April 2, 2020
Seniors, Disabled Won’t Need to File to Get Recovery Checks - Jad Chamseddine, Tax Notes ($):
“Social Security recipients who are not typically required to file a tax return need to take no action, and will receive their payment directly to their bank account,” Treasury Secretary Steven Mnuchin said in an April 1 statement.
The announcement comes just two days after the IRS said that taxpayers who typically don’t file tax returns would have to file a simplified return to access the relief payments promised under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136).
That means the checks will have to come out of separate databases - either the IRS 1099-SSA database, or one from the Social Security Administration; and the regular individual tax return database. Nothing will go wrong.
Social Security Recipients Won’t Need to File Tax Returns for Coronavirus Stimulus Payment - Richard Rubin, WSJ ($). "The tax agency has little trouble keeping track of the Americans who file returns every year, but it now has to identify and pay millions who don’t."
After Backlash, Treasury Concedes Social Security Recipients Don’t Need To File A Tax Return To Get Stimulus Check - Kelly Phillips Erb, Forbes.
IRS Helps Taxpayers Navigate Employee Retention Credit Maze - Eric Yauch, Tax Notes ($)
The CARES Act also added the Paycheck Protection Program, which will provide loans to small businesses that want to keep paying employees during the downturn.
The loans will be forgiven as long as the proceeds cover payroll costs and some interest, rent, and utility payments during the eight-week period after the loan is made, and granted employee and compensation levels are maintained....
If an employer uses the loan program, it can’t take advantage of the employee retention credit program.
Paycheck Protection Plan -Ready For Corporations - Questions For Other Entity Types - Peter Reilly, Forbes. "Don’t fail to take the money, because you may end up having to pay some of it back. It is a good deal regardless - 0.5% interest, two years, no payments for six months, no personal guaranty, no collateral."
Paycheck Protection Program Offers Forgivable Loans for Eligible Small Businesses - Kristine Tidgren, The Ag Docket. "The forgiveness amount is also subject to reduction if there is a reduction in employees or a reduction in the salary or wages of any employee."
SBA Paycheck Protection Program resources for CPAs - AICPA. "Beginning April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply."
New Paid Leave Guidance Clarifies Medicare Tax - Stephanie Cumings, Tax Notes ($). "A new set of questions and answers about the payroll tax credits now available for paid leave has clarified how to factor in healthcare costs." The FAQ is here: COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses FAQs. The IRS has a COVID-19 landing page with links to other CARES Act and administrative guidance related to the Coronavirus emergency.IRS Agrees To Speed Up Payroll Tax Refunds Related To New Covid-19 Credits - Tony Nitti, Forbes. "The guidance, however, has been VERY favorable to small employers; thus, it’s vital that all business owners are aware of the opportunities being afforded to them to maximize cash over the coming weeks and months."
"Disaster/Emergency Legislation – Summary of Provisions Related to Loan Relief; Small Business and Bankruptcy" - Roger McEowen, Agricultural Law and Taxation Blog. "The SBA has up to 30 days following the enactment of the CARES Act to issue regulations implementing and providing guidance on certain CARES Act provisions."
Certain Disaster Relief Payments Tax-Free to Employees - Eide Bailly. "The exclusion does not intend to cover income replacement payments, for lost wages or unemployment compensation, for example."
CARES Act Means Crunch Time for IRS and Treasury - Jonathan Curry, Tax Notes ($) "Fortunately, the guidance writers at the IRS and Treasury shouldn’t have their efforts hampered too badly by the shift to remote work, as opposed to others like IRS audit staff, who will likely experience choke points in the coming weeks and months, according to [Steptoe & Johnson attorney Lisa] Zarlenga."
State and Local Responses to the COVID-19 Pandemic - Lauren Taylor and Jennifer Barajas, Eide Bailly. "Some states acted quickly and provided extensions of time to file and/or pay tax year 2019 income and franchise taxes, first quarter 2020 estimated payments, as well as other taxes such as sales and use tax, payroll taxes, property tax, hotel/motel occupancy taxes, alcohol taxes, tobacco taxes, and various others." With a state-by-state summary.
Idaho, Mississippi, and Virginia are the Holdouts on July 15th Tax Deadlines - Jared Walczak, Tax Policy Blog. "As of today, every state with an individual income tax has made some adjustment to its filing or payment deadlines, but three—Idaho, Mississippi, and Virginia—have not followed the federal government’s date of July 15th or later. And Virginia in particular is offering taxpayers relatively little relief."
CARES Act Interest Limitation Relief Could Have State Tax Effects - Amy Hamilton, Tax Notes ($). "The Tax Cuts and Jobs Act limited the section 163(j) deduction to 30 percent of a taxpayer’s adjusted taxable income, but businesses now have the option to deduct interest expense up to 50 percent of ATI for the 2019 and 2020 tax years under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136)."
Motor vehicle title and registration renewals extended - South Dakota Department of Revenue. "The Motor Vehicle Division requests that law enforcement not ticket March 2020 registration renewals for noncommercial and commercial vehicles expiring on March 31, 2020. These individuals will be given an additional month to renew their registrations."
Governor Newsom Grants Additional Relief for Business Taxpayers; Small Businesses Now Have Until July 31, 2020 to File First Quarter Returns - California Department of Tax and Fee Administration. "The California Department of Tax and Fee Administration (CDTFA) administers California's sales and use, fuel, tobacco, alcohol, and cannabis taxes, as well as a variety of other taxes and fees that fund specific state programs."
Primer On How To Navigate The Recovery Rebate This Time - Bryan Camp, TaxProf Blog. "Section 6428 operates as a refundable credit – just like the earned income tax credit or the additional child tax credit."
The CARES Act Provided Important Relief For The Coronavirus Economy, But What Should Phase 4 Look Like? - William Gale and Claire Haldeman, TaxVox. "Policy makers should make contingency plans for the uncertainty that marks the future path of COVID-19 and the economy. It is currently unclear what the worst-case scenario is and there are a number of potentially high-impact options to mitigate potential catastrophe."
Part II: What I Worry About When I Think About the IRS and the CARES Act - Nina Olson (Retired Taxpayer Advocate), Procedurally Taxing:
Many low income taxpayers who receive sizable refunds or who are unbanked utilize Refund Anticipation Loan (RAL) or Refund Anticipation Check (RAC) products, which create a temporary bank account in the taxpayer’s name so the taxpayer’s refund can be paid into it. The taxpayer does not control this account and thus any TSP paid into this account would not reach the taxpayer.
Lots more at the link about the logistics of pumping the cash out. It's hard enough with "typical" taxpayers. When you try to reach those on the fringes of the system, it's daunting.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.