For generations, April 15th has been recognized as the day set aside for everyone to remember the civic duty of paying our taxes. Whether one has a refund or a balance due, attention turns toward taxes when April 15th turns up on the calendar. This year, however, is different in many respects. Many businesses and individuals had a different vision for 2020 than the blur that surfaced over the last month. With the onset of the Coronavirus, many lives, businesses, communities, and more have been turned upside down.
Congress got involved and passed three bills in March aimed to address the challenges presented by the Coronavirus, with the most recent legislation – the CARES Act – offering over $2 trillion in relief to individuals, businesses, and others. The IRS also was drawn into the mix dealing with many logistical issues related to filing 2019 tax returns, as well as addressing the new laws passed by Congress. As you may know, several weeks ago the IRS issued guidance deferring any tax returns and tax payments due on April 15, 2020 and postponing these items until July 15, 2020. There is no need for individuals or businesses to file any extensions to get this postponement – it is an automatic deferral of the due date to July 15, 2020.
The IRS has issued several significant pieces of guidance over the past week. We wanted to highlight the following key IRS developments for you:
Individuals are eligible for a rebate of $1,200 (and $2,400 if married filing jointly), plus $500 per qualifying child. This rebate is available for individuals with Adjusted Gross Income (AGI) of $75,000 or less (for single taxpayers; $150,000 or less for married couples filing jointly) and is phased out for taxpayers with AGIs above these thresholds. This rebate is available even for individuals with no income.
The IRS started issuing these rebate checks the week of April 13, 2020. The initial payments will be handled by direct deposit to the taxpayer’s bank account. Other payments will be mailed out to taxpayers in the coming weeks. The IRS provides guidance on these rebates and addresses various questions posed by taxpayers. Here are some resources, including a new “Get My Payment” page launched by the IRS today:
This CARES incentive permits employers and self-employed individuals to defer the employer’s share of the FICA tax for their employees (employers are responsible for paying a 6.2% FICA tax on employee wages). The payroll deferral period begins on March 27, 2020 and runs through December 31, 2020. The provision allows the deferred payroll tax to then be paid over the following two years: half paid by December 31, 2021 and half by December 31, 2022.
This payroll tax deferral is essentially an interest-free loan from the government. The IRS issued its first guidance on this provision on April 10, 2020 in a FAQ on its website. A few items to note:
The recent CARES legislation relaxes the new limitations from TCJA related to NOLs. First, any NOLs incurred in 2018, 2019, or 2020 can be carried back five years to obtain a refund of prior years’ tax liabilities. Prior to this, NOLs needed to be carried forward, so this change could provide a cash infusion for a struggling business. Further, another NOL change removes the taxable income limitation for NOLs.
Late last week, the IRS issued guidance relating to these NOL relief measures in CARES:
As indicated above, the IRS previously extended the due date of individual tax returns and tax payments due April 15, 2020 until July 15, 2020. On April 10, 2020, the IRS issued Notice 2020-23 that further extended many tax returns and tax payment obligations. As a rule of thumb, any tax return or tax payment, except for payroll taxes, due on or after April 1, 2020 through July 15, 2020 is extended until July 15, 2020. The following should be noted from this additional extension granted by the IRS:
This is not the end of IRS guidance, but hopefully the above items will assist you as you deal with the ever-changing tax landscape. We will offer more updates as they are provided. Please contact your Sikich advisor with any questions you may have. Be Well.
This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.