March 19, 2020
Limited Coronavirus sick leave mandate and tax credit signed into law.
The President yesterday signed a bill (H.R. 6201) that creates a new sick leave and family leave tax credit. The credit requires some employers to pay up to $511 per day in sick pay to some employees affected by the virus. The bill provides for a 100% tax credit for the employers - those who have 50-499 employees - that are covered by the bill.
Employees are eligible for the benefit if they fall into one of these categories:
(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.
(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.
(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.
(4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
100% of the benefit is available for the first three categories; the other categories are eligible for 2/3 sick pay. The leave mandate doesn't appear to cover the many employees who are forced home because their businesses are shut down by state authorities. Eide Bailly will have more detailed coverage of the mandate and the tax credit later. The bill provides up to 10 days of leave and credit.
Bill Providing Small Business Tax Credits Signed Into Law - Jad Chamseddine and Alexis Gravely, Tax Notes ($):
For small and medium-size businesses that already provide paid sick leave, the legislation won’t change much, according to Garrett Watson of the Tax Foundation.
Employers will still be able to claim the new quarterly payroll tax credit intended to fund the paid sick leave if it is used for qualified purposes — that is, for employees who are unable to work or telework because of the coronavirus...
Greater challenges might arise for businesses that don’t already provide paid sick leave, said Watson. “That may create some liquidity problems for some businesses to potentially have to wait three months to get that credit back,” he said.
More so if income has dried up.
Other Coverage: Senate Passes Coronavirus Relief Bill To Provide For Testing, Benefits & Paid Leave - Kelly Phillips Erb, Forbes.
More legislation is expected.
IRS Confirms: No April 15 Return Filing Extension - Jonathan Curry, Tax Notes ($). "The AICPA’s Edward Karl noted that historically when disasters have been declared, the IRS paired tax payment relief with filing relief. 'It is very surprising that we have not yet seen filing relief given the severity of the coronavirus pandemic’s impact on our nation,' Karl said in the statement."
The IRS approach baffles me:
- It encourages people to venture out to preparers when health authorities want people to stay home.
- It creates a trap for the unwary. By its terms, Notice 2020-17 only waives interest and the 1/2% monthly late payment penalty, but not the much more severe 5% monthly late filing penalty. A taxpayer who doesn't extend and files and pays in July will face a 15% late-filing penalty for taxing advantage of the "relief" provision.
- It pushes the due date of the first quarter estimated tax payment to July 2020, while the second quarter payment will be due sooner, in June. That makes no sense.
The Treasury has chosen to offer relief in a complicated, narrow and weird way that seems oblivious to the compliance problems raised by the crisis. I expect the IRS to rethink this under pressure of events. Until then, April 15, everyone.
States are adjusting due dates in the face of the pandemic. The AICPA tracks these state adjustments here.
UPDATE: April 15 Tax Day deadline and delay Q&A - Kay Bell, Don't Mess With Taxes.
IRS Issues Guidance on Extended Due Date for Tax Payments - Kristine Tidgren, The Ag Docket
IRS Issues Official Guidance Extending Payments (but NOT Tax Filing Deadline) Until July 15th - Russ Fox, Taxable Talk. "It would make a lot more sense to simply extend the deadline…but that has NOT happened."
Tax Policy to Bridge the Coronavirus-Induced Economic Slowdown - Stephen J. Entin, Tax Policy Blog. Some good suggestions. I like this one:
Let businesses cash out any existing net operating losses (NOLs), and any new losses suffered in 2020.
The proposal would allow firms a 2020 cash payment of their past and current-year losses at the statutory marginal tax rate they would face in a profitable year (e.g., up to the top 21 percent for a corporation, or the marginal tax rate applicable to a pass-through business).
Other good suggestions as well.
If We Give Everybody Cash To Boost The Coronavirus Economy, Let’s Tax It - Donald Marron, TaxVox. "Universality is simpler and recognizes that we are all in this together."
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