UPDATE – Friday, March 27th, 2020
President Trump signed the new Coronavirus Aid, Relief, and Economic Security (CARES) Act after it passed the House with a quorum of more than 216 members present.
The quorum vote came after a Republican representative from Kentucky attempted to force an in-person vote instead of a voice vote. Shortly after the House passed the legislation, the President signed it into law.
Of the CARES Act, House Minority Leader Kevin McCarthy said, “The aid must be robust, rapid, and resilient, just like its recipients. We are going to help Americans through this.”
The 880-page piece of legislation covers a wide range of topics. Just a few include:
- Direct payments to Americans as Recover Rebates (which will be $1200 for most individuals depending on their tax bracket)
- Expanded unemployment insurance that will include $600 more per week in benefits, up to four months of coverage, and expanded coverage to the self-employed and gig economy workers, who aren’t traditionally covered
- A payroll credit of up to $10,000 for businesses affected by the coronavirus
- $150 billion for a Coronavirus Relief Fund for city and state governments, which will be allocated by population size.
The Act is designed to alleviate the burden on individuals, businesses, hospitals, and local governments. This is the third round of government support in the wake of the coronavirus pandemic, the first being an allocation of $8.3 billion to public health support and the Families First Coronavirus Response Act that passed last week.
UPDATE – Wednesday, March 25th, 2020
Early this morning on Capitol Hill, Senate leaders in the Trump Administration reached a historic bipartisan deal on an emergency relief package in response to the COVID-19 pandemic. The announcement, made at 1 a.m., marks the end of several long days of negotiation in the Senate.
Senate minority leader Chuck Schumer and Treasury Secretary Steve Mnuchin ran point on negotiations with the White House, facing intense pressure to reach a deal after several failed or delayed negotiations earlier this week.
“This is a wartime level of investment in our nation,” senate majority leader Mitch McConnell said of the deal. “The men and women of the greatest country on earth are going to defeat this coronavirus and reclaim our future.”
Some key points in the new bill include:
- Checks mailed to Americans in low-income and middle-class households (exact amounts currently unknown)
- Funding for low-interest loans for small businesses, as well as possible existing loan forgiveness
- Funding for the healthcare system across the country
- Extended unemployment insurance for laid-off workers
Exact details of the bill have not yet been announced; the full bill is expected to be released later today.
This is not the first bill this month designed to provide economic relief to those affected by the coronavirus. Last week, the Families First Coronavirus Response Act passed, which was designed to allow tax breaks for self-employed people and small businesses that have to take (or provide to their employees) paid time off.
The Senate is expected to vote on the bill later today.
UPDATE – Sunday, March 22nd, 2020
On Friday March 20th, Treasury Secretary Steve Mnuchin announced on Twitter that the IRS would defer the Federal filing deadline for individuals and businesses to July 15th, matching the deferred payment deadline announced earlier in the week. The next day, the IRS confirmed with an update on their newsroom.
As with the payment deferral, the extension is automatic and requires no form to request. Any taxpayers who need additional time to file beyond the July 15th deadline will need to apply for an extension as normal.
IRS Commissioner Chuck Rettig still strongly recommends that any taxpayer who expects to receive a refund file as soon as possible. Most refunds are still being issued within 21 days.
In the same announcement, the IRS also lifted the limits on individuals and businesses to defer payments. Instead of $1 million for individuals and $10 million for businesses, the IRS is now allowing all taxpayers to defer payments until July 15th. As with the original deferral announcement, that means that individuals and businesses can defer payment until July 15th with no penalties or interest, regardless of how much they will owe.
However, taxpayers who live in states that charge income tax on the state-level may still have to file and pay their state income taxes by the original deadline of April 15th. Many states may match the new filing deadline, but taxpayers will have to seek guidance from their local governments to know for sure.
Another thing to note is that the filing and payment deadline for Partnerships and S-Corporations was March 16th. There as of yet has been no word on amnesty or abatements for businesses who missed that deadline.
March 17th, 2020
On March 11th, the World Health Organization declared COVID-19 a pandemic, and states across the country started to take measures to ensure their population would slow the spread. Many states have ordered that restaurants and bars close their doors and no longer allow in-person dining (though it should be noted that most places still allow takeout). Communities around the Bay Area in California have taken an even more extreme measure of closing all non-essential businesses and limiting travel.
It’s become clear that small businesses are struggling due to social distancing measures. Those that are still open have reported drops in sales almost across the board.
On the same day, President Trump announced from the White House that the Small Business Administration would offer disaster loans to small businesses affected by COVID-19. He also announced he would advise the Treasury Department to defer tax payments for those affected. Here’s what that means for small businesses and taxpayers across the country.
In an effort to both help struggling small businesses, and to encourage business owners to take the appropriate measures to protect themselves and their employees.
According to the SBA, they are working directly with state Governors to provide loans to affected businesses. These loans are designed to be low-interest, and according to President Trump, they’re designed to “…help small businesses overcome temporary economic disruptions caused by the virus.”
These loans can be used for things like payroll, paying fixed debts, and other bills that can’t be paid because of the economic impact of the novel coronavirus. For businesses without credit, the interest rate is 3.75%, and for non-profits, 2.75%. Businesses with credit available elsewhere are not currently eligible for disaster relief loans.
Businesses that need help can check their eligibility, apply online, and learn more on the Small Business Administration website.
Deferred Tax Payments
On March 17th, 2020, Treasury Secretary Steven Mnuchin confirmed that President Trump authorized the deferral of $300 billion in IRS tax payments in an effort to allow the U.S. economy to recover from the fallout of the virus.
This doesn’t mean that taxpayers don’t still have to file their taxes or an extension by April 15th. It does, however, mean that individuals and businesses that owe payments to the IRS have an additional 90 days to pay the IRS past April 15th.
Individuals who owe the IRS can defer up to $1 million in IRS payments, and businesses are allowed to defer up to $10 million. There’s no interest or penalties for this deferral for 90 days.
According to Mnuchin, “All you have to do is file your taxes. You’ll automatically not get charged interest and penalties.”
The National Society of Accountants sent a letter Friday to Internal Revenue Service Commissioner Charles Rettig, asking for the IRS to extend tax-filing season because of the threat from the coronavirus, while the National Conference of CPA Practitioners asked the IRS and the Treasury to waive penalties and interest charges for taxpayers.
The American Institute of CPAs also requested earlier this week that the April 15 tax deadline be pushed back, along with other forms of tax relief. Treasury Secretary Steven Mnuchin indicated an openness to doing that during a congressional hearing Wednesday, but so far President Trump has only called for deferring interest and penalties for “certain individuals and businesses negatively impacted” by COVID-19.
At this time, the April 15th deadline is still in place for businesses and individuals. The accountants on our team recommend filing either your return or your extension as soon as possible.
Talk to an Accountant
The situation is unpredictable, but it’s clear the government is taking steps to support individuals and small businesses in the face of this crisis. The president also announced that the Small Business Administration would be offering businesses low-interest loans to help them fight the economic effects of COVID-19.
If you’re worried about how to best take care of your business during this time, consider connecting with an accountant to work proactively toward a plan. A professional accountant can ensure you meet your tax obligations and make the best choices for keeping your business stable in an unstable time.