax returns if you are expecting a refund to make sure you receive those refunds as quickly as possible.