Tax Relief Measures in Response to the COVID-19 Pandemic

On Friday, March 13, President Trump declared a National Emergency in response to the COVID-19 pandemic, issued an emergency declaration for all states and territories under the Stafford Act, and instructed Treasury to provide relief from tax deadlines under Sec. 7508A. Pursuant to this authority, Treasury and IRS deferred until July 15 income tax payments due on April 15. Further tax relief was approved after President Trump signed legislation offering a tax credit aimed at reimbursing part of the costs for small employers with employees taking unpaid leave.

President Trump declared a National Emergency on Friday, March 13, in response to the COVID-19 pandemic, as well as issued an emergency declaration for all states, tribes and territories under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). Section 7508A provides Treasury and IRS with the authority to modify tax return and tax payment deadlines in case of federally declared disasters (generally defined as a declared emergency under the Stafford Act).

Tax Payment Due Date

IRS Notice 2020-17 postpones the due date of federal income tax payments (up to the deferral limit) from April 15, 2020 to July 15, 2020. The deferral limit is a single limit that applies to the combined amount of 2019 tax year payments and 2020 estimated tax payments due on April 15. The deferral limit for corporations is $10 million for each consolidated group or for each C corporation that does not join in filing a consolidated return. The deferral limit for all others is $1 million, regardless of entity type or filing status (including individuals and taxable trusts).

If deferring a portion from both payments, take care that the combined deferral does not exceed the taxpayer's deferral limit.

The April 15 filing deadline for 2019 calendar year tax returns or extension requests remains unchanged. Thus, it is necessary to file a tax return or extension for 2019 by April 15 to take advantage of the tax payment deferral.

Tax Credits for Paid Leave

The Families First Coronavirus Response Act (H.R. 6201) includes a refundable payroll tax credit to reimburse businesses with less than 500 employees for paid sick leave and family and medical leave wages paid to employees impacted by the COVID-19 pandemic. Treasury Secretary Mnuchin also announced that employers will be able to use cash deposited with IRS to pay sick leave wages.

The Takeaway

Important tax relief measures have been implemented since President Trump declared a National Emergency. The due date for federal income tax payments (up to the deferral limit) is postponed from April 15, 2020 to July 15, 2020. Under the Families First Coronavirus Response Act, many small employers will be entitled to receive a tax credit for wages paid to employees taking sick leave. Andersen will continue to monitor and report developments regarding tax relief in response to COVID-19.