New Tax Developments Affecting Small Businesses

New Tax Developments Affecting Small Businesses

Information is changing so rapidly that news is outdated almost as soon as it comes out.  Here are some recent developments that will affect small business:

  1. Which payments you can extend to July 15: The IRS issued minimal clarification on their extension of tax payments.  The wording on their website states “Taxpayers can also defer federal income tax payments due on April 15, 2020 to July 15, 2020, without penalties and interest.”  Since this wording does not relate to any specific year it appears to be safe to not only defer payment of your 2019 balance due but you can also defer payment of the first estimated tax payment due for 2020 since it is also due April 15.  The IRS wording would not give you the ability to defer your June 15 estimated tax payment since it only refers to tax payments due April 15.
  2. Tax filing date now extended in addition to tax payment date: In addition to the above extension to pay tax, the IRS has now extended the filing date for 2019 tax returns due April 15, 2020 to July 15, 2020.
  3. Missouri also extended the time to file and pay taxes due April 15: Missouri further clarified on their website “This relief for individuals and corporations will also include estimated tax payments for tax year 2020 that are due on April 15, 2020.”  Based on that wording the June 15, 2020 estimated tax payment would not be extended.
  4. Questions unanswered: We still don’t know what will happen for those who already filed and told the IRS to draft their tax due and/or their first estimate on April 15, the original due date.   The original announcement talked about giving taxpayers an interest free 90 day loan but the guidance to date has been silent on if IRS will automatically defer an authorized April 15 draft and therefore grant that 90 day loan to those who already filed.  Many of those taxpayers are hurting just as bad as those who have not filed but IRS silence on this would indicate they intend to draft those taxes on the April 15 date authorized in the accepted efile.  The only hope I see is the statement on the IRS website “Treasury and IRS will issue additional guidance as needed….”   Other than that you can try and call IRS and stop the payment. Good luck with that unless you enjoy being on hold for the day……….
  5. First COVID-19 bill passed by congress and signed into law affecting employers goes into effect April 2, 2020: The Families First Coronavirus Response Act was passed and signed into law on March 18 to become effective April 2.
    1. At this point it appears the law is not retroactive and will expire Dec 31, 2020 so everything you do prior to April 2 comes under existing law.
    2. The new law applies to all employers with under 500 employees so every small business needs to become informed.
    3. Unpaid job-protected leave: Any employee may request 12 weeks of unpaid job-protected leave to care for the employee’s child under age 18 if the child’s school or place of care is closed or the childcare provider is unable due to public health emergency.  Employers with 25 or more employees must return the employee to the same or equivalent position upon return to work.    Employers with fewer than 25 employees are generally excluded from this requirement if the position is no longer exists due to an economic downturn or other circumstances caused by a public health emergency.
    4. COVID-19 paid leave: An employer is not required to pay for the first 10 days of emergency leave but the employee may use existing sick leave or vacation to pay for this first 10 days off.  After this 10 day period the employer generally must pay full-time employees at two-thirds the employee’s regular rate of pay.  This amount is limited to $200 per day and a maximum of $10,000 per employee.
    5. This leave is generally limited to conditions related to COVID-19 related items such as quarantine advised by healthcare provider, COVID-19 symptoms and seeking medical diagnosis, caring for an individual subject to the above, caring for the employee’s child if school or childcare closed, etc.
    6. In addition to COVID-19 paid leave the employer must provide any full time employee with 80 hours of paid sick leave at employee’s regular rate or two thirds the employee’s rate to care for others described in e above. This provision is capped at $511 per day or $5,110 per employee.  This sick leave may be in addition to employer’s normal sick leave policy. Fine more on the sick leave changes in our post HERE.
    7. Employers will be reimbursed for these costs by reducing the payment to the IRS of the employer portion of the social security payroll tax deposit. Employers are entitled to a refundable credit of any leave payments made but not reimbursed by reducing the social security tax deposits.  It appears this refundable credit will be a part of the filing of the quarterly payroll tax forms.

 

Even though the tax filing date is extended, we still urge everyone to try and get us your tax information so we can calculate what tax liability or refund you have coming.  Those who have a refund will want to file immediately.  Those who owe will better be able to plan their cash flow needs going forward.  Putting off your tax return is just another distraction you won’t need later so we ask you to get your information in so we can help you plan for the future.

 

One final note on your tax return.  The tax filing date is extended to July 15 but since it appears the June 15 estimated tax payment is not extended, you will need to prepare your 2019 tax return before June 15 in order to know how much to pay for your June 15 quarterly estimate for 2020.

 

Once again we ask everyone to be calm and understanding as we all work together to get through these trying times.  It is sad to see so much opinion and blame in the news media when we really need to pull this country together and help those in need where we can.

 

Thanks to all our great clients for supporting us over the years and we continue to do what we can to support each and every one of you.  As a business we will certainly honor any stay at home orders by government officials but we will be available through email and via phone to answer your questions as always.

 

At times like this I remember former president Kennedy’s famous quote “Ask not what your country can do for you.  Ask what you can do for your country.”  We should all simply look to how we can help others who are in more need than we are.

 

I firmly believe we will be back on track soon.  Sixty day ago, China was where we are today.  Now they report very few new cases of COVID 19.  We have learned from them and we are a great country.  I truly believe we live in the best country in the world and it is that way because we will join forces and pull through this together.

 

God Bless everyone and be safe.

Bert Doerhoff