Update to Treasury Deadline and Clarification on Paid Family Leave

Update on the Federal 90-Day Waiver of Penalties and Interest on Tax Payments

Back on March 17, 2020 Treasury Secretary Mnuchin announced a 90-day grace period on the payment of individual and corporate Federal taxes, normally due April 15th. Individuals and corporations have until July 15th without being assessed penalties and interest. Individuals can defer payment on up to $1 million in owed tax and corporations up to $10 million in owed tax.

Please note that the your tax return or extension still needs to be filed by April 15th, only the payment and any penalties have been deferred until July 15th.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020. What is not currently clear is whether relief would also apply to the required June 15th estimated tax payments for individuals.

We do anticipate additional guidance from the IRS as this progresses and will keep you informed.

To summarize:

The 90-day extension only applies to paying taxes. As of now, taxpayers still must file their federal returns by April 15, 2020
Individuals (including in their capacity as partners in a partnership or shareholders of an S corporation) can defer paying up to $1 million in taxes; corporate taxpayers can defer paying up to $10 million
Taxpayers can obtain a six-month extension (until October 15, 2020) to file their federal income taxes by submitting Form 4868 to the IRS by April 15, 2020. However, taxpayers requesting an extension generally must estimate and pay at least 90 percent of their 2019 taxes by April 15, 2020, or face interest charges and penalties. It is not clear whether the extension to pay announced by Secretary Mnuchin will apply to taxpayers who file an extension rather than a complete return by April 15
Tax refunds are not affected by this action. Taxpayers who expect to receive refunds are encouraged to file timely returns, which will be processed and refunds issued under the IRS’s usual procedures
The AICPA are hoping for additional guidance from the Treasury concerning the 90-day extension to pay. It is not clear at this point how the 90-day extension on paying taxes fits with taxpayers needing in-person assistance with filing their taxes
We await further updates or additional guidance from the IRS as this progresses.

Impact on Massachusetts State Tax

For Massachusetts State tax, the DOR has stated they will follow the actions of the Federal Government with regards to tax deferral. While we have not seen a formal announcement as of yet, we will continue to update you once we receive any new information.

Families First Coronavirus Response Act (H.R. 6201)

Yesterday, the Families First Coronavirus Act (H.R. 6201) was signed into law by the President as an additional method of relief for American’s affected by the COVID-119 crisis. The bill as passed increases funding for testing and extends paid sick leave to employees all over the country affected by the pandemic.

Here are the key points of the new law which applies only to employers with fewer than 500 employees:

Employer must provide paid sick leave to employees who are forced to stay home due to quarantining or to care care for a family member (“qualified paid sick leave”)
Employer must provide paid sick leave to employees who need to care for a child if the school or place of care is closed (“qualified family leave”)

The bill compensates employers and the self-employed for this paid leave in the form of a tax credit. In the case of sick wages paid by an employer to an employee, the employer receives a refundable credit against its share of either the OASDI and the RRTA portion (as applicable) of the payroll tax. The credit can be claimed on a quarterly basis, equal to 100 percent of the amount of sick leave wages paid under the new law. The amount of the credit is limited to $200 per day. However, the credit is increased to $511 per day if the employee is on leave because he or she:

is subject to a federal, state or local quarantine or isolation order related to COVID-19
has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
or is experiencing symptoms of COVID-19 and seeking a medical diagnosis

The amount of total hours of paid sick leave is limited by the new law and the payroll tax credit is limited to 10 days of wages.

For family leave wages paid by an employer and the self-employed, a separate refundable payroll tax credit applies, with different limitations. The 100 percent credit against the employer’s share of the payroll tax is limited to $200 per day, up to an aggregate of $10,000.

We will continue to keep you updated as we receive new information.