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COVID-19 Tax and Workplace Updates: March 23, 2020

03/23/2020
Ceschini CPAs has been monitoring the COVID-19 Outbreak and we are working to keep track of new developments. We would like to take this moment to provide the following updates:


IRS Issues Guidance on a 90-Day Extension for Tax Payments, Filing

On Tuesday, March 17, Treasury Secretary Mnuchin announced a 90-day extension for making tax payments, in response to the coronavirus pandemic (COVID-19). On Wednesday, March 18, the IRS released guidance on the extension for tax payments. Concerns about not extending the filing deadline were voiced by tax preparers and lawmakers. Treasury listened to the concerns. In a tweet on Friday, March 20, Mnuchin announced Treasury is moving “Tax Day” from April 15 to July 15. The IRS acted swiftly and released Notice 2020-18, providing guidance on the federal filing and payment extension.

Who gets a federal extension to file and pay taxes?
Any individual, corporation, trust, estate, or partnership with a federal income tax payment or a federal income tax return due April 15, 2020, will be granted an extension. The extension appears to be limited to returns (and related payments) for the 2019 tax year and estimated tax payments for the 2020 tax year. For example, the extended tax return due date for a C corporation with a fiscal year-end of June 30, 2019, is April 15, 2020. While the return is due April 15, the deadline for the corporation’s return and payment does not appear to be extended because the return is for the 2018 tax year.

How long is the extension?
Taxpayers have until July 15, 2020, to file their federal income tax return and pay any federal income tax liability.

Do taxpayers have to file a form on or before April 15 to get the extension?
No, an extension is not required because the due date has shifted to July 15.

Is there a limitation on the amount of tax payment that can be postponed?
No. Unlike the prior IRS notice that deferred up to $1 million for individuals and $10 million for corporations, there is NO limitation on the amount of tax that can be deferred to July 15.

Is the extension for all federal tax returns and federal tax payments?
The extension only applies to:
  • Federal income tax payments, including self-employment tax;
  • Federal income tax returns for the 2019 taxable year due on April 15, 2020; and
  • Federal estimated income tax payments, including self-employment tax, due on April 15, 2020, for the 2020 taxable year.
Accordingly, the extension does not include other taxes, such as employment, excise, estate, and gift taxes. The extension does, however, apply to income tax payments and income tax returns for estates. The notice does not specifically include excise and payroll taxes submitted with an income tax form. For example, Schedule H is for Household Employment Taxes. It is a payroll tax form, but submitted with the Form 1040. We expect that the July 15 due date applies for this tax. We expect that the July 15 date applies for the Net Investment Income Tax (NIIT) as well.

Gift tax returns for the 2019 calendar year are due April 15, 2020. A separate gift tax return extension should be filed if Form 709 is not filed by April 15, 2020.

Will the extension of time to pay taxes and file the return be subject to penalties or interest?
No, neither penalties nor interest will apply as long as the tax is paid and the return is filed (or extended) by July 15.

Are state tax filing and payment obligations also extended?
This is up to each individual state. Some states have already provided extensions. Some states have not yet granted extensions, but they may do so in the near future.

Does the extension apply to payments or returns due in May or June?
The extension does not apply to payments or returns due in May or June.

Does the extension apply to second quarter estimated tax payments due June 15?
The IRS notice says the extension applies to estimated tax payments due on April 15, 2020. Without further guidance, second quarter estimated income tax payments due on June 15, 2020, do not get an extension to July 15.

If we apply for an extension at July 15, 2020, will that extend the return to October 15, 2020 or January 15, 2021 (six months)?
We don’t know. A six-month extension is not mandatory; the granting of an extension is within the discretion of the IRS, but cannot exceed six months. Further guidance from the IRS is expected.

If you expect a refund, you should continue to work with your tax advisor to determine your tax liability so you can get a refund as soon as possible. If you are expecting a tax liability, work with your tax advisor to determine your tax liability so you can manage your cash flow.


SMALL BUSINESS INTERRUPTION LOANS

The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). For more information or to apply for a loan, please visit the SBA's COVID019 webpage.

The government is working on pushing through a massive stimulus packages in response to the COVID-19 outbreak. Part of this includes significant funds for “small business interruption loans,” which would provide businesses with much needed cash to cover payroll over the short term, (up to six weeks), for up to $1,540 a week per employee.


REMOTE WORK FORCE, DIGITAL DELIVERY & SAFE DISTANCING

Governor Cuomo has issued an executive order that no business in New York can have any employees working away from home. At this time, the rule does not apply to essential services like supermarkets, pharmacies, medical facilities, and gas stations. We have already implemented such procedures and have had as much of our team working remotely as possible. We are asking that clients send as much of their tax documentation via electronic methods (email, portal), as soon as possible to limit interruption due to mail receipt and sorting. We are also looking towards electronic delivery options of your returns and deliverables through our encrypted email delivery systems to further ensure a lack of interruption to client servicing.

If you have any questions at all please contact our office. In these times, email is the best contact method.


EXPANDED FML COVERAGE

New York State has acted quickly to expand coverage for New Yorkers impacted by COVID-19. They have expanded their FMLA coverage available. The main points are:
  • The Governor and Legislature have an agreement on a bill guaranteeing job protection and pay for New Yorkers who have been quarantined as a result of novel coronavirus.
  • Governor Cuomo signed an executive order directing all schools in New York to close by Wednesday, March 18 for two weeks ending April 1.
  • Casinos, gyms, theaters are closed until further notice.
  • Bars and restaurants are closed, but takeout can be ordered during the period of closure.
  • Strongly advise only services and businesses that are essential stay open after 8:00 PM:
  • Groceries
  • Gas stations
  • Pharmacies
  • Medical facilities
  • Testing is free for all eligible New Yorkers as ordered by a health care provider.
  • Your local health department is your community contact for COVID-19 concerns.

For more details thereon, please visit the FMLA COVID-19 web page.

Please contact our office with any questions. Above all health and safety are paramount. Please practice CDC protocols and help work to #FLATTENTHECURVE